From the September 2000 issue of Entrepreneur

Any time that one of Mark Bonfigli's salespeople learns of a customer problem, question, comment or issue of any kind, he or she turns on a laptop, logs on to the Internet and enters the information into a special online serv-ice called Agillion Notes. The information then becomes instantly available online to any of the 11 employees of Earthcars. com Inc., a Burlington, Vermont, developer of software and Web sites for automobile dealers.

"It guarantees us immediate response to customer service issues," says the 31-year-old founder. "And that's what our company is based on."

Bonfigli's service is an example of customer relationship management (CRM), a term referring to a set of tools, practices and technology that helps people perform a number of customer-related tasks. Those tasks include collecting customer data in one place, making it widely available, iden-tifying the best customers, find-ing more like them, figuring out their needs and, eventually, turning prospects and first-time buyers into long-term, loyal customers.

In trying out CRM, Bonfigli joins Marriott, Doubleclick and an estimated 70 percent of large U.S. corporations, according to a study conducted by the Economist Intelligence Unit and Andersen Consulting. CRM is a combination of technology, training and business strategy that promises to help companies improve returns on investments in marketing and boost both sales and profits. "Customer relationship management is all about building lasting beneficial relationships with customers," explains David Tinjum, founder and CEO of Customer FX, a St. Paul, Minnesota, CRM solutions provider. Among other things, CRM promises to generate better sales leads, enable faster response to changing customer needs and make sure everyone in sales and marketing has the right information, at the right time, for every customer.

That's a promise many users say CRM delivers on with interest. "It automatically means everyone is in tune in real time," says Bonfigli. "It's an extremely powerful tool, and that's an understatement."

 

The Truth About CRM

The forerunners to CRM were techniques developed in the 1960s by direct-mail marketers like Sears, book clubs and publishers of newsletters, says Jay Curry, chair of Netherlands-based The Customer Marketing Institute, a CRM instruction center. "They were first to use the computer to store information about their customers for reasons other than sending out an invoice," explains Curry. "They were saying, 'Who is this customer, what do they want, and what are their interests?' "

CRM received a boost when ACT!, a contact management program for PCs, debuted in the mid-1980s, adds Tinjum. Then a series of books came out during the 1990s from marketing experts Don Peppers and Martha Rogers on "one-to-one" marketing. The rise of the Internet and its ability to collect computerized data on customers who shop and surf on the Web was the final impetus. "Without information technology, it was impossible to treat people as individuals," says Curry. "With information technology, we can."

Many types of businesses have tried CRM, but it has been absolutely embraced by e-businesses. Web surfers provide marketers with fresh, accurate data every time they fill out forms, register at sites, place orders or click on links. "It's a dream world for CRM," says Curry.

Give your customers the star treatment. Take a quick Customer Service 101 class by reading "Full Service".

Most popular CRM software fit best with businesses that sell to other businesses, as opposed to consumer marketers. "The mainstream [software] players do not do a good job of working with consumers," Tinjum says. Top-selling software include ACT! and Goldmine for small businesses, SalesLogix and Pivotal for mid-range companies, and Siebel Systems for large enterprises. A growing number of electronic CRM (or eCRM) providers deliver their services over the Internet. These, including Agillion and Salesforce.com, require only that their clients have a computer, Internet access and browser software.

Small firms generally lag behind larger ones in adopting CRM. And perhaps that's not so bad. Some 70 percent of CRM efforts reportedly fail to meet expectations. One reason may be that companies tend to simply purchase software and expect CRM to result, Tinjum says.

The truth is, CRM is a multistep exercise. First, you analyze all your individual customers by sales volume and profit trends. Then you select the best and most profitable customers and identify their needs. You attempt to sell your best customers even more-and you try to find more like them. Finally, you stop serving the worst customers, those too small to be worth the trouble or those who actually cost you money.

Choosing The Right CRM Program

To get a good return on your CRM project isn't easy. Winners improve the odds by doing considerable advance research. This should involve more than comparing features of competing software packages. Focusing solely on the software is a mistake, says Tinjum, because most programs on the market can do what most businesses want. Instead, he says, concentrate on implementation. That means committing to see the project through, making customer focus part of your business strategy and following up with training.

Implementing CRM usually involves a major change in a business's culture. This can be frustrating, Curry says. CRM can give sales managers convincing reasons to persuade salespeople to call on accounts that may be difficult or intimidating but likely to produce results. CRM efforts also run aground because of conflicts, typically between the information technology and marketing departments. Data processing types may be unwilling to take on the sometimes daunting technological challenges of full-bore CRM. Marketers, on the other hand, may feel threatened by what they see as technologists encroaching on their turf.

Many other CRM programs simply run out of steam before showing results. "There are a lot of companies out there that have spent millions of dollars on systems that were never used because it was never part of their strategy," says Tinjum. "They ended up just buying software."

Smaller firms can count on budgeting anywhere from a few hundred to several thousand dollars for each marketing person, including salespeople, who will work on the CRM system. That's just for software. Computer upgrades are often necessary. Training provided by the software vendor or so-lutions provider will also take a bite. Ongoing support for the often complex programs is costly, too.

But CRM can be well worth it. And we may be only at the beginning of the CRM boom. Tinjum says educational systems are adapting CRM ideas for student-relationship management systems, and he sees many similar evolutions ahead.

No matter whose relationships you're managing, using computers and the Internet to help do it can mean that everyone in your organization always knows just what to say or do to keep relationships on track, says Bonfigli. "That's the difference between moving at a thousand miles an hour and 90 miles an hour," he says. "Right now, it's providing us a huge advantage."

Next Step

Try Agillion's ECRM solution for 60 days free by visiting www.agillion.com.

The Customer Marketing Method by Jay Curry with Adam Curry (Free Press) shows how to implement CRM from top to bottom, in general and in detail. Download spreadsheets from the book at Jay's Web site, www.customermarketing.com.

Visit www.customerfx.com and sign up for a free e-mail newsletter, e-FXtra! CRM Newsletter, covering news, views and trends in the field.