The 80/20 Rule

Does the 80/20 rule apply to your company? You know, the old business adage that 80% of your profits come from 20% of your customers. If this rule holds true for you, then Customer Relationship Management (CRM) products will be a natural extension of your business process. If the 80/20 rule does not currently apply to your business, then investigating a CRM solution is a must.

CRM is a hot buzzword in the marketplace right now. It is gaining momentum because it is so basic to business. If a CRM strategy is effectively implemented, a business will realize improved customer satisfaction, great customer loyalty and a lower cost of operations. Imagine increasing revenues and reducing expenses all in one stroke. CRM strategies are quickly becoming mainstream because they establish deeper and more profitable relationships with customers.

So what is CRM? It is a process and products (typically software) that make the customer the center of the universe. This basic business 101 principle is easy to preach but more difficult to do. CRM in its most simple form can be a pen and paper basis for gathering data and responding to customer needs. At the other extreme, it can be very sophisticated software and ecommerce tools that provide comprehensive data mining, tracking, analysis and reporting. The key to success with CRM is defining what portions of the customer experience will be addressed through specific CRM initiatives and why.

CRM software typically integrates marketing, sales and customer service components. The three categories are critical to capturing and retaining customers. The Gartner Group defines CRM as "the art of locating, acquiring and keeping profitable customers while reinforcing an enterprise's brand across contact channels". Although this definition may be comprehensive, it may not be terribly practical. Unless your firm has unlimited time and money the best bet is to prioritize and focus on one category at a time.

As an example, the marketing component of your business model may be the weak link. In this case your CRM strategy should include software product(s) that automate customer profiling, telemarketing, email and campaign management. If a stronger sales focus is required in you business, the CRM tools should provide call management, contact management, sales configuration options and post sale reporting. In a sales environment, CRM process and products will make sure the customer receives the right products and services at the right time by the right people in your organization. If the problem area in your business is related to customer service or customer fulfillment, then the appropriate CRM initiative might include email response management, workflow automation, computer telephone integration or web bases self-service options.

CRM solutions help companies work at maximum effectiveness while giving them the ability to truly understand both prospective and existing customers. Statistics show it costs a company 8 to 10 times more to get new customers than it does to keep current ones. Therefore the process of smoothly and professionally managing a contact through the entire customer cycle is critical to customer retention and loyalty. In my last column we discussed Microsoft Outlook and the many features, functions and benefits that will assist you in beginning your CRM process. In my next column we will review some specific examples and discuss more sophisticated tools that will help you define, refine and implement a more sophisticated CRM solution. If the 80/20 rule makes sense to you, CRM will too.

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