The CRM package has landed?some would say crash-landed. A Bain & Co. study in June showed that 19 percent of customer relationship management users decided to pull the plug on their investments rather than pour money into them. Two out of five respondents (41 percent) said their CRM projects are either “experiencing
difficulty” or are “potential flops,” according to a Data Warehousing Institute survey released in May. These points echo a warning from experts such as Berkeley Enterprise Partners that, in spite of their popularity, most CRM projects don’t result in measurable benefits (see “The Truth About CRM,” May 1, 2001).
But there is hope. A number of companies are getting CRM right. They are treating the applications as more than a new set of sales-force automation tools or a new call center system. They’re focused intently on the returns: increasing the chances their customers will remain repeat buyers and identifying new prospects, whom they can then sell to.
What you’ll find in this article are three businesses?high-tech company Hewlett-Packard, online marketer Student Advantage and old-line manufacturer Tipper Tie?that avoided some of the common CRM pitfalls. First, they made sure they understood their customers’ needs before tackling a CRM application. They limited the scope of their rollout. They won buy-in from in-house users. They kept consultants, when they used them, on a short leash. And they measured the benefits of their projects. (See “Customer Focus,” Page 106.)
By keeping their focus on the bottom line, these companies have achieved significant payback?an HP division counted an estimated $144 million in increased revenues, Tipper Tie’s CRM system should pay for itself in two years, and Student Advantage has leveraged its data insights of college students to sign up 15,000 business partners.
TIES THAT BIND TIPPER TIE
Apex, North Carolina
Tipper tie, a $94-million-a-year division of Dover Corp., is the world’s leading manufacturer of aluminum clips and wire machines for the food-processing industry. The Apex, N.C.-based company’s typical customer uses costly machines that wrap and seal its products?everything from a summer sausage the size of your pinkie finger to 8-inch-diameter Italian mortadella meats. (If you check out the meat aisle in your local supermarket, those small metal clips that seal the plastic casings on chickens, hams and sausages are likely made by Tipper Tie.) The meat packers’ machines need service, new parts, and plenty of wire and clips. Tipper Tie’s field sales reps and service technicians make in-person visits to customers, and a call center fields their questions, requests and complaints.
Competition in this quiet market began heating up two years ago when overseas competitors entered the United States and alternative packaging methods began making inroads with Tipper Tie’s customer base. Executives sought to beat back that challenge by responding earlier and more often to their clients. To do that, the company needed to change the way its customer-facing staff worked, including the eight call center operators, 16-member field sales force and eight repair technicians.
Kendra Bender, Tipper Tie’s IT manager, says the company recognized that it needed to provide easy access to up-to-date customer data to its sales team, technicians and customer call center. The former setup left sales reps blind to customer concerns. “We didn’t have a way to get any complaints or special needs out to [the sales reps] in a timely way. They might spend three-quarters of their sales call dealing with old complaints instead of selling [new products],” Bender adds.
By linking its sales reps in the field and call center into the same continually updated customer data view, Tipper Tie could trim the time sales reps had to spend listening to customer complaints, for example. The reps would be able to prep themselves prior to their sales calls by reading up on technical service problems the customer had logged, machine repairs, parts sales histories and any gripes their call center had entered into the company’s centralized system.
Tipper Tie anticipated that providing sales reps with the same customer view as call center operators and service technicians would increase the time sales reps could actually sell products. Such a system could also trim the cost of generating sales leads and produce more sales from its best customers by providing better service and better communications between its service channels.
Last fall, Tipper Tie began implementing Siebel Systems’ standalone call center and sales-force CRM modules. Since December, when the system was put in place, Tipper Tie estimates that each sales rep has approximately 18 more days per year in face-time selling that they would have spent generating reports or dealing with peripheral issues. The company has also been able to increase its sales territory without increasing its number of sales reps and has trimmed a sales support IT job with the automated system in place. Bender estimates that Tipper Tie’s Siebel system will pay for itself in a little over two years (though she declines to cite the cost of the investment).
Even though Bender can project a real benefit for Tipper Tie’s project, she says that during the planning stages she made sure that she didn’t oversell what the CRM applications could do. “In our initial presentation to our executive board we said, ’No software package will increase our sales. What this [software] will do will allow us to understand our customers better, track things better and look more professional in front of customers,’” she says.
And in another key move, Bender says her staff didn’t force the new applications on her users. In the planning stages of the project, call center and sales reps were interviewed about how they did their jobs, what processes they used and what customer data they needed. Bender’s group found a need for precise sales data, including dollars spent, number of units bought, parts purchased, and current and prior year sales.
Then after the small but critical step of carefully checking consultants’ backgrounds and references, Bender brought in a pair of consultants to implement the system. “I didn’t just bring in consultants and turn them loose?our [IT] teams worked closely with them for knowledge transfer, and I asked for semiweekly updates to avoid surprises,” she says. Her diligence paid off. At one point Bender discovered that a consultant had spent most of a day configuring the system to have the Tipper Tie logo appear on each of its screens. “She was about halfway through when I found out what she was doing,” Bender recalls. “For $200 an hour I thought we could use her talents more sensibly.”
Once the system was developed, Bender picked a small group of dynamic sales reps to be the test guinea pigs. “We chose people who had positive, upbeat personalities for our pilot project because we knew they would help us convince others once they saw how this would help them,” she says. The team members actively used the software for one month and then made a presentation about their experience at Tipper Tie’s annual sales meeting last December. “Their presentation was so positive it galvanized everyone else?there wasn’t any way [sales]people could drag their feet after that,” says Bender.
Bill Burkhardt, a Tipper Tie sales representative in the Northeast based in Pittsburgh, was one of those enthusiastic early testers. “I just told people how easy it was to use and how useful it was to have all of that information going into a sales call,” he says. “When I first started as a sales guy, I was just given a printed out account list of clients and phone numbers and told, ’Go get ’em.’ The system now allows us to be much more responsive to customers by providing better communication between the customer and the company.”
Cross-functional and pilot teams are keys to success, says Elizabeth Herrell, an analyst at Cambridge, Mass.-based Giga Information Group. By employing these teams early in the planning stages of CRM projects, “it saves a tremendous amount of time and effort later on by including their insight expertise and gaining their support,” she says.
RETURN TO SPENDER HEWLETT-PACKARD
Palo Alto, Calif.
Paul horstmeier, a 14-year veteran of Hewlett-Packard who took on the position of e-marketing manager two years ago, quickly realized that the computer industry giant had made a mess of its attempts at e-mail marketing. The company’s typical customers include IT managers whose business division has purchased servers, printers and services from Hewlett-Packard. These customers also include managers in other parts of the business, and those managers request e-mail updates and newsletters that tell them when new printer drivers are available, when security updates are posted and when product updates come to market. Once in a blue moon they call a customer help line, but they’re much more likely to get most of their answers from online sources. Customers like these love getting news and updates by e-mail and are quite responsive to online marketing offers.
Even with that knowledge, HP, based in Palo Alto, Calif., wasn’t using its Web presence effectively, Horstmeier says. HP had been steadily collecting business customer data and e-mail addresses from all of its sales channels but didn’t have a central program or strategy for e-mail marketing. At times, as many as nine different marketing groups would blast out e-mail marketing campaigns to segments of the list, but each one was a single shot effort. “They weren’t coordinated, they weren’t leveraged in any way, and we didn’t learn from them,” Horstmeier says. Instead of (by some fluke) promoting loyalty among its business customers, these efforts were more likely to promote irritation by inundating people with information they didn’t want or ask for, he says.Horstmeier recognized that in order to provide useful benefits to HP, his group needed to take control of e-mail campaigns from those nine different marketing groups. It also had to champion the customer-centric idea that marketing should be a long-term process that focuses on the life cycle of customers instead of looking at a sale as a singular occurrence. “We didn’t do this in a vacuum, though. We worked with HP’s larger CRM strategy groups to figure out what we could do with e-mail marketing that would fit into the larger CRM framework,” Horstmeier says. That meant Horstmeier’s group had to focus on the e-mail marketing piece while coordinating its efforts with the larger corporate picture that included other customer-facing groups like call centers and customer service teams.
The reverse was true too. HP at large had to understand what Horstmeier’s group was up to, says Mike Overly, worldwide CRM manager for HP’s business customer organization. HP is in the process of rolling out a worldwide system that shows a single, unified view of customer contacts, says Overly. “We need to do this in order to provide a consistent customer experience, and [the e-marketing group’s] work is a rock solid piece that will be tightly integrated into that single-customer master.”
To accomplish that goal, the e-marketing group brought in e-mail analysis, segmentation and personalization tools from San Mateo, Calif.-based Digital Impact. By analyzing its e-mail databases, HP found that its business customers fell into two groups?IT managers and end users. So instead of immediately churning out more e-mail campaigns, HP set out to learn what these groups wanted through small pilot tests. The company found that IT managers were willing to tell HP exactly what kinds of general product and support alerts and newsletters they’d like to receive (such as laptop support newsletters and discussion forums, print driver updates, and new product introductions) while end users wanted much more specific information about the exact product (network server, PC or printer model number) they’d purchased and how to use it.
Horstmeier and his group decided to provide exactly what these two groups asked for, but they wanted to find out which type of marketing campaign best suited each customer’s individual preferences. So HP embarked on a carefully controlled project comparing an e-mail campaign with a direct-mail offer. He says his team looked at both cost savings and revenues generated from both campaigns, and studied the e-mail marketing’s effect on the customer experience. The results showed that more of their customers responded to the low-cost e-mail offer, making it over 20 times more cost-effective. (It costs $1 per direct mailing per customer but only between 10 and 15 cents per customer to create and send monthly e-mail, for more than 1 million customers per month.) Customers also said they loved getting the e-mail alerts and updates with more than 85 percent saying they were quite satisfied with the content they received. And the e-mail campaigns generated an estimated $15 million in new sales revenues per month, Horstmeier says.
As for cost savings, the e-marketing division estimates they save a half million dollars per month by combining and reducing the multiple e-mail campaigns. By sending out product support alerts and e-mails, the resulting reduction in calls made to support lines alone saves close to $150,000 a month, Horstmeier says.
“We found that we can deal with IT managers with a one-to-many campaign where they all get some of the same e-mails. It’s high volume and quick,” Horstmeier says. But the company’s customers “require more tailored campaigns that fit their specific situations?these require a deeper level of personalization and detail, which bring us a greater level of detail in return.”
STUDENT CONNECTIONS STUDENT ADVANTAGE
Even though it knows its customer, Student Advantage has the added challenge of pinning down targets that move?literally?on a regular basis.
The typical customer for the Boston-based marketing company is a college student who’s looking for discounts on everything from bagels and bikes to textbooks and train tickets. They have both a home and school mailing address, but their school address often changes every year, so pinning down their actual physical location can be tough. They are voracious e-mailers and eagerly respond to online offers and targeted e-mail marketing campaigns.
Student Advantage began business in 1992 by providing discount cards to college students. The company’s business plan was to sign up local businesses in college towns that wanted to increase their student foot traffic and then give out discount cards listing those businesses to students. In 1995 and 1997 the programs broadened to a national scale when Student Advantage signed up American Express and AT&T to provide both companies card offerings to its student members. Four years later, Student Advantage launched its first website, a rather primitive online billboard. The company has since expanded into a broad and potentially lucrative network of interactive college student discount and community sites. (Student Advantage makes its money by charging members an annual fee and charging business partners that want to advertise their services on its website or through e-mail campaigns.)
The company’s current holdings include its flagship discount program, student and alumni communities CollegeClub.com and FANSonly.com, student loan resource center eStudentLoan.com, and a free newswire for college media called Uwire.com. Students now register online for each program and then use their Student Advantage ID number for discounts at more than 15,000 brick-and-mortar stores and online business partner websites ranging from Amtrak and US Airways to Tower Records. Student Advantage marketers also keep members informed about special member offers with tailored e-mail notices and updates. All of the partners’ sales data and the members’ information are collected in a data warehouse along with data that comes in from Student Advantage’s call center.
The company has begun applying e-marketing and warehouse analysis tools from E-piphany and customer care tools from Egain and Siebel in a focused CRM effort to better understand how its products are being used and to maximize ROI on marketing opportunities to its client base.
Early on in the process the company realized it had to focus on keeping just the types of demographic, geographic and purchasing data it could use for better segmentation and analysis. “We had a tendency to keep too much data because we thought we’d use it somehow, someday,” says Craig Macfarlane, chief technology officer at Student Advantage. “But there is a storage and performance cost for every field you’re tracking.” Macfarlane and his group rethought their efforts and trimmed the fields they tracked to match what their business partners were looking for. They chose not to rely on telephone numbers (since those often change frequently and have limited marketing usefulness) and discarded student ISP data, too, because most students use a school .edu address, so there wasn’t a marketing case to track the anomalies.
Student Advantage is also a firm believer in starting small with pilot projects. “Pilot programs have helped us analyze how new programs are working and let us tinker with and adjust them before rolling it out,” says Macfarlane.
One of its first successful CRM applications was a targeted e-mail offer for Amtrak discounts it sent to college students around the country whose schools were within 30 miles of an Amtrak station. The offer of discounted train tickets was snapped up by students, and Amtrak saw a “significant increase” in student ridership, Macfarlane recalls. In the first year of the program, more than 90,000 train trips were purchased by Student Advantage members, raising close to $4 million in revenue. In the fifth year of the program, members booked more than 300,000 trips, generating more than $13 million for Amtrak.
More recently, Student Advantage has been dicing its database of 2 million registered users into very small segments. “One of our partner-advertisers only wanted to target students in Florida with their offer, and Dollar Rent A Car was interested in only reaching students over 21,” says Sarah Suppes, vice president of marketing at Student Advantage. “We were easily able to do both and charge [the advertisers] a higher cost-per-million to focus [an e-mail campaign] so narrowly.”
Another Student Advantage goal is to use CRM to ease customer service down a level: from phone to e-mail and from e-mail to webpage FAQs. Updated FAQs help keep the volume of e-mail questions down. Prompt e-mail responses likewise keep down calls to the customer service call center. “We’re handling many more support questions by e-mail now than we were a year ago,” Macfarlane says, and the ratio of e-mail to phone questions has been swung the way Student Advantage has intended?toward e-mail.
This year for the first time the company has also developed a membership renewal campaign to proactively reach out to students instead of waiting for them to re-up on their own. Students pay $20 per year ($10 to renew this summer). “Doing this in any sort of direct [U.S.] mail campaign would be prohibitively expensive, and mailing address data for students is notoriously incorrect because so many move every year,” says Suppes. “By running an e-mail campaign we’ve already had thousands of students renew in just the first weeks, two months earlier than ever,” and quickly generated more than $70,000 in revenues.
To gather all this useful data, Student Advantage had to help students understand how they benefited by giving precise personal data. “For some of our services students didn’t see the value in filling out every field accurately,” says Suppes. “So we showed them what kinds of offers, like last-minute air fares, they would receive if we could dependably and reliably contact them. We had to show them what was in it for them.”
The next steps in Student Advantage’s CRM programs involve a type of on-campus cash card that parents could add money to from afar and students could use to buy books, meals and other college necessities in on-campus partner establishments. Information about purchases would feed back to the Student Advantage data warehouse and provide even more granular and precise data about students’ buying patterns and behavior. The marketing possibilities at that point are almost boundless, and, Macfarlane says, those types of projects combined with the power provided by CRM will cause “the biggest transformation between where we are and where we are going.”
Even so, the potential impact of CRM projects can’t allow companies to lose sight of the fundamental power in customer contact. CRM must be used to help each customer feel special, says Don Singleton, Student Advantage’s senior director of customer member services. “It doesn’t matter if you have 10 customers or a million. Every time a customer talks to you they want to feel like they’re your only customer.”