Imagine a world in which a customer enters your store and hands you her loyalty card. You scan the card using a PDA (Personal Digital Assistant) and direct the customer toward the newly arrived fall line of her favorite designer. Your customer is thrilled to receive such personalized service; she didn't have to wade through other merchandise to find "her" brand, and you're happy because you've made a sale and hopefully earned a customer for life.
This is Customer Relationship Management (CRM) the way it is supposed to be, and for some retailers this isn't an imaginary world: it's reality. Retailers such as Future Shop, Best Buy and Prada are using CRM technology to create long-lasting relationships with their customers. At Prada's New York store, clerks - who wander the aisles with PDAs ready to scan a customer's loyalty card - can point out the perfect Prada bag to match those Prada shoes she bought there last week.
According to estimates, a properly planned CRM implementation can increase earnings growth by 40 percent per year. Aware of the potential, retailers are responding: almost one-third of small- and mid-sized consumer goods retailers are planning to invest in a CRM system in the next three years, as reported in Info-Tech's Retail: 2005 Budget and Staffing Report (see Retail Technology Implementations chart).
Choosing a CRM vendor can be tricky, though. While there is a myriad of CRM vendors out there, smart retailers will focus on those that target the retail industry specifically, and focus on companies of a specific size. For example, don't choose a vendor who caters to chain department stores when you own a single boutique. If you're a small- or mid-sized retail outlet with a modest IT budget, be sure you select an easily modifiable system that can provide most or all of the functionality out-of-the-box. In that situation, the ideal vendor also will provide functionality on a modularized basis to reduce system costs. On-demand solutions offer the added benefit of short implementation times and reduced strain on the IT infrastructure.
Once you've chosen a vendor that focuses on the retail industry and has a solution that fits your budget, ensure that the system benefits both you and your customer. Customer satisfaction and retailer financial performance are inextricably linked, yet few retailers use customer satisfaction as a metric for CRM success.
Retailers have traditionally adopted CRM for database-driven mass marketing initiatives. Retailers that make this their sole focus, however, are missing out on in-person interactions that are more directly linked to increasing customer satisfaction. Following are six key customer-oriented components that contribute to a successful CRM program.
Loyalty-rewards program support - When implementing a rewards program many retailers don't consider that it costs less to keep a customer than to attract a new one. By tracking purchases either on-line by name or through a loyalty card, you can reward your best customers with specific pricing and promotions and keep them coming back.
Customer purchasing history capabilities - It's easy to become the Prada of your market if your CRM can track a customer's purchasing history. Customers will keep coming back because you know what they want, all at the swipe of a card.
Serial number tracking for warranties -This is one of the cornerstones of good customer service. By keeping serial numbers on-line, connected to a specific customer, a customer can easily return a defective item directly to your store.
Customer-by-customer data mining at Point-of-Sale (POS) - Some vendors provide analytics systems that sit on top of CRM software. They work in real time to give store managers a complete picture of the customer, which can result in better cross-promotional opportunities. While the cost of such systems can be steep, it's worth considering because the potential payoffs are significant.
Multi-channel CRM - Some CRM systems have full POS integration, allowing clerks to view past purchase patterns, regardless of whether they were made in-store, on the Web, or via catalog. This allows staff to up-sell, cross-sell, and advise customers on products and services before they leave the store.
In-store technology - The retail industry is plagued by high staff turnover, resulting in low product knowledge and expertise among employees. To alleviate this problem, some retailers use self-service kiosk technology that is tied into the CRM system. Customers have easy access to product information, pricing and availability. This can increase customer satisfaction, resulting in increased sales and retention levels.
Assess the Market
Successful CRM programs feature strong analytical components. Knowledgeable retailers know that buying pattern information helps them to better place products within the store, resulting in higher sales. Most retailers collect information on their clients' buying patterns, but very few actually put it to good use. To get the most out of business intelligence analytics retailers should conduct focused marketing campaigns on specific customers, which are more economical than large mass mailings.
When researching the marketplace, be sure to track the demographic profile of your customers - that way you can ensure that you have the merchandise that's "hot" with your target audience.
Consumer goods retailers that plan to make significant investments in CRM need to understand that these systems are for more than just sending out mass mailings. Retailers that want to see real sales gains need to use their CRM systems to truly create a customer relationship.
Janet White is a research analyst at Info-Tech (www.infotech.com), an IT analyst firm focusing on small and mid-sized companies. She specializes in customer relationship management, purchasing and procurement and project management research.