Customer Segmenation and CRM Strategy

Customer Segmentation
One of the benefits a CRM system can provide an organisation is the ability to categorise or segment its existing customer base and prospects. This may be based on the products or services that the client purchases, demographic information for consumer clients, industry sector or company size for corporate clients and so on. Once you have this kind of information on your system you can analyse it using a variety of techniques ranging from very simple graphing and summary reports through to sophisticated statistical packages which can be used to draw inferences from your raw data. For instance you might find a link between somebody’s occupation and their likelihood of buying from you, or a company’s location with its profitability to you. So you’ve collected all the information, have the software tools to analyse it – what can you look for that will benefit your company?

The following are some examples of how you can segment your customers.

• Profitable customers. Obviously, you can look at whether some customers are worth doing business with at all but you can also decide how much effort should be put into account management and sales effort for each customer. You should also segment your customer base in other ways (geography, social grouping etc) and see if there is any correlation with the profit they bring to you. This can lead to significant insightsinto where you should be directing your marketing effort.

• Cross selling. If you’ve got more than one product or service then you’ll already know that one of the easiest sales you can make is the sale of a different product to an existing client. If you can analyse what identifies a client as a likely purchaser of a specific product or service you can identify which other current customers might want to buy that product or service but haven’t yet.

• Guiding marketing focus. If you record where your customers first heard about you – a particular advertising campaign, by recommendation etc – then you can calculate which marketing method is proving the mosteffective. Employee Empowerment Implementing a comprehensive CRM system through your organisation can have an interesting side effect that needs to be considered – employee empowerment. If you give employees access to a significant amount of information relating to your clients you have to give them the ability to act on that information, within well understood boundaries. For some organisations this can be a major change in the way people work, for others it is business as usual.

CRM Strategy
The best CRM system in the world can only help where staff can act on the information it provides them with. There are a number of consequences of this that need to be considered when creating a CRM strategy:

• The information in the system needs to be complete and accurate. If you haven’t got every client-facing member of staff contributing then nobody can be sure that all the relevant information that they need to act on is there. If your staff begin to doubt the accuracy and completeness of the system it can soon fall into disuse and your CRM investment is wasted.

• The culture of the company needs to encourage people to act on the information. This is usually less of a problem for smaller companies but for larger organisations there can be a tendency to refer to others even though all the information to make a decision is available. On the other hand, there also need to be clear boundaries on what decisions people can make and what authority they have.

• Individuals can be reluctant to share their knowledge. Some people will always want to retain their ‘special’ relationship with a client or try to protect their position in an organisation by holding onto information that should be put in the CRM system. This can undermine the success of the implementation and has to be addressed at an early stage when you see it happening. Integral to your Existing Technology As we have discussed in preceding sections a CRM system is going to have a significant influence on your business. When it comes to choosing the software that will support your CRM strategy you should be equally careful given the influence it will have on your IT strategy.

As CRM systems can ultimately be used throughout an organisation you have to evaluate the technology used in the systems you already have, where you will need to integrate to these systems and where your IT strategy is directing you. If you don’t have an overall IT strategy it is worth creating one as you put together your CRM strategy. The complexity of documented IT strategies varies widely but our view is that you should take a medium term view, of say 3 to 4 years, which outlines the core technologies that will be used (e.g. server and client operating system(s), strategic database platform, development tools, middleware) and whatprojects are broadly planned to be undertaken. This will mean applications, including CRM, can be chosen to fit the selected technologies and that you know what applications are will need to be integrated in the future. Planning more than a few years ahead can be difficult as technologies, and possibly your business, can change quite rapidly and it is better to have a medium term plan which is reviewed on an annual basis.

Typically systems that you might need to link your CRM solution to include:
• Accounting, especially sales order processing
• Ecommerce
• Existing service management systems
• Delivery support systems
• Existing sales & marketing systems

You will need to review each of these systems and ensure that where integration is needed this is possible with the CRM solutions you are considering. You also need to look at the longer term future of the systems – all of this again revolves around getting your IT strategy set out as fully as possible. It is obvious that selecting well known, open technologies that are likely to be supported by a wide range of IT vendors will usually be a sensible part of any strategy.