Up close and personal

CRM has escaped the shadow of its past failures to find favour again, says Ron Condon.

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Last Updated: 31 Aug 2010

If you were a BT customer three years ago, calling the company helpline could be a long and patience-stretching experience. More than likely, you would be passed around between departments until someone was able to answer your query, if you were lucky. This was no fun for the customer, and for BT it was an expensive waste of time and effort.

Fast-forward to the present moment and the picture is completely different.

The number of BT contact centres has been cut from 104 to 33 (with two of them in India), and customers can usually talk to someone immediately capable of sorting out their problem on the spot. Quite often, they'll be able to carry out their transaction using an automated self-service system. The result is a huge rise in customer satisfaction, and BT has saved more than £150 million into the bargain.

Behind the success story is a customer relationship management (CRM) project that cost about £100 million and involved a radical reorganisation in the way the company services its customers. With its combination of new technology, retrained staff and new ways of working, it is a textbook example of how to make CRM pay for itself and be effective.

Until now, however, stories like these have been the exception rather than the rule. 'CRM is damaged goods as far as many CEOs are concerned,' says Tony Mooney, a CRM specialist with consultancy ClarityBlue. 'It has not lived up to what was promised. Somewhere in the region of 90% of CRM projects have failed to deliver against their original business case.'

Mooney should know. He spent four years at Orange working on CRM projects and was with Centrica before that, and has seen close up how hard it can be to make an implementation a success.

As with many of the TLAs (three-letter acronyms) so beloved of the computer industry, CRM was initially oversold by vendors promising instant benefits.

'I saw presentations where they promised to increase sales by 40%,' says Steve Elsham, head of the CRM practice at Oracle, a leader in the field. 'The reality was always going to be different.'

He says that in the initial CRM boom, about eight years ago, many prospective users failed to apply basic business disciplines. 'If they were implementing SCM (supply chain management) or ERP (enterprise resource planning), they'd do a lot of analysis and then start a phased implementation, so that each stage would pay for itself. But with CRM they threw caution to the wind, feeling it was essential to gain first-mover advantage. The projects lacked intellectual rigour. There was no change management, so the bad old processes were now executing at lightning speed.'

Failure to change business processes meant also that CRM operated in a vacuum, 'as a functional silo', as Elsham puts it. 'Calls were answered faster, but this generated pieces of paper that were then re-keyed into the back-office systems. Client companies should have realised they would get no value - they had to optimise the whole chain of processes from taking the order to picking and shipping and seeking payment. CRM got a bad name and seemed to give little value.'

The bursting of the dot.com bubble in 2001 appeared to nail CRM for good, and it is only now that it is emerging from the shadow of its failures and finding favour once more.

The leading vendor of CRM software is Siebel Systems, and Neil Morgan, the company's head of European marketing, reckons the market has matured since the 'inflated expectations of the technology' that were rife five years ago. Many companies make the mistake of relying solely on technology to achieve the benefits; as at BT, it is essential to change people and processes too. 'Companies need to find ways to join sales, marketing, customer service and call centres together, and build the business around the customer,' says Morgan.

He cites another Siebel customer, Abbey, which almost uniquely among banks has created what he calls 'a single view of the customer across multiple touchpoints'. And in another case, the South African Revenue Service has taken a dozen disconnected systems and turned them into a single view of the individual taxpayer, so that tax and benefits can all be operated under the same system.

But software is not the whole answer - it is merely the delivery mechanism.

With the mass of new touchpoints that Morgan refers to - which can include phones, SMS messages, e-mail, internet, retail outlets and direct mail - the business has to reinvent itself to focus on the customer. The new touchpoints can't operate in isolation, otherwise a chaotic collection of disjointed messages is created. A relationship with the customer has to be nurtured.

Building a single view of the customer means that a call-centre adviser, for example, will know that a customer has received an SMS marketing message or a direct mailshot. They will have at their fingertips a picture of the customer's buying patterns, previous purchases and credit record.

And the smart CRM systems will suggest opportunities for up-selling or cross-selling while the customer is on the line.

In the case of BT, that meant taking four distinct divisions of the company, including directories and sales and repairs, and bringing their contact centres together. As project director Gabby Heppner-Logan explains, the old arrangement created huge wastage. 'We had four separate training departments, four separate IT departments, four separate complaints departments. We were organised around our processes rather than around the customer.'

By creating systems that brought together all information about the customer, and by providing customer advisers with the resources they need to provide quite complex information (the knowledge management element of the system alone cost £8 million), the customer gets a fuller service. 'We were able to eliminate 300,000 calls a day by improving processes and systems because advisers were better equipped to resolve queries at first point of contact.'

Impressive as this is, it taps only part of the full potential of CRM.

Explains Siebel's Morgan: 'CRM allows you to measure marketing campaigns much more effectively. You can try out different approaches and measure the effects in real time. This is process-driven marketing, and the marketing guys hate it.'

The new generation of marketing people, he says, will have to be 'more tech-savvy and perhaps have a mathematical background'.

ClarityBlue's Mooney strongly agrees. 'The big driving force within organisations should be the marketing function. But most of the marketing individuals are still working to a 1960s 4Ps model of marketing (product, promotion, price, place), which views marketing as interruption advertising. They think it's all about brands, mass advertising, TV, posters. They think it's all about awareness.'

The touchy-feely marketing types are helped, he says, by a marketing services industry that has a vested interest in maintaining the status quo. 'I detect a growing dissatisfaction in the boardroom with the performance of marketing as a discipline, its lack of accountability and measurability. CRM is the diametric opposite of their techniques and business model. CRM is a more forensic and scientific approach to marketing. It is measurable.'

This is especially true for purely web-based companies, such as Google and Amazon, which make virtually no use of conventional marketing channels in building market awareness. 'They are further down the road to building individual relationships with their customers without resorting to this carpet-bombing approach,' says Mooney.

To illustrate how far some industries have to go to match that, in April this year Siebel and IBM commissioned Datamonitor to conduct a 'mystery shopper' exercise with 300 banks worldwide to test how they managed their customer relations. The results were depressing.

A third (32%) failed even to respond to customer e-mail enquiries. Two-thirds (68%) did not capture customers' basic contact details for follow-up purposes. Nearly all (93%) made no attempt to up-sell or cross-sell during the course of a transaction with a customer, and 97% had no way of seeing what other transactions the customer had previously carried out with the bank.

Partly because they were early adopters of computers, the banks have experienced great difficulty in changing the way they work, but Mooney thinks technology is not the problem. 'There is little technologically that is beyond anyone to achieve success. It is usually the carbon-based life forms that stop it succeeding: their lack of skills or inability to organise themselves around the customers. It is all about how human beings configure themselves within organisations to be able to deliver this stuff.'

WHO'S BIG IN GLOBAL CRM Vendor 2004 revenues Market share (dollars m) (%) Siebel Systems 950.2 10.7 Oracle 600.6 6.8 SAP 591.7 6.7 Avaya 358.7 4.1 Aspect Comms 285.0 3.2 Amdocs 255.1 2.9 Genesys 252.0 2.8 Reynolds & Reynolds 250.0 2.8 Salesforce.com 150.5 1.7 SAS Institute 149.1 1.7 Concerto Software 136.1 1.5 Microsoft 108.1 1.2 Source: IDC.

BT SLIMS DOWN FOR A SLICKER RESPONSE

BT has created Europe's largest call centre, having invested £100 million over three years in a programme that has involved a rationalisation of buildings and business processes.

Central to the project has been the installation of Siebel Systems' CRM software, which holds details of all BT customers and allows customer advisers to view these on-screen as they answer calls.

The system makes use of interactive voice response (IVR) systems, so that callers can define the subject of their call before being put through to an adviser.

The number of contact centres was reduced from 104 to 33, and all centres form a complete 'virtual' service. This means that customers call a central number and are routed to whoever is free to take their call and has the right information to deal with their query.

The number of calls handled has dropped by one million a day, partly as a result of the opening of the directory enquiry business. About 300,000 calls a day have been eliminated because advisers can resolve problems at the first point of contact. Caller ID allows customers to be identified in most cases before the adviser takes the call.

By integrating four main business divisions, BT has cut the number of support staff (such as IT support and training) from 4,000 to 1,462. The number of desktop PCs has been reduced from 16,000 to 10,766. Customer dissatisfaction has dropped year-on-year by 10%.

According to project manager Gaby Heppner-Logan, key factors were the involvement of BT staff from the start and a clear policy of no compulsory redundancies. 'When you treat people with respect and involve them in the process, it is very empowering. People now have a better environment in the new centres,' she says.

In the next phase of the programme, BT is piloting a new segmentation model to gauge a customer's propensity to buy.

SCOTTISH WATER FULFILS A COST PROMISE

Scottish Water was formed in April 2002 after the merger of the three regional water authorities, and is a publicly owned company answerable to the Scottish Parliament. It serves 2.2 million private customers and 130,000 business customers across an area a third of the size of Britain.

At its formation, the company was given a goal to reduce costs by 40% by March 2006, while maintaining water quality standards and customer satisfaction. It is on target to do so. A key element in achieving this has been the Promise to Response (P2R) project, which is designed to improve the level of customer service and cut costs.

The company has overhauled its old contact centres and field operations, and implemented a CRM system from Oracle to support them. Scottish Water already used Oracle for its back-office systems and, as project leader Cheryl Black recalls, Oracle became a natural choice for the CRM project.

'Most of the companies we spoke to were quoting months or years to do the job, and they also wanted more money than we wanted to pay,' she says. 'Oracle said it could give us CRM out of the box in 90 days. We said: prove it.'

The result is that call-centre agents can answer enquiries faster and have succeeded in cutting the number of repeat calls. By also consolidating contact centres, Scottish Water expects the cost of customer management to be cut by 38% by the end of 2005.

Field engineers are connected to the system via laptop computers, and operate autonomously rather than coming into the office to be given work.

According to Black, the effect has been to drive up customer satisfaction from 75% in 2003 to 95% this year. 'Our engineers now aim to complete the job first time. The guy doing the job has access to information about the job he's about to do, so that makes it easier.'

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