Magazine Article | May 1, 2001

Multiple Channels Call For CRM

Source: Innovative Retail Technologies

Changes in retail traffic have required retailers to take another look at their customers. How can retailers in the multichannel world benefit most from a CRM (customer relationship management) solution?

Integrated Solutions For Retailers, May 2001

With customers coming at retailers from so many angles, the need to manage each customer interaction will eventually make or break retailers' bottom lines. Jupiter Research published a survey that found shoppers who enter the retail world through multiple channels buy 30% more than those who shop through one channel. This shows that today's consumer is a multichannel consumer - but are all retailers equipped to handle the multichannel traffic? Internet and direct channel personalization have also raised consumer expectations for customer service, putting more pressure on retailers to achieve a 360-degree view of their customers. Advancements in CRM (customer relationship management) technology have started to account for the expanding marketplace, but retailers need to make sure they are looking at their operation and customers as one - not separate channels or interactions. Randy Covill, senior retail analyst at AMR Research, and Andrew McGlasson, senior marketing manager at Retek, discuss the latest trends in CRM and how retailers should manage not just their customers, but all the data that comes with them.

Define CRM (customer relationship management).

Randy Covill (RC):CRM is rooted in sales force automation, which provides a way for sales representatives to list all of their contacts and keep track of who they contacted and when. It also evolved from customer service call centers. Customers would call in when they had questions about or problems with a product, and the interaction would be logged in a database system. Then these two components merged to be used in other areas of business. The Internet required a third component to manage the interactive customer experience on the Web. The retail CRM concept looks across all retailing channels to get a single and consistent view of the customer and manages that view.

Andrew McGlasson (AM):Basically it is managing every customer interaction to the benefit of the organization. Retail is such a unique business not only because of the number of interactions, but also the unique types of interactions; CRM can be really confusing if retailers don't look at it from inside their operations. Retailers need to use CRM to gain a holistic view of their customers - identify touch points and where they occur, then manage them to increase their effectiveness.

How does CRM relate to customer service?

Andrew McGlasson (AM):A lot of business approaches over the past year have favored bells and whistles, so e-tailers have moved away from the fundamentals of straightforward, consistent fulfillment of customers' requests. But with a multichannel model, the fundamentals are more important than ever. It is a challenge for retailers to consistently manage orders and service requests that enter their systems in many different ways. In the past two years, some retailers looked at each new opportunity (the Web, call centers, kiosks) individually. In doing so they developed stove-piped systems to serve each channel. This fragmented their customer service.

How can retailers successfully manage their customer relationships?

Randy Covill (RC): I think it is very important that retailing companies have a single, consistent view of the customer. I would warn retailers not to have separate views. For example, if a customer goes into a store and returns a product he is unhappy with, then goes to the Web site the next day and is offered that same product that he just returned, obviously this is a problem. To manage customer relationships you have to see every interaction. This involves managing the whole fulfillment process - including shipping and delivery of the product, product returns, recalls, and warranties.

What CRM challenge has arisen as retailers branch into multiple selling channels?

Randy Covill (RC):There is really no CRM vendor out there that offers a complete cross-channel view of customer margin. Retailers need to mine their customer information, analyze it, and identify ways to motivate shopping behavior. Retailers need to identify specific actions they can take to motivate different shopping behavior based on the analysis they have done from their CRM data across channels.

Andrew McGlasson (AM):Retailers need to avoid channel fragmentation, understand the massive amounts of data, and act on it. It is one thing to have a CSR (customer service representative) who can browse the site with a customer, but managing those interactions so that they add value is another. Some retailers think they need a separate retail concept to maintain their Web offerings. This has value for the short term, but as far as overall growth strategies are concerned, it doesn't work.

How can technology help retailers manage their customer relationships?

Andrew McGlasson (AM):Managing the transactions has to be done through a central customer system where the retailer can build on the strength of one channel to enhance the others. Retailers say their customers are always first, but if they look at their system architecture from a technical standpoint, they will find that the customer is dispersed throughout the enterprise. There is a little bit of me as a shopper in a retailer's POS (point of sale) system, on the Internet, and in the catalog system. This makes for an inconsistent retail operation. Technology that can get those channels to work together earns greater revenue and reduces costs of acquiring, selling to, and servicing those customers.

What features are important in a CRM solution? Please provide examples.

Randy Covill (RC):I think the most important feature is that the solution be multichannel. Retailers need to collect customer information from their Web sites, call centers, and store loyalty programs and merge all of it into one file. That way if someone wanted to look up a specific customer record, it is all there. The kinds of information that are important for a company to collect include the amount of revenue and cost that the customer represents to the company. Then a company can chart the revenue and expense for certain customers. A CRM system that can do that will enable a retailer to break through barriers to profitability. However, most solutions today do not calculate margin per customer. If a retailer knows the margin per customer, it could match those numbers to customer buying behavior. If a customer returned two out of every three items she purchased, the retailer needs to give that customer incentives to change that buying behavior. I think the technology exists for CRM solutions to contain this feature, and the vendor that brings it to market will improve retailers' bottom lines.

Andrew McGlasson (AM):The increase of multiple channels has been a tricky proposition from a technology standpoint. An inability to manage channel conflict can be detrimental to a retailer. Technology is driving more competition for retailers which enables more changes in consumer behavior which then fosters more technology innovations. The CRM system needs to be flexible enough to add on other technology channels that haven't been invented.

What does the future hold for CRM?

Randy Covill (RC):CRM companies need to calculate margin per customer. They have done a good job on the revenue side, but not on the expense side as of yet. Another solution on the horizon is software that will look at customer satisfaction data (the number of complaints) and give retailers a probability calculation to predict the likelihood that a customer will leave or switch suppliers. The software calculates customer turnover and can generate an e-mail to the customer offering them a discount to stay. This is known as prediction software because it predicts human behavior. I think we will also see more retailers figuring out what motivates customers and then taking actions to motivate that behavior. At the end of the day CRM is about getting people to buy, and retailers want to motivate purchases that are the most profitable.

Andrew McGlasson (AM):As retailers follow this holistic view of managing all of their touch points together as opposed to individual touch points, you are going to see many creative synergies. I think the near future of CRM and the Internet will include exploration between multiple channels, better ways to market retailers' brands, and ways to increase retail revenue. I know of a retailer that has 17 different channels in its strategic plan. That includes everything from B2B (business-to-business) kiosks to wireless e-commerce. CRM will need to enable more responsive growth as well as effective management to meet those various touch points.

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