Improving CRM Investments


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Here\'s a white paper I wrote to better help our clients understand the purchasing cycle from the buyer\'s perspective. Happy reading!

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Improving CRM Investments

  1. 1. WHITE PAPER | ENGAGEMENT SYSTEMS improving crm investments opTiMiziNG ThE cuSToMEr lifE cYclE wiTh iNTElliGENT MArkETiNG AuToMATioN
  2. 2. WHITE PAPER | 1 InTEllIgEnT MARkETIng AuToMATIon EMPoWERs CoMMunICATIon THRougH TECHnology The technology evolution is replacing live human interaction. GpS systems give better directions than a passenger with a map. Elementary schools have changed their curriculum to better prepare students for the day computers become smarter than human beings. Many people spend more time with their cell phones, ipods® and Blackberries® than with other people. And yet most people feel more connected to their friends and families today, than they did before the advent of mainstream technology.1 This is also true in today’s business environment, where the basic premise of relationship building through good communication is growing more dependent on technology. however, people still buy from people, not from computers. crM systems promise results through improved communication with prospects and customers, yet most companies are still struggling to figure out how to make that happen and to realize a return on the investments made in these systems. read on to discover why crM systems have failed to effectively build customer relationships, and to learn how to reverse that trend by better utilizing these systems in combination with the customer life cycle to increase sales and reduce costs. PART onE: AssEssIng THE CuRREnT sITuATIon the truth About Lead generation And Follow Up whether the marketing staff size is one or many and consists of internal employees, agencies or consultants, their primary responsibility is to be the creator and keeper of the brand. Through the creation of advertising and marketing materials, marketing staffs focus on consistently getting the word out about the company, resulting in brand awareness, but not necessarily more revenue. Typically marketing departments are responsible for lead generation and are routinely measured on the quantity of leads delivered to sales, with little attention to the quality of those leads. Trade shows are a perfect example. Small fortunes are spent on booth displays, marketing materials and travel expenses. The result: a considerable number of “leads” in the form of business cards collected at the event. however 80% of these leads never receive any follow up.2 The internet has also changed lead generation by making it easy to collect large amounts of prospect data. using information and entertainment as bait to capture contact data, masses of leads are dumped into crM systems. The reality is that the majority of leads today do not go through a formal qualification process and, if not 1 pew internet and American life project, 2008 2 center for Exhibition industry research (cEir)
  3. 3. WHITE PAPER | 2 immediately ready to purchase, are deemed unqualified prospects by sales. Buried in all those leads are qualified prospects who will buy at some point in the future, but they go unnoticed. As marketing automation platforms become the latest panacea to fix crM systems, marketing 70% of consumers departments have taken advantage of the opportunity to communicate with prospects and customers interviewed said they were using automated methods. for most this means a dependence on email only; sending auto-response “more likely to respond to “thank you” emails, or generic email messages that are personalized and “dripped” to the customer or remember something if or prospect over a period of time. however, even the best communication makes no impact if it is not it is communicated by received. Email appears to be delivering the message, but unfortunately email can be a hit or miss mail and email.” medium. That great prospect that is truly interested, or customer who is ready to buy more, is not Quadrangle always getting the message. closed sales, not Leads, pay the Bills for most companies, the sales process does not change after a crM system is implemented, other than lead and customer information is now being stored in this central repository. Most salespeople Today, 80% of all sales are feel that adding and updating prospect and customer information is just another administrative task made on the 5th-12th contact. they don’t have time for, and they perceive crM as one more way for management to keep tabs on 15 years ago it took only an their activities. They don’t recognize any tangible benefit in being able to perform their role more average of 2-4 contacts before effectively.3 As a result, many companies become frustrated over the lack of adoption by their sales concluding a sale. staff, and struggle to find a way to persuade them to utilize the crM system. however the underlying reason for poor crM adoption by sales people is often overlooked: closed sales, not leads, pay their The National Association of Sales Executives bills, feed their children, and pay for their new house. Because of the monthly or quarterly sales cycle, salespeople still cherry pick the leads that will close in time to hit the next commission check. prospects that are not buying in the immediate future fizzle away in the abyss of the crM system, untouched by sales and receiving occasional, if any, communications from marketing. the Battle Between sales And marketing optimizing any crM system requires aligning sales and marketing to function as a team. however, lack of agreement on metrics, what makes a lead qualified, the amount and types of marketing material needed, and who is responsible for executing marketing communications tends to drive them in different directions, instead of bringing the two departments together. This becomes even 3 “The challenge in crM is really specific to the sales and marketing applications. Much of the (crM) software on the market today helps automate process, but doesn’t necessarily provide incremental value back to the user. Salespeople often complain that crM or SfA is just an administrative burden, and does little more than prove to their boss that they are doing their job. So adoption wanes, and users go back to using familiar tools like spreadsheets, databases or even just rolodexes.” -robert Bois, research director for AMr research
  4. 4. WHITE PAPER | 3 more complicated when consultants, agencies and contract employees provide all or a portion of the company’s marketing. finger-pointing between sales and marketing begins with the lack of agreement on shared metrics. in times of significant growth, both sides claim victory, and in challenging times, it’s easy to assign blame to the opposite party because there’s no clear end result that measures mutual success. As often occurs, marketing successfully generates a large quantity of leads, but sales stops following up on the leads when the majority are not ready to buy in the near term. without agreement on specific qualification criteria, both teams become disenchanted. The battle rages on as sales and marketing can’t agree on what marketing methods and materials are needed. Traditionally, some companies get bogged down creating the materials to be used in conjunction with a crM system. white papers, emails, descriptions of products and services, case studies, websites, blogs… the list goes on and on as sales demands more from marketing, while marketing can’t possibly provide materials for every unique situation. one of the core principals of customer relationship Management is maintaining consistent communications with prospects and customers. Yet neither team can afford to spend valuable time to deliver personalized, non-automated marketing communications. As a result, marketing creates generic materials to promote the company and generate more prospects, often with little thought about nurturing those prospects and retaining current customers. The battle between sales and marketing escalates over who should be responsible for lead nurturing and customer retention. Healthy investment, Unhealthy results The investment in crM and marketing automation systems is both strategic and financial. Strategically, it signifies a commitment to fostering prospect and customer relationships, and creates a central data repository for data-driven decisions. financially, the purchase decision is tied to an roi figure that must be met. There are reasons why 50% of business and iT executives are not satisfied with their crM applications. it didn’t meet initial expectations and didn’t quickly return the value they had planned for.4 upon introduction of a crM system, the focus often becomes getting marketing to generate leads to put in the system, and finding a way to make sales actually use the system. The outcome quickly reflects the lack of focus on the end game: an effective lead process that generates more sales. The result: sales don’t go up, costs increase, and finger-pointing between the two departments becomes prevalent. 4 forrester research Best practices: Getting the Most from your crM Deployment - July 2007
  5. 5. WHITE PAPER | 4 companies become focused on making the crM system work for them, forgetting that the real value The real value of a crM system of the system is making it work for potential buyers and current customers. is making it work for customers and potential customers. PART TWo: HoW To gET MoRE FRoM youR CRM sysTEM Define And Understand the customer Life cycle Just as businesses go through a life cycle, prospects and customers also follow a life cycle in their interaction with a company. Not all customer life cycle stages are the same. Depending on the product or service being sold, the stages and length of time in each stage can vary. Generally there are five stages to a customer life cycle: CoMMon CusToMER lIFE CyClE sTAgEs sUspect An unqualified lead who is an information gatherer. This prospect has unknown potential. QUALiFieD is qualified to become a customer and needs information throughout prospect the buying process to guide a purchase decision. neW has made an initial purchase and needs to be assimilated into a partnership cUstomer to avoid returning to the previous vendor or suffering from buyer’s remorse that could impact long-term sustainability. This adjustment period builds the foundation for rapid growth and repeat business. estABLisHeD has made repeat purchases over time and is in the growth and maturity cUstomer stage of the relationship. has a need for education on new products and services, and may have unmet needs; potential for up-selling and cross- selling. May be a key target for competitors. DecLining purchases are in decline or time between purchases lengthens. holds potential cUstomer for defecting to a competitor or going out of business. Figure 1.1
  6. 6. WHITE PAPER | 5 figure 1.2 displays what a common customer life cycle looks like for a company with multiple repeat purchases throughout the life of the customer. THE CusToMER lIFE CyClE lead generation lead nurturing Assimilation growth/Maturity Recession suspects qualified prospects new customers established customers lost/declining customers revenue Figure 1.2 realign sales And marketing efforts to enhance custom growth Breaking down the stages of the customer life cycle and then identifying where sales and marketing efforts are being applied, highlights where efforts are misaligned and can lead to a revised strategy regarding resource allocation. Not all companies apply resources in the same manner, but for most companies figure 1.3 demonstrates where sales and marketing efforts are being focused in comparison to the customer life cycle.
  7. 7. WHITE PAPER | 6 THE CusToMER lIFE CyClE Comparing Revenue to Sales and Marketing Effort lead generation lead nurturing Assimilation growth/Maturity Recession suspects qualified prospects new customers established customers lost/declining customers marketing effort sales effort revenue Figure 1.3 To make any crM system a revenue-generating machine, communication must match the needs of prospects and customers. figure 1.3 highlights that marketing efforts and budgets are typically focused on the front end of the cycle – generating leads – often leaving only a small investment remaining for building trust and an ongoing relationship through the critical life cycle Stages of lead nurturing, establishing new customer relationships, and fostering customer retention. loading up the front end of the cycle, only to lose revenue at the back end, sets up a stagnant cycle that results in flat sales and disappointing growth. THE CusToMER lIFE CyClE Comparing Revenue to Marketing Effort lead generation lead nurturing Assimilation growth/Maturity Recession suspects qualified prospects new customers established customers lost/declining customers marketing effort Majority of Marketing Resources Lack of Marketing Resources Lack of Marketing Resources revenue Figure 1.4
  8. 8. WHITE PAPER | 7 reallocating marketing resources to give better, more focused attention to prospects and customers throughout the customer life cycle results in a shorter amount of time to turn a qualified lead into a new customer, faster assimilation of new customers, and a much longer growth and maturity phase. (figure1.5) THE CusToMER lIFE CyClE Reallocated Marketing Resources lead generation lead nurturing Assimilation growth/Maturity Recession suspects qualified prospects new customers established customers lost/declining customers Marketing Effort Moved To improved Entire Customer marketing Life Cycle effort Shorter Lead Nurturing & More Time in Assimilation for Growth & New Customers Maturity improved sales effort improved revenue Figure 1.5 Although not all prospects and customers behave in the same way – nor do all customer life cycles look the same – the knowledge and application of identifying and mapping the stages, and then applying resources to best develop customers, is a worthwhile effort. By identifying the critical communication points for each stage of the life cycle, and then allocating resources to focus on those critical points, the crM system can become a viable tool to achieve increased revenue.
  9. 9. WHITE PAPER | 8 The final step in aligning sales and marketing efforts with the customer life cycle is to determine the objective, strategy, tactic, timing, message and offer for the communications to be applied at the various stages of the cycle. Developing a solid communication plan begins with common principles: What today’s • WHo wants or needs to hear from us? buyer is saying: • HAt do they need to see or hear to make a decision? W • ducate me when I’m E o WHAt are they trying to decide? it is not necessarily just a purchasing decision. ready to learn, not when other information may be needed to take the next step in the buying process. you want to teach me. • Hen do they need to see or hear the information? W • on’t hound me if I’m D • Here would they like to receive the information: in the mail, via personal visit, W not ready to buy, but telephone, email or internet? keep in touch. • nderstand WHy they want or need the information to make sure the communication is U • e there for me when I’m B relevant and speaks to their situation. ready to buy, not when • oW should the information be conveyed: conversation, chart, graph, research paper, H you want to make a sale. product brochure, demonstration, etc.? • on’t forget that I have D needs after i’ve become using the data within the crM system, companies can refocus their marketing communications an established customer. strategies on the buying process of prospects and the entire customer life cycle. Marketing activity • want to feel like I’m I should support long term sales growth by nurturing relationships among qualified prospects and with important to you. current customers. This allows sales to focus more effort on prospects that are immediately ready to buy to successfully create new business revenue and protects the organization’s investment in the current customer base. marketing And sales: partners in revenue growth What sales and marketing staff want from Getting sales and marketing to work together seems like an obvious solution. however, historically a CRM system: their differing incentives, goals and metrics have often created an adversarial relationship resulting • lerts when someone A in inadequate utilization of the crM system. To align these two teams, create shared goals, and break needs to be contacted so down the preconceived ideas about their roles in supporting one another. guesswork is eliminated • limination of excess E Traditionally, marketing is measured on the quantity of leads generated as reflected by the administrative work misleading metric of “cost per lead generated.” Salespeople often ignore or inaccurately • way to automatically A disqualify leads, resulting in two thirds of disqualified leads making a purchase from someone deliver our relevant, else.5 Determining what makes a prospect qualified must become standardized, so all subjectivity personalized is eliminated. with the appropriate add-on technology, prospect behaviors can be analyzed and communications matched to different stages of the buying process to help determine how close the lead is to making • etrics and reporting M 5 70 percent of all incorrectly disqualified leads purchased the product or service from another vendor. - wendover that supports a corporation unified goal
  10. 10. WHITE PAPER | 9 a purchasing decision. however, it is critical that these criteria be agreed upon by both sales and marketing in order to gain buy-in from both parties. Buying processes are longer today, and for complex products and services it can take months to more than a year to close a sale. however, 90% of companies that implemented a structured sales process in their crM system didn’t match the steps to their customers’ buying process.6 poorly timed sales processes that force a prospect into a premature purchasing decision will cause the prospect to become annoyed with the communication. They will assume future communications are irrelevant and will eventually “tune out” all attempts at engagement. Aligning both sales and marketing efforts to the customer buying process is critical for success. An attentive, correctly-timed approach to nurturing prospects until they are ready to purchase is a change for both sales and marketing. This requires the reallocation of the marketing budget to focus on creating and delivering communications to qualified prospects. Nurtured through automated marketing touches, prospects “raise their hand” by demonstrating behaviors that indicate they are ready for a live discussion with a salesperson. This makes the salesperson more efficient and better converts marketing dollars into sales dollars, thereby improving roMi (return on Marketing investment). Both sales and marketing should agree upon what marketing support is needed to achieve their shared goals. it is important not to alienate the marketing team by suddenly demanding multitudes of new programs and support materials that they are not adequately prepared to create. lack of expertise or general lack of resources should be taken into consideration and a plan developed to provide training or additional resources to develop the required materials. Developing trust and rapport between sales and marketing begins by holding both accountable for a common desired result: continual sales growth. in essence, sales and marketing must share the common goal of increasing revenue and become one voice to the prospect or customer. The crM system becomes the data collection and analysis point to determine what the prospect or customer needs to see or hear next, and when that communication should take place. implement intelligent marketing Automation to Deliver personal touches A crM system becomes a very expensive and resource intensive data collection device if the data is not used to impact a company’s growth and profitability. To put crM into action, a marketing automation solution must be integrated for every stage of the customer life cycle. leads are nurtured through the buying process with relevant, timely information that naturally moves them toward a purchasing decision. customers are informed and given the attention they need to increase 6 robert J Schmonsees - “Escaping the Black hole,” Thomson, 2005
  11. 11. WHITE PAPER | 10 the amount of time they spend in the Growth and Maturity stage. And finally, lapsed customers are quickly identified for immediate win-back initiatives. Marketing automation comes with a variety of bells and whistles, but certain functionality must be present to improve sales efficiency, increase effectiveness of marketing campaigns, and earn the trust of both sales and marketing. Triggers are the rocket science behind marketing automation. identifying prospect and customer 71% of sales and marketing activities and behaviors that indicate the need for more or less contact. Triggers are the intelligence executives have no process that make everything else happen. They detect when a prospect has moved further into the buying for identifying lost or inactive process and when a current customer’s purchasing pattern has changed. These triggers can be simple customers and 68% have or complex depending on your business, industry and capabilities. Some common triggers include: no process to predict how customers behave before • a prospect changing to a customer switching to a competitor. • a customer requesting a new product demonstration • a prospect’s status changing from “cold” to “warm” as identified through predetermined behaviors customer Sat 2007 Survey • a customer missing a regularly placed seasonal order • a prospect visiting your website multiple times within the same week • online shopping cart abandonment • algorithms and predictive models that indicate probability of purchase with programmed business rules, triggers can then automatically initiate the appropriate actions, including tasks for personal attention from sales, and automatic electronic and printed communications from marketing. intelligent marketing automation eliminates clerical activities for both sales and marketing. No licking stamps, stuffing envelopes, or sending emails the old fashioned way. The latest technology does all of that and more, by creating personalized web pages, surveys, dynamic content and imagery specific to the needs of each individual prospect or customer. intelligent marketing automation then delivers the information via the medium that is most effective for a particular phase of the life cycle or based on the recipients preferences: mail, email or online content. The best marketing automation solutions take efficiency one step further by creating affordable, personalized communications, delivered to one person at a time. literally sending one mail piece, one email, or creating one web page, allows relevant content to be delivered at precisely the correct time for each individual. These targeted and personalized communications connect with each prospect or customer by only conveying what they want to see or hear at that moment, and eliminate the expense of emails, mailings and phone calls that go to untargeted individuals.
  12. 12. WHITE PAPER | 11 finally, intelligent marketing automation builds trust through information. All prospect and customer Questions to Ask When behaviors, marketing touches and sales activities are automatically written back to the contact record in Determining Triggers For the crM system. This provides a 360 degree view of each contact across the organization, along with a your CRM system: history of exactly what has occurred over time. This allows simple analysis by users, more complex analysis • hat makes a lead ready for W for data mining, and data modeling to optimize ongoing efforts. Sales is able to review the marketing immediate attention? touches that have been delivered to individual prospects and clients, while marketing can use the results • hat information do our W of the campaigns to determine changes to the messages, offers, timing and medium. And management prospects need to see or finally has a tool to measure the impact of the crM system. hear to make an informed buying decision? suMMARy: sIx kEys To EMPoWERIng CRM • hen do they need to W hear it? using technology to build customer relationships requires six key elements to be in place and working • hat mediums are W together to maximize the investment. Because these strategies are synergistic, one missing piece most effective for direct impacts the effectiveness of the other parts. The six critical components to lead an organization to a communication? profitable crM solution are: • Phone Calls • Email 1. Build a solid communications plan and budget allocation based upon the entire customer life • Mail cycle and prospects’ buying process, not the organization’s selling process. • Online Interaction 2. foster a single unified sales and marketing team charged with mutual short- and long-term • Personal Visits goals and metrics to support achieving those objectives. • hat behaviors indicate W 3. implement a truly automated marketing solution based on programmed triggers to initiate a current customer is and manage communications. unhappy? 4. Match communications to the needs of the customer or prospect for their stage in the • hen does up-selling W customer life cycle by using personalized multi-channel communications to deliver marketing make sense? messages via direct mail, email and website landing pages. • hat can be done to W 5. Adopt a system that makes it possible to automatically deploy 1:1 communications, one person turn current customers at a time, with individualized content for maximum relevancy without adding administrative into advocates? work for sales and marketing. 6. find an affordable add-on solution that allows you to be confident the additional investment will create a positive roi. people buy from people, not from computers. At the heart of any business transaction are real, live people. intelligent marketing automation utilizes technology to communicate personally with
  13. 13. WHITE PAPER | 12 prospects and customers to put them back where they belong: at the heart of business. crM systems on their own are just fancy data collection devices. But enhanced with the right marketing automation solution, crM platforms can foster the connections required to earn the business of prospects and customers, while making sales and marketing more efficient. CAPTuRE. nuRTuRE. RETAIn. REPEAT. Four simple Words. one Advanced Application. Engagement Systems is the only web-enabled marketing automation solution where the execution of multi-channel communications including direct mail, email and personalized urls is native within the application itself. Through the use of programmed event and behavior triggers, Engagement Systems helps organizations address the entire customer life cycle, dramatically increasing lead generation results, prospect conversion rates, customer retention and overall lifetime value. Specializing in 1:1 marketing to one person at a time, the technology backbone has been used by nearly 11,000 customers and executed more than 14.5 million unique communications. To make your crM data actionable, call Engagement Systems at 866.938.3658 or learn more at WHITE PAPER • DECEMBER 2008 © Engagement Systems, All rights reserved