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What is a CRM?

06 September 2020

CRM are initials for Customer Relationship Management

Most people use the initials CRM to denote software used to track enquiries and customers. More than a contact list, the CRM provides tools to record customer interactions (notes about conversations and sales calls) and all of this information is stored in a database. This information is usually shared across many in an organisation enabling "picking-up were we left off" irrespective of which employee the customer last spoke.

However, the concept of CRM is both broad and, like many things in business, varies between organisations but with common themes.

There are many definitions for what a CRM is...

The lofty and impressive definition

Customer relationship management (CRM) is a discipline for managing interactions with current and potential customers. By combining data analysis about customers' sales and contact history, business relationships with customers can be improved, driving customer retention and ultimately sales growth.

CRM is a term used interchangeably to describe both a discipline and a software application.

The more down to earth explanation

At its most basic, a CRM is a database for storing customer (and other people's) details - name, position, company name, address and contact phone numbers and emails.

Rightly, such a system wouldn't be called a CRM - it would be called a contact database.

What transforms a contact database into a CRM is the addition of a place to add a record of each customer interaction.

At the very least, such a record would include:

  • Date and time
  • Who handled the contact
  • Details of the conversation including what was agreed to and what the next step is.

You can appreciate that an organisation that manages many thousand customer relationships would find such a database useful.

However, even a one person organisation can benefit from being able to add notes each time they speak to a contact.

Recording touch points

Each time the customer has contact with the organization, a customer service person can refer to the contact notes (the customer history) and be able to (hopefully) pick-up the conversation and seamlessly continue handling the customer's needs or help solve the problem.

The ability for the customer service person to achieve this seamless continuity is dependent on...

  • How well past customer service people have entered notes
  • How quickly the next customer service person can read these notes and pick-up the ball.

We know from experience with calling customer service representatives that rarely is this achieved, most times we have to start at the beginning and tell the whole story again.

What this observation informs is that Customer Relationship Management is a bigger concept than simply having a CRM which after all, is just a computer application that facilitates the customer relationship management task.

Customer Relationship Management requires a well trained customer service team and well planned procedures and protocols for interacting with customers so the full value of the investment in the CRM system is realised.

CRM therefore is used interchangeably to mean the software platform (also known as 'an application') and/or the management discipline of managing Customer Relationships.

It's also implicit that 'customer' in the context of a CRM can also mean sales leads (not yet customers) therefore the CRM is the universal database for storing the contact details of people with which the organisation has some type of relationship. This can include suppliers, employees, agents, distributors, influencers, and others. As long st the system has some means of categorising and filtering records, the CRM can be a centralised contact database.

Centralised contact database

We've all experienced the annoyance of contacting a supplier (banks used to be famous for this) and notifying change of address or phone number details. Years later, they are still sending some correspondence to the old address. Obviously they have more than one database and a flawed process for synchronizing information.

Small organisations (SME's) continue to perpetrate this error with each employee often running their own contact database (using OUTLOOK, a spreadsheet, or similar). Without a centralized CRM effort is duplicated keeping records up-to-date, and the opportunity to efficiently market to all of the people who have 'touched' the organisation in the past is lost.

A comprehensive CRM system is either already integrated with the Accounting system or linked through an API. Although it has to be said, the CRM's supplied with ERP systems are notoriously underwhelming.

Thus the CRM assumes the role of the one central point where all contact details are stored. Of course, for this to work satisfactorily, all employees must have access to the one system. Some CRM's therefore have user credentials and privilege settings to ensure each employee only has access to some information associated with a customer on a need to know basis.

Further, and this is true of many government departments (ATO for example) and banks, each time a customer record is accessed a log entry records the user name of the person accessing that record. In this context, the core system is often more than a CRM (and probably isn't called a CRM) but has CRM type functions.

Credentialing and access logging is essential for implementing privacy policies. For example it is difficult (one would have thought impossible) for an ATO employee to look-up the tax records of a friend or family member. Similar quarantining exists in financial institutions such as banks, and law enforcement agencies.

Categorising contact records

CRM's have the ability to tag contact records to enable grouping records together that share common attributes.
Common examples are...

  • Differentiating: between enquiry, hot-lead, customer, and lapsed customer.
  • Assigning contacts to sales people: who then take responsibility for managing that contact.
  • Separating contacts into sales territories: These could be geographic, industry, value, product or some other territory
  • Industry categories: e.g. retail, professional services, mining, oil and gas etc.
  • Value of customer categories: Typically organisations categorise customers using ABCD. A = Critical customer (if we lost this customer, we would need to retrench people) B = High Value customer, but not an A, C = One of many customers, smaller than A or B but still worth having, D = small customer that probably cost more to service than the profit derived from sales.
  • Assigned to branch: For organisations that have more than one office.

There are hundreds of ways of categorising contacts. A good CRM would not limit the number of tags possible, and would also provide a tool for merging or renaming categories as needs change.

CRM's as the central point to lead management

Commercial organisations seeking to find new customers engage in marketing activity that results in generating sales leads.

Rather than writing sticky notes, sending emails, or jotting notes on pieces of paper - the CRM (along with an efficient procedure) provides the tool for properly capturing sales leads and there after tracking their progress to an outcome (hopefully a sale).

Moreover, should the new contact not result in a sale, having captured their contact details and other information the CRM provides the means to implement future contact with and the delivery of marketing messages aimed at converting them from a lead to a customer.

Thus, a CRM is an essential tool for properly implemented lead management.

A complete thesis on this topic is presented in this blog article Digital lead generation on steroids

CRM's have become complex

Over the years CRM's have acquired an impressive list of bells and whistles that have improved their sophistication and usefulness..

  • Sales Pipeline Management: Being a central repository for both customer information as well as a place to list sales prospects, many CRM's have fields for classifying prospects according to where they are in the sales pipeline (how close they are to buying and therefore becoming a customer). Sales Pipelines provide the ability to list prospects according to category (e.g. New Enquiry, Strong lead, Identified Project, Requested Proposal, Submitted Proposal, WON, LOST). Many will visualise the sales pipeline showing all prospects and where they are currently sitting on the pipeline in a visual representation. Further, some Pipeline CRM's allow you to attach a dollar value and probability to each lead, thereby providing a means of estimating the value of leads in the pipeline. A good example is PipeDrive.

  • Quoting systems: Some CRM's provide the means to write a sales quotation through a user interface which is then emailed to the customer. The quote is stored and scheduled for follow-up. This provides a task for customer service people to perform when inbound calls are quiet and team members can then switch to outblund calling to follow-up on quotes thus increasing conversion rates. Sometimes, the simple act of ringing a customer and asking "are you ready to place an order yet?" can kick the sale over the line.

  • Sales Automation: CRM's become bloated with data and the task of staying in contact with each person becomes beyond one sales/customer service team (at a realistic cost). However, many contact tasks can be automated and this introduces the topic of Sales Automation which is one of the fastest growing applications for the fully featured CRM. Read more about Sales Automation.

  • Telephone system integration: Linking the telephone system with the CRM enables some clever time saving features. The system can recognise the number and route the call through to a particular customer service person, thus establishing continuity. In addition, when the call is answered, that person's customer record is fetched by the CRM. In the back-ground the system is automatically recording date and time of call information, how long they were in the queue, and finally if they called and hung-up in frustration. Similarly, when the call centre is making an outbound call, the CRM dials the number auto-magically. Based on customer failing to answer, the system builds a 'best-time-to-call' profile. Marketing campaigns are assigned special phone numbers; the CRM records which in-bound phone line the customer (or sales lead) called on thus verifying the performance of the marketing campaign.

  • Third party platforms: There are many tools available with specialised capability in online marketing. CRM vendors may conclude it is better to integrate with existing platforms than develop their own tool. This CRM's can be integrated with platforms such as (for example)...
    There are many others
    Integration is achieved through a data connection known as an API (Application Program Interface), and CRM's often will provide a wizard for establishing permanent connections through API's often requiring only a few clicks. For example, marketing emails can be authored in the CRM and delivered via (say) MailChimp and any analytical data (delivery reports, email opened and other events) reported back to the CRM via the third-party platform. Often third-party integrations is the method by which the CRM can become a sales automation platform.

Fully logged customer interactions

CRM software can be designed or integrated with other information databases within (or external) to the organisation to provide a single point to view a full history of ALL interactions with that customer (or contact). Such interactions may include...

  • Sales History: What have they bought from us? When? How much? How often? Most popular purchase? Total value of sales.
  • Contact History: A record of every conversation either via email, telephone, letter (still possible), or from counter encounter. Dated, and recording which member of the organisation was involved.
  • Touch point statistics:How many minutes spent dealing with each customer is an important statistic; some customers are 'high-touch' they call about every little thing. The more time dealing with customers requires a larger call-centre team adding operating cost. Of course, a high-touch customer might also be indicative of where the organisation has let-them down. This is important to know as well.
  • Social Media: Some CRM's enable calling-up the contact's social media history, and will even flag when the contact has mentioned the company. Now that's spooky, imagine if 6 months ago you tweeted dissatisfaction about a company and next time you call them, the Customer Service person is instantly served-up what you said.
  • Service History: Any service call outs requested by your organisation.
  • Your installed base: Equipment suppliers maintain a list of currently operating equipment they have supplied complete with serial numbers, current configuration. Moving into the IoT era, such equipment may be in constant contact (via 5G mobile networks) with the supplier. Next time you ring-up and say "I don't understand, I hardly use my air-conditioner." you may be corrected by the customer service person who will tell you exactly how often you use it, when you use it, and what settings you run it on.
  • Credit history: This may not just be your payment record with them ("I notice you are taking longer to pay your monthly bill..") but also external reporting agencies. High volume transaction companies with huge customer bases (office supply and utility companies) share their debtor lists and payment day information with credit reporting agencies. If you are late paying your small bills, could be an indicator your company is in financial stress. Such information could be flagged on the CRM when you call up.
  • Skimmed digital finger-print information: Software tools exist that collect your browsing history and report it back to the CRM. So, if you've been shopping online comparing prices, when you call a supplier, instantly they are warned you have been shopping their competitors.

CRM software as a tool for customer relationship management

From the above, you will have gleaned that the CRM can be more than just a convenient central place to look up phone numbers and email addresses.

At it's most impressive a CRM is a comprehensive intelligence file and therefore a valuable tool for managing customers. But, what does "managing" mean?

Customer management is about looking after the best customers to ensure retention, and discouraging the worst customers. With such an accumulated volume of data across a wide range of attributes, it is possible to perform some sophisticated analysis to rank customers from best to worst (a score).

Looking after the best customers can mean:

  • Prioritising them on the call queue. A higher scoring customer will automatically be ranked in the call queue at a higher position in front of a low score customer.
  • Being especially lovely and tolerant to them during calls
  • Routing their calls through to high performing customer service people
  • Prioritising their orders if stock levels are getting low
  • Sending them special offers, and even presents (tickets to the Football)
  • Ensuring they receive priority deliveries and other benefits.

Encouraging the worst customers to go elsewhere is about doing the exact opposite:

  • Answering their calls with low priority (longest queue wait)
  • Getting them off the phone as fast as possible
  • Removing all discounts
  • When stock is getting low for certain SKU's - tell them you are out of stock (why sell it to them, when you need it to keep your best customer's happy?)
  • Take them off the Christmas card list

Of course, the customer service person need not see any of this, it can all be managed in the background by the automation.

'Worst customers' are those who actually cost money to service and whose profiles indicate they aren't likely to improve. Typically, bad customers don't spend, record high touch points, are demanding, rude - in short 'pains in the backside'. It makes sense to encourage them to do business with your competitors. The trick is to train your customer service people to not give them any non-verbal cues that they've been categorised as "make them go away."

Some CRM's even have the ability to know when a customer is related to high value customer, and ensures they are looked after well even if they don't spend much (or exhibit some other undesirable traits).

CRM as a data mine

At the back of every CRM (most of us only see the screen) is a big database where data is stored in an orderly fashion.

This database is a wealth of information. We've already discussed the common ways it is used in preceding sections, however the patterns contained in this data can yield enormous decision making value.

One example: We mentioned potentially scoring customers according to their value. The obvious question would be "what common characteristics do high value customers have?"

A simple outcome would be, they all tend tend to live in wealthy suburbs. The next question is "are there any more living there?". This would provide the marketing department with important targeting information. At the very least, letter boxing the suburb with a well crafted flyer (or a geo-fenced online advertising campaign). But, we didn't need to analyse the database to find this out.

It's the less obvious findings that can be of the greatest value. Often, anecdotally, the best customers might be thought to live in the wealthy suburbs, but surprisingly this may not be the case. It's not uncommon to find European luxury cars tend to sell better in the up and coming suburbs (nouveau riche) than in the old money suburbs.

Further, data mining will provide a detailed profile for best customers. Suburbs, Post Codes, Age, Ethnicity, Social Media Habits, Products they tend to most often purchase, media they consume, websites they visit. The list is only limited by the data being collected and stored.

Feed this information back into the CRM protocols and customer service parameters can be tuned to nurture sales leads (not yet customers) based on their likelihood to become future best customers and suddenly money invested in marketing becomes doubly effective with shorter pay-back periods.

Examples of CRM applications

Salesforce.com one of the world's most popular CRM

Hubspot - A CRM mainly focused on lead generation and sales automation

Microsoft Dynamics 365

PipeDrive - Particularly optimised for B2B lead tracking and sales pipeline management

Zoho - another CRM with lots of bells and whistles

By Justin Wearne

Further reading

The importance of the CRM
What is a sales pipeline?
Digital Lead Generation on steroids

crmcustomer relationship managementwhat is a crmcrm definitionsales pipelinewhat is a crm definition

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