Too Many Executives Are Missing the Most Important Part of CRM

For all the emphasis placed on customer relationships these days, very few large organizations really understand how to manage them. Whether you’re a corporation, a nonprofit or a government agency, chances are that your approach to customer relationships at a system-wide level begins and ends with CRM (customer relationship management) software — yet its implementation rarely does much to foster real relationships. As a consultant, I’ve seen dozens of CRM implementations in a wide range of organizations, and consistently find that they fail more than they succeed. This isn’t the fault of the technology or the CTO, who usually manages it. It’s a result of misguided strategy.

The problem is that CRM’s purported goals are vastly different from the way it usually functions in real life. For most organizations, it’s calibrated to drive sales, which means sales conversions are the primary metric it follows. Moreover, CRM implementations tend to entrench ineffective practices rather than introduce new ones: contact your average CRM consultant and the first question you’ll likely get is, “What’s your current process for customer management?” This approach might make sense when bringing in accounting or supply chain management software, where the greatest gains come from bringing order and clarity to an existing system.

Relationships aren’t numbers, though, and CRM isn’t an efficiency tool. It’s a relationship-building tool — that’s why there’s an “r” in it — and it’s one of your only opportunities to put real effort and resources toward developing your network of relationships. By treating it as merely another piece of software to optimize, most organizations squander this opportunity.

Turning data into action. Instead, CRM should be an executive concern, not just an IT one. Because it involves software, many companies make it the CTO’s responsibility. But relationship management also depends on policy, incentive structures and people. In the brand-driven environment of modern commerce, no strategy impacts your business more than how relationships are managed, inside and outside the organization, and that’s an executive role if ever there was one.

But how does the relationship-savvy CEO or CMO go about mending these gaps? In my experience, relationship leadership boils down to three essential components.

Setting a vision for your relationship network Great organizations have a strong sense of purpose — this has been argued and proven so many times that I won’t rehash it here. But for some reason, purpose-setting tends to evaporate when it comes to relationships. Just as there are many purposes that can make a company great, there are many kinds of effective relationship models. In both cases, it’s the CEO’s job to form a vision for which direction to take, and embed that vision within the organization.

Think about the relationships that Amazon, Patagonia and Airbnb have with their customers. Amazon is about connecting people with the information and vendors they need, while Patagonia fosters a community of like-minded explorers and environmental stewards. Airbnb blurs the line between provider and consumer, to encourage deeper personal connections—even, occasionally, at cost to the company. Each model is clearly stated and universally understood, internally and in the market. Without this kind of clarity, there’s little beyond sales conversions for CRM to track.

The Airbnb example is particularly instructive. Its business model — an online marketplace for peer-to-peer lodging — was already established by services like HomeAway and VRBO. But Airbnb surpassed both of them by actively encouraging hosts and guests to form genuine relationships. Members are urged to provide photos and background information, hosts contribute to online city guidebooks, and the company rewards its especially responsive hosts with greater visibility and even small gifts. Individually, each gesture is small, yet they add up to a community that emphasizes relationships over strictly transactional interactions.

CRM is a crucial tool for making this happen, but only if there’s a clear goal for it to pursue. This starts with organizational leaders asking the question, “What relationships are critical to the success of my business?” And it continues with the question, “How do I support those relationships to help them grow into a community?”

Prioritizing the right relationships A good CEO knows that not every relationship is equally important, and not every important relationship is about money. Often, the most valuable people in your network are those who are most engaged, who take the time to learn about your brand, who proactively share their enthusiasm or who are simply well connected to potential new customers. The key is figuring out which of these behaviors correlate to success for your organization, prioritizing the relationships with those who have them and then letting those people know they are important to you.

The highly targeted buyer and seller rating system that eBay uses makes an excellent example. Not only does it reward consistent positive engagement over the long term (a more important metric than dollars spent), it also steers buyers toward sellers likely to provide a good customer experience. Beyond the technological back-end that lets the site function, this is eBay’s real value: an intentionally built network that pushes eBay’s most valuable members to the forefront, empowers them and inspires the newly engaged to follow suit.

Assigning metrics that measure relationship activity To be fair, most CRM software can track more than just sales actions, yet very few implementations actually do. This omission stems from a lack of intent, and it’s up to the organization’s leadership to correct it.

How often are customers logging into your site? Are they creating content and discussing your brand unprompted on social media? How about referring new customers, or contributing to support forums? By combining and correlating metrics like these, it’s possible to measure not just who’s in your community, but how active they are, and whether the community itself is thriving.

Find metrics that measure relationship health, not just sales. EBay’s seller ranking system, mentioned above, grants “PowerSeller” status to members who transact frequently and earn consistent high marks from buyers. At Airbnb, getting repeated five-star ratings from guests and responding quickly to booking requests puts you on the path to “Superhost” status. Each program comes with perks that incentivize certain behaviors, but also combines metrics in a way that helps these companies track the health of their community.

When strategically designed, CRM can measure all of these things, and, when properly managed, it provides that most crucial of insights: how important your organization is in people’s lives.

Great relationships matter because they’re durable. More than today’s sales numbers or quarterly reports, your “relationship numbers” let you know whether your organization will continue to thrive in the coming years. CRM is a tool for finding this out, and for helping correct what’s not working. As with any tool, it can do as much harm as good; its value stems from strategic design and supported implementation. Success starts with the right people asking the right questions. In this case, success starts with an aligned leadership team setting the direction for a culture of relationships.

TAKE AN ACTION! THE FIRST STEP IS CONNECTING. info@devspark.lt