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The growing importance of CRM
e-CRM rises to the top of retailers’ to-do list.
What is customer relationship management? There are about as many answers as there are retailers. CRM encompasses marketing, customer service, loyalty programs, ongoing communications with customers, cross-channel recognition of customers-and on and on. In short, customer relationship management covers all the ways and times that a retailer interacts with a customer. “CRM is a business strategy to build loyalty and sales with one’s best customers,” says Janet Murphy, president of Morristown, N.J.-based consultants Ogden Associates Inc., which conducted a survey with researchers/consultants Gartner Inc. of retailers’ CRM initiatives for the National Retail Federation. “It’s very important in retailing today.”
Indeed it is. The NRF survey reveals that 54% of retail companies have already implemented at least one CRM application; another 39% expect to do so within two years. And many see true payback possible: 72% said they view CRM as a way to extend their business and generate revenue. Among the biggest uses that retailers plan to put CRM to are analyzing and understanding customers better, tracking results of marketing efforts and keeping track of customer contacts.
The web is key
The web plays a key role in implementing a customer relationship management strategy. It is an easy way to gather information about customers, often requiring only that the retailer ask the customer for information in return for discounts or notices of special sales. Because e-mail is inexpensive relative to other ways of communicating with customers, it facilitates keeping in touch. And the web is an effective way to move customer information among all the channels where sales associates might need it.
Retailers’ heightened interest in CRM is spelling increased opportunities for CRM vendors. The NRF survey says 57% of retailers expect to spend more on CRM this year than last and 60% expect further increases next year. Those figures underscore how CRM is spreading throughout retailing. “CRM was pioneered by the biggest companies, even before many knew where a CRM project would take them because they believed they could gain a competitive advantage,” Murphy says. “But now we’re seeing adoption growing in a dramatic way from the over-$1 billion companies to the medium-sized and small businesses.”
The NRF survey is backed up by a survey that Jupiter Research released in February predicting that CRM spending by retailers will nearly double from $1.7 billion in 2001 to $3.2 billion in 2006. Jupiter reported that 26% of businesses will spend $500,000 or more on customer relationship management over the next two years. Many also view CRM as more important than other technology initiatives; 23% are planning to spend $500,000 in web content management and 19% on supply chain efforts.
Because CRM encompasses so many parts of a business, implementing CRM can be daunting. A key first step is to define goals-not as easy as it sounds. “This is an area that’s morphing all the time,” says Jeff Roster, senior retail analyst of Gartner Dataquest.
One way to start is with site registration. That was the approach that outdoor gear retailer Cabela’s Inc. took. It learned the benefit of registration when it had an overstock of men’s shoes size 14 and 15 it wanted to unload. An e-mail to registered users whose shoe sizes Cabela’s knew resulted in a quick depletion of the shoes. “Registration at the web site was a vital link to making this happen,” says Sam Sidner, marketing manager of Cabelas.com.
Another way to start is to link a customer’s purchase to a customer’s behavior. For instance, Todd & Holland Tea Merchants found a relationship between gift purchases and credit card usage-identifying American Express and Discover users as likely gift buyers vs. MasterCard and Visa as buyers for personal use. Such information would not have become apparent with a manual review of purchases. “This system was able to come up with things that we didn’t see in our mind or things that had too many variables going in,” says Bill Todd, owner.
To ensure a successful CRM program, a report from Gartner says, retailers must understand their data, keep internal politics out of the process, make sure IT and business users work together, implement CRM with the customers’ benefits in mind rather than the company’s, don’t just automate manual processes, make sure the right people with the right skills are implementing CRM and have a plan.