Put together a smart, detailed business strategy, and customer relationship management (CRM) software can help you develop, find, and reward your top customers. This article offers insight into what determines your top customers — profit per customer — and how CRM can help nurture those relationships.
 | What it's really all about is whether you have a strategy for providing a better value for customers. |  | | Bob Thompson,
founder and editor-in-chief,
CRMGuru.com. | |
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In Summary:| • | CRM software can help businesses learn which customers produce the most profit, not just the most revenue. | | • | CRM help analyze buying patterns, which in turn identify potential high-value customers. | | • | CRM also can help maximize per-customer profits by showing how to reduce the cost of sales to that customer. |
Developing a successful CRM program doesn't necessarily mean buying the newest and most sophisticated CRM package, says Bob Thompson, founder and editor-in-chief of CRMGuru.com, an online community for CRM best practices. Even before you make a CRM purchase, Thompson says, companies that want to use the software to strengthen relationships with their best customers — again, the ones that generate the most profit per customer — need to think hard about their own business and customer goals. "What it's really all about is whether you have a strategy for providing a better value for customers," says Thompson, who has held a wide range of CRM-related positions at IBM and other companies. "Deliver a great experience for the customer, and when they come back you can pick and choose whom you want to spend the most time with." Depending on the size of your business, you may be able to uncover valuable customer data from something as simple as a spreadsheet. First, develop revenue numbers from each customer — something any business should have on hand. Then calculate the cost to serve each customer based on sales calls and other interactions. "The spreadsheet becomes your CRM tool," Thompson says. "You'll see quickly that the 80-20 rule applies — that probably 20 percent of your customers are generating 80 percent of your revenue." Beyond that, today's increasingly sophisticated and easy-to-use CRM software gives midsize businesses a wide range of ways to identify their most profitable customers. Customers will recognize benefits, too, as CRM helps businesses better understand them and determine how to reward their loyalty. Understand what customer information is relevantIt's true that technology can help you compile all sorts of information about your customers. But gathering information that's useful takes careful thought. The first step toward identifying your most valuable customers is understanding why they buy your products or services. A CRM record with account management features might include a custom template allowing a sales representative to categorize whether the purchase was based, for example, on a special offer, a sales call, or geographic proximity. You then can link that kind of data to analytical detail about customers, which is available for purchase from specialized research firms. The resulting analysis can provide a clearer picture of why certain customers or customer types make particular purchases. Your CRM system should also provide detail as to whether a purchase requires follow-up — perhaps through training or maintenance — or needs minimal customer contact, or may not occur again for a long period. That information is important because it helps you assess customer profitability by better understanding acquisition and retention costs. Microsoft Dynamics CRM, for instance, can record all details of customer transactions —purchases, sales and service calls, and more. You may also customize customer profiles, to allow for the deletion of irrelevant information or the addition of unique customer attributes. You can then export that data to Microsoft Office Excel or other tools for analysis. As well, you can run reports on customer revenue and costs. Put to best use your customer informationBanks have helped pioneer a concept called "share of wallet," meaning how much of a customer's total business they receive. Say a customer simply owns a checking account. With CRM analysis, however, the bank might learn that that customer has a present or future need for business loans, mortgages, a line of credit, or a savings account. By sending targeted marketing messages to that customer, the bank might increase its share of wallet. Sophisticated CRM strategies can help bring in more business, says Andrea Fishman, director of global strategy for BGT Partners, which offers marketing strategy and analytics to companies such as Sony and Visa. Fishman now works with an industrial manufacturer that uses its CRM system to segment customers by industry and size, and track what customers in each category purchased. For instance, manufacturers that bought an industrial roller (used to move large loads across a shop floor) often bought machine movers as well. CRM analysis might also identify other categories of customers that purchased rollers and might also be interested in machine movers, or manufacturers that are good candidates for such a sale. "In the past a business might say, 'We're not sure what these customers want, so we'll show them 20 products and hope one sells,'" Fishman says. With analytics, a business can narrow down a segment and make sales predictions based on a customer group's profile. Microsoft CRM allows you to segment customers and view easy-to-read graphs or "dashboards" of purchase histories, which reveal patterns that can be useful marketing tools. Use CRM to anticipate customer needsCRM tools can track your high-value or "premier" customers so that when they click on your Web site they are automatically routed to a special page with relevant offers (Microsoft CRM offers this capability). In the telephone call center, contacts from top customers can even be routed to top-tier sales or service people, so they receive the best service. The same treatment might be accorded customers who aren't yet significant revenue producers, but who fit a profile your company covets. CRM software or a Microsoft SQL Server reporting tool also can track whether customers respond best to sales calls, Web offers, online events such as webcasts, e-mail campaigns, or other approaches, notes Fishman. "That's a great way to start cutting down on the cost of sales," she says. Which CRM tools a business uses depends a great deal on its size, the sophistication of its information technology (IT) staff, and whether its customer base is too large to be tracked with basic sales and revenue reports. But any business can gain by applying better strategies for making the most of its customers. Those strategies pay off for customers too. They show that a business is thinking about its customers and how to serve them. Douglas Gantenbein writes often on technology for Microsoft. A journalist for more than 20 years, his work has appeared in Business 2.0, Scientific American, Popular Science, and other magazines.
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