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Soak it up

Understanding your customers requires more than immersing yourself in a pool of information on their habits. You need to squeeze the data in the right way

SoakThere must hardly be a marketing department in the industry that hasn't at least looked at the issue of CRM in recent years. For many of them, it has consumed a lot of time, effort and, of course, money.

Yet, for all this attention, CRM has been remarkably slow to deliver the results it promised and, for some, it has been more of a white elephant than a panacea. As with all new ideas, the innovators climb the learning curve for the rest of us and the CRM Research Forum at Cranfield, one of Europe's leading schools, has spent the last three years uncovering and recording their experiences.

The picture that emerges can be summarised in six key lessons:

Lesson 1: CRM is not for everyone

The term CRM is used to cover two types of IT applications; operational and strategic. The former, which simply automates and integrates existing systems, is relatively straightforward and, if you don't make a hash of it, offers useful but minor improvements in efficiency.

The big gains, however, come from strategic CRM, which uses the technology to do things that were not possible before. In essence, this involves using individual data to tailor the value proposition much more closely to the customer, whether that is a prescriber, Primary Care Organisation, or even a patient.

Therein lies the rub: in some market sectors (typically, generics or other commoditised therapy areas) the customers do not want tailoring because the market is not granular; in simple terms, the customers all want pretty much the same thing. Only markets with significant granularity - where different customers want different levels of service, support etc - really benefit from CRM.

CRM is only worthwhile if the company is set up to act on the data by tailoring its value proposition. Those companies that can vary communications, people, channels and other parts of the mix between customers, can create advantage by flexing their overall value proposition, of which the drug is merely the core.

By contrast, companies without proposition flexibility can't really use the outputs of strategic CRM and so might do better to invest their money elsewhere. This is summed up in figure 1, which shows that only companies with well-matched market granularity and proposition flexibility should attempt strategic CRM. The others, in the zones of low return on investment or inaccessibility, either should not, or cannot.

Figure 1

Lesson 2: Not all companies can do CRM

Even for those companies in the CRM zone, failure is common. The reason: a certain set of preconditions need to be in place before CRM can work.

The research at Cranfield uncovered no less than 15 of these success factors, grouped loosely under marketing strategy, IT strategy and company culture headings. The effects of these preconditions are additive, so that weaknesses in some are compensated for by strengths in others. Important factors include things like well-defined segments, strong cultures and market-oriented IT systems, and taken together they define a triangular CRM space.

Companies that meet the conditions will have a large space, and vice versa. Those firms in the latter camp are best advised to work on the preconditions and expand their space before attempting CRM.


Lesson 3: It's best fit, not best practice, that matters

Arguably one of the most interesting findings of our work was to debunk the idea of CRM best practice. We found that the ideal form of CRM depended on the nature of the market and the capabilities of the company. As a result, we identified five `subspecies' of CRM, each of which fitted a place in the CRM ecosystem (see figure 2, below).

Figure 2

Each subspecies followed the same basic process but with important differences. Companies that - often with the help of big software vendors - tried to copy the best practice of other firms in different contexts tended to fail.

The crucial lesson to emerge was to treat the idea of a single 'best practice' with caution and, instead, look for the species of CRM that is a `best fit' with the particular context of your company's market and internal situation.

Lesson 4: Justify your investment, not someone else's

All of the companies we looked at had invested significant amounts of money in CRM and, as is the way in the real world, had to find a way of justifying that investment to the board. We expected to see the typical financial justification models based around tools, such as discounted cash flow and net present value, but we were surprised.

Marketing departments that depended solely on financial arguments could never make the case for CRM because so much of the benefit is hard to quantify. Their more savvy rivals used three kinds of arguments: financial (it will save X and make Y); strategic (competitive threats and market changes); and linked decisions (other investments and strategies connected to CRM). It was fascinating to note that every company's finance director was amenable to a different blend of arguments, as if a different key was needed to open each firm's capital investment coffers (see figure 3, below).

Figure 3

Lesson 5: Manage the team over time

We knew, from a previous phase of the research work, that successful CRM requires exceptionally effective cross-functional working, and that senior level involvement and broad functional participation is critical. However, we struggled to see how companies made this work in practice.

From our early findings, it looked as if everyone from board member to customer service assistant had to be in on every meeting, which is clearly impractical. In the second phase of the work, we uncovered that the critical variable is the project life cycle stage. Put simply, effective project management involves very senior but narrow teams at the start, which gradually broaden and lower in their membership as the project advances.

The critical features of this life cycle approach included a 'brain storming pool' as the project went from definition to the building phase, and the careful channelling of the team's effort by project leaders, to avoid the whole task going off down a blind alley. We came to call this the CRM waterfall (see figure 4, below), a metaphor which sums up how projects evolve over time.

Figure 4

Lesson 6: It's insight that matters, not data

Of all the areas we studied in this work, none was more problematical, or more rewarding, than that which looked at how companies extract value from their data. None of the companies we looked at had a shortage of data; it was valuable information that was missing, often despite the application of awe-inspiring amounts of processing power and frightening mathematics.

The breakthrough, ironically, came from observations of companies with relatively limited IT resources. The firms that seemed to extract real customer insight were those that had, by luck or good management, synthesised both hard, digitally-held, data and soft, qualitative, knowledge.

The key lesson that such firms grasped was that data was only a means to an end and that end was an understanding of customer motivations. Data which revealed those (eg, conference attending, re-print requesting, appointment cancelling), combined with hard data (eg, financial and market research), revealed previously unexpected segments based on needs and motivations.

By contrast, companies that stuck to crunching hard data only (often collected for financial and operational not marketing reasons) were stuck in a rut of endless reclassification and labeling which provided little insight or no competitive advantage.

Good firms found value by having 3D data which had length (a long enough history to iron out anomalies), depth (enough data points to be representative) and breadth (enough different types of data to give insight into customer needs, as seen below).

Figure 5

In practice, this meant more effort was put into integrating data from different sources (eg, sales team reports and market research data), rather than heavyweight crunching of easily-available but less useful operational data, such as ordering patterns.


It is difficult to capture the findings of years of research and hundreds of thousands of words of interview transcripts, in one article. However, while a lot more detail, and several useful diagnostic tools emerged from the research, these six lessons summarised briefly here capture the essence of the work. They answer some questions about the failed implementation of CRM and acknowledge that it just isn't the right thing for some firms.

Sadly, but not surprisingly, the lessons imply that effective CRM is much more difficult than simply throwing money at IT and expecting value to pop out of the data.

In short, these lessons remind us of an inescapable fact and one we sometimes forget: all relationships need work, the customer variety doubly so.

Dr Brian Smith is principal researcher and Dr Moira Clark is director of the Cranfield CRM Research Forum. If you have any questions about this article, contact Dr Smith at

2nd September 2008


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