CRM is back in fashion

It is surely an indisputable truth that a financial services company which 'knows' its customers must be in a better position to service those customers' needs more efficiently.

The issue is how that knowledge is acquired, maintained, shared and used. The situation has changed dramatically with respect to the first wave of implementations that took place years ago. Today, differentiation and efficiency are two key imperatives of financial services, and CRM needs to become pervasive in all of the business processes.

CRM is making a comeback, partially because managers have had some experience and now know what they want, but also system integration and business intelligence are getting more sophisticated and providing better tools.  The common methodology is to capture as much information about individuals and their transactions as possible through questionnaires and transaction data. This information needs to be gathered and collated to build life time value pictures of individual customers.

CRM is not just a system. It is a total business strategy that recognizes the value of customer relationship and engages the entire company in improving profitability. It helps companies to manage their customers, promote their products, and service their client base. Most importantly, CRM strategies help customer retention and build brand.

A properly implemented CRM strategy can achieve all this and more by consolidating customer information, standardizing data collection, and centralizing customer intelligence, enabling the organisation to focus on customer centricity and improve overall profitability. Customers can be grouped by needs and marketing campaigns can be tailored for each customer segment and delivered through a range of channels, from relationship managers, through branches, call centres, internet, WAP and mail.

BUT this requires a change to the traditional way of working in most financial services companies and requires all staff and departments to work together, sharing information and communicating effectively internally and with customers.

A research report into customer satisfaction from analysts GI Insight suggests that despite heavy investment in CRM systems over the last decade, Retail Banking scores low for customer satisfaction and marketing communications relevancy, implying that the sector needs to conduct a rigorous review of method and the return on marketing investment. It implies that staff in banks may not be working together as a team to provide the types of experience that customers want.

A survey by Business Edge demonstrates that the financial services sector is not only pushing beyond the envelope of other sectors pursuing customer centricity but also understands its full value as a vehicle for improving compliance and operational efficiency. They define customer centricity as "a business focused technology with intrinsic value that enhances the intelligence of business processes while enabling efficiency gains and providing the underpinnings for compliance needs today and in the future."

Nucleus Research has found more and more companies that are taking the plunge have learned from the mistakes of their predecessors and are getting positive returns from CRM projects. Instead of treating CRM like a test-tube experiment or a magic elixir, they know that CRM is like farming -" it takes a lot more than a few seeds and a shiny tractor to harvest results".

According to Gartner's research with end users, the technology is one of the easiest bits of a CRM deployment, with the hardest being the organisational restructuring that such a project can lead to, and the creation of customer-focused measurements. Currently around 80% of CRM systems are custom-developed, with the remaining 20% being packaged applications from hundreds of different niche vendors, the research reveals.

CRM is a highly analytical and nuanced business philosophy. It's not just about acquiring and retaining customers - it's about keeping the most profitable or strategic clients. Similarly, customer service is not about investing to provide the best possible support - it's about providing adequate levels of support and keeping customers happy, while satisfying the bottom line. These qualifiers challenge many established practices. Sales people, for example, are often compensated on the basis of revenue generation, when the ultimate business need is to focus on specific revenue sources that improve profitability or market share. This means that the overall performance management of the organisation has to reflect the balance between the varying focus across the organisation while ensuring overall optimisation.

Although revenue has long been the key criterion for judging sales performance and customer value, customer profitability analysis provides a more accurate long-term picture, but it is not always easy to determine. Activity-based costing (ABC), should give customer-facing managers a new perspective on value by allocating detailed costs - including costs usually lumped together as overheads - to specific activities. Yet many finance professionals have been guilty of over-complicating ABC. For most companies, the more pragmatic the analysis, the better. It means some finance professionals may have to get more comfortable with cutting corners, and this means working with the various aspects of the business to identify which corners to cut. Improving the flow of data between CRM and financial systems and back-office functions is becoming a business priority, and probably one of the largest challenges organisations face in their CRM rollouts.

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