CRM (Customer Relationship Management) means different things to different people, especially in the digital age, where the term social CRM or cCRM muddles it further. If we have trouble defining it, imagine the difficulty in measuring CRM.
Strictly speaking, CRM means just what it says — managing relationships with customers. The concept became really popular in the 1980′s, when researchers (including Gronröos and the rest of the European IMP group, and Len Berry) found returning customers generated about 5X the ROI of new customers — a pretty profound difference supporting the value of keeping customers and generating customer loyalty.
In it’s infancy, marketers advocated for actions that built communities of consumption, such as the HOGs at Harley-Davidson, Apple communities like MACWorld, and NikeTown. Communities of consumption provided customer support, including peer-to-peer support that we now call user-generated content. But, more than that, communities of consumption gave consumers a place to hang out with like-minded peers to feel a part of something in a world of increasing isolation — see Putnam’s book, Bowling Alone, to understand the rise of these consumption communities.
Of course, even in its infancy, CRM was a little cloudy — crossing the lines of quality and services marketing. But, in the digital age, CRM now looks more like customer management, rather than customer relationships. That’s because firms like Salesforce.com have reduced CRM to managing sales efforts aimed at the consumer rather than trying to build a relationship with my customers through engagement, ensuring superior customer service, and treating them as individuals, rather than cogs in a wheel.
I mean, look at the top listing on a Google search for customer relationship management:
Notice, they’re all companies offering management tools for tracking customers and prospects through the funnel and allow easy communication with these individuals (and companies)
Of course, this limited view of CRM translates into metrics used to monitor the success of your CRM programs. And, this is a sad state of affairs, according to Ian Gordon at Ivey Business Journal, who says:
While many companies invest a great deal of money in building close relationships with profitable customers, their efforts are often unsuccessful because they fail to incorporate two important tools. The first tool is a method for setting relationship objectives and measuring the firm’s progress toward achieving them; the second is a strategic, integrated plan for managing customer relationships.
Instead of measuring CRM, firms commonly use surrogates such as customer satisfaction or it’s near relative, brand sentiment. Both fail to capture the richness of CRM. Or, they assess firm-centric measures including movement down the sales funnel, marketing communications, performance, such as ROI, and website visit data. Few customer-centric measures get included in CRM assessments at most firms.
What metrics should firms use to measure CRM? The answer draws heavily on notions from sociology in expressing success in other close relationships, such as marriage. Here are a few:
- consistent values
- customer satisfaction
- customer loyalty or loyalty value added
- number of customer complaints and complaint handling time
- share of voice
- CLV (Customer Lifetime Value)
- customer engagement
- First call resolution
- emotional investment in the brand
Measuring CRM the right way
The problem with most firms measuring CRM is they’re measuring from their perspective — what do I (the firm) get out of the relationship. While such measures make your CFO (chief financial officer) happy, its measuring CRM from the CUSTOMER’S perspective that actually enhances firm performance. Happy customers buy more and cost less to service than unhappy customers. So, measuring CRM should focus on elements critical for encouraging customers to engage with brands. Many of these metrics are listed above, suggesting a movement toward greater customer-centricity.
Some tools for measuring CRM need to look at the outcome of a relationship from the customer’s perspective: customer loyalty, satisfaction, complaint handling. But, more important, firms need to assess elements critical in the PROCESS of building customer relationships. Outcome measures just tell you how successful you are, process measures provide the more critical insight of how am I doing in creating relationships, which allows course corrections leading to greater outcome performance. Examples on process measures are metrics such as: engagement, emotions, reach, trust, and word of mouth.