In-Depth

Summing Up the Total Customer Service Equation

• By Bruce Hollinger
• 05/01/2001

In today's volatile economy, there is a growing focus on customer satisfaction and retention as the surest path to sustained growth and profitability. Businesses of every size are coming to the realization that while growing their customer base is important, keeping existing customers coming back may be even more so. With the dawn of e-business, the need has become even more urgent. As a result, there is an upsurge in the amount of resources being committed to Supply Chain Management (SCM), Customer Relationship Management (CRM) and e-business software.

In a recent e-business investment survey of Global 1000 executives, AMR Research learned that, despite prospects of an economic downturn, 87 percent of respondents say they plan to "sustain or increase their budget initiatives on sales and customer management," citing these initiatives as "strategic differentiators." More than 80 percent of respondents also cited supplier management and e-business initiatives as key to reducing costs, improving customer service and increasing revenues. (Source:PR Newswire, Jan. 29, 2001)

Among industry-leading firms, the feeling seems to be almost unanimous that SCM, CRM and e-business solutions provide a potent remedy for increasing customer knowledge, improving the rate of repeat business and maximizing the profitable life-cycle of each customer.

While large global companies have the deep pockets and sophisticated IT infrastructures to implement multimillion dollar solutions, small to midsize enterprises (SMEs) do not. The great thing about technology solutions is that they can scale to size and, if wisely invested in, can help level the competitive playing field.

A few years back, forward-thinking SMEs discovered the value to be gained from integrated Enterprise Resource Planning (ERP) systems designed specifically for their needs. By automating and standardizing internal business processes, such as accounting, financials, manufacturing and distribution, ERP systems reduced costs by streamlining processes, eliminating redundancy, and improving accuracy and efficiency. With those cost saving victories now taken for granted, today's progressive SMEs are looking at the ERP system in a whole new light - namely, as a powerful information backbone on which to build extended supply chain, CRM and e-business applications. This trend is rapidly gaining momentum. Industry analyst International Data Corporation forecasts worldwide revenues for CRM will soar to $90 billion by 2003.

For the small to midsize player, the biggest obstacle to successful SCM, CRM and e-business is the difficulty of integrating these front-office and customer-facing functions with information stored in the back office enterprise system. Yet, most industry analysts agree that reaping the promised benefits of these initiatives -- including higher fulfillment rates, higher margins, better customer satisfaction and retention, and increased growth -- depends mightily on this integration.

Traditionally, the role of ERP was internal control to reduce costs and increase efficiency. Greater visibility of the enterprise also provided better information faster for strategic decision-making. The core functions of ERP clearly reflect its back-office position: financial management, accounting, payroll, human resources, materials management, production and distribution processes, including order entry, purchasing, and inventory management.

As more and more customer transactions were recorded in back-office databases, companies began to realize what a "gold mine" was contained therein. Enter the concept of Business Intelligence (BI). By tapping into the information provided by core back-office processes, companies could gather volumes of data relative to suppliers, customer credit information, payment history, buying patterns, order frequency, product preferences, overall profitability, and much more. Forward-thinking SMEs began to recognize the untapped potential of their ERP system and the competitive advantage to be gained in capturing and analyzing this data.

With this discovery, integrated information systems suddenly assumed a new luster, beckoning with the promise of top line profits rather than simply bottom line cost reductions. Concurrently, sophisticated database technologies, such as data warehousing, data marts, On Line Analytical Processing (OLAP) and powerful reporting tools enabled multidimensional analysis and rapid drill-down capabilities, as well as at-a-glance views and customized reports on sales information, production status and financial summaries.

Initially, BI was used primarily as a decision support tool, providing executives and managers with timely information to make better operational and strategic decisions. With the growth of e-business, however, the newest target of Business Intelligence has become the customer. Effectively applied, BI strategies and tactics can help a business rapidly identify trends and opportunities that have an impact -- positive or negative -- on its competitive position. With advanced BI technology, CFOs, for example, can look beyond the numbers and mine data from multiple sources to determine customer and sales demographics, buying patterns, supplier reliability, and customer profitability. Obviously, the more sources available from which to extract customer data, the more effective the analysis will be -- a factor which leads us directly to the front office.

For many SMEs, the first step in extending the ERP system beyond the four walls of the enterprise was Supply Chain Management. Launched over a decade ago, EDI was the first e-commerce initiative to affect the way information moved across the supply chain. Today, the Internet has become the fastest, most cost-effective and ubiquitous way to transmit information in realtime, causing companies of every size to build Internet-based intranets and extranets to promote collaboration and information flow among employees, suppliers, distributors and other trading partners. For most, the result has been measurable reductions in cycle times, order fulfillment rates, inventory costs and administrative time accompanied by dramatic improvements in customer service and satisfaction.

Arguably, the success of SCM has helped spur the growth of CRM and the recognition that Internet-based CRM solutions could provide a distinct competitive advantage. Studies have shown that it costs ten times more to acquire new customers than to retain and up-sell or cross-sell existing customers. At this rate, an incremental increase in customer retention rates would yield enormous profit over time.

Because of its long-term implications, CRM involves more than just technology, however. For SMEs especially, where competing on price is usually not an option, CRM can become a defining element of a successful business strategy. Rather than being internally focused, front office solutions, such as SCM, CRM and e-business, focus on delivering a high level of personalized customer care, contact and service. And, once embedded in the corporate culture, as well as in its information systems, CRM can create a powerful marketplace differentiator.

In terms of technology, CRM represents the next generation of contact management and Sales Force Automation (SFA), incorporating advanced features for customer support, marketing planning, and partner/channel relationship management. Typically, CRM application suites might include functions, such as account and contact management, lead tracking and opportunity management, calendars and scheduling, mobile sales tools, literature fulfillment, after-sales customer and technical support, automated e-mail and fax, standard and customized data mining and reporting.

SMEs are feeling increased pressure to implement e-business and e-commerce solutions to reduce administrative costs while improving service to customers and supply chain partners. Solutions chosen might be relatively simple, such as implementation of an informational Web site to provide self-service product and specification data, or an FAQ-based technical support page. Or, the applications may be more complex, such as fully transactional sites for 24/7 global product purchasing, personalized tech support, or online procurement from a trade exchange or marketplace. The important thing to remember is that any e-business solution should be strategic and fully supportive of both corporate objectives and the pervasive goal of increased customer service.

Putting customers first is the driving force behind front-office applications. Well-planned and well-executed SCM, CRM and e-business solutions can have a significant impact on the bottom line by reducing administrative and customer support cost, increasing inventory turns, and speeding up delivery cycles. Their top line effects, however, provide the fuel that can help SMEs gain and sustain growth through increased value of existing customers, acquisition of new customers, and greater market share.

In formulating an SCM, CRM and e-business strategy, many SMEs fail to realize the critical importance of front and back office integration. For total customer service to be truly effective, the front and back office must converge into a single, closed-loop, realtime information system. Concurrent with demands for CRM and e-business solutions has been the proliferation of technology applications to satisfy them. As a result, companies are frequently being sold on narrow-based, standalone applications to fulfill this or that specific function, without a thought as to how or whether the solution can be integrated with back office data and processes.

The non-integrated approach is self-defeating, creating a "silo" effect of multiple information systems that cannot communicate with each other. Web-enabled discrete SCM and CRM applications may be useful to solve "local" problems related to inventory management or sales force efficiency, for example, but they fail to provide the business with "global" business intelligence so necessary for decision support, strategic planning and a high level of customer service. If customer-facing and production employees, suppliers and partners are to coordinate their efforts to better serve customers, there has to be a timely flow of information across functional areas to add velocity and responsiveness to every customer contact.

The synergy created by linking front-office applications with mission critical back-end components of the enterprise system -- such as order entry, logistics, production execution, finance, sales and marketing -- is immense, multiplying exponentially the value delivered by the front-office applications. With front- and back-end integration, customer account information is instantly available online to the sales force and other customer-facing users, and key sales and customer information is likewise available in realtime to marketing, financial, purchasing and production management charged with making decisions.

How does this synergy work? Consider the following scenarios of a seamless system that uses the Internet a vehicle for total customer service:

• Management can instantly convey corporate news, product or pricing changes and promotional activities to a far-flung sales force, and sales people can convey pertinent information to their customers.
• Sales people in the field or on the phone can instantly access customer account information and take advantage of opportunities to up-sell or cross-sell.
• Sales people at customer sites can tap into product inventory status and production schedules to determine a viable fulfillment date for a customer's order.
• Sales people can enter a customer order, which is then automatically entered into the ERP system where it triggers processes required for fulfillment.
• Using a Web-enabled self-service portal, suppliers and customers can access up-to-date information about product availability, order status, order histories, thus saving the host company significantly in administrative and customer service time and costs while providing instantaneous, round-the-clock service.
• Customer-facing users can initiate processes to automatically schedule activities, respond to literature requests, print form letters, send e-mails and perform other customer service functions. This, too, saves time and costs.

SMEs seeking to emulate industry leaders in climbing aboard the CRM bandwagon can improve their chances for success by keeping in mind a few important guidelines. The first is this: Do not attempt to implement unrelated, standalone SCM, CRM or e-business applications. That way, the "silo" approach, lies inefficiency, redundancy and chaos. In "silo" applications, the focus is on the enabling solution -- the storefront, catalog, order entry, payment or sales management system. In an integrated system combining an ERP backbone with customer-facing front end, the focus is on the business objectives of the enterprise and customer service goals.

In sourcing an integrated solution, SMEs should consider ERP systems that are specifically scaled to their size and functional needs. Too small a system is quickly outgrown, thus wasting the technology investment. Too large a system results in undue complexity, high cost of installation and maintenance and extended implementation time. The ideal choice for small to midsize businesses would be an open, flexible back-office system built on proven technology, a robust and scalable database -- and offering tightly integrated touch-points with reliable, full-featured front-office applications

Organizations that keep their focus firmly fixed on the enterprise and the customer as they evaluate and integrate end-to-end technology solutions will experience lower risk, a higher success rate, faster implementation and return on investment. Today, more than ever, customer satisfaction is the cornerstone of sustainable growth and success. And, as many companies, large and small, are discovering, deploying tightly integrated ERP and CRM technology solutions is an effective roadmap to reach that destination.