Building business relationships through value: as more and more companies focus on becoming solution-centric organizations, many of them are turning to customer relationship management systems to boost their bottom line.
Many companies turn to enabling technologies, such as customer relationship management (CRM) systems, as a means for improving business relationships. When implemented in a vacuum, however, CRM systems almost always fail to produce sustainable business improvements and show little to no return on investment.
To make a successful transition to a solution-centric organization, companies must use a holistic change management approach. This begins with a defined sales process that reflects a deep understanding of customers' buying processes. Enabling technologies must be implemented within the context of these processes--not in anticipation of them.
The Focus on Value
Why focus on value? Many companies, especially those experiencing flat or declining revenue, seek to develop solutions and value-based customer relationships to create new revenue opportunities and to differentiate themselves from their competitors. As products mature and competitors match key features and benefits, companies are forced to seek additional areas of differentiation.
As Morningstar, a leading provider of independent investment research in the United States, so aptly commented recently, "Success breeds competition as surely as night follows day." As a result, the ability to create and sustain defensible differentiation becomes progressively more difficult in virtually all markets, which inevitably leads to a commodity perception accompanied by declining revenue growth and margin erosion.
Companies have responded to revenue problems in a variety of ways, from implementing strategic sales transformation initiatives to tactical training projects, with a wide range of outcomes. Three of the most common reactions to sales revenue growth and margin erosion include the following:
(1) We must "fix (i.e., train) the sales force."
Most companies genuinely believe that products and services provide legitimate value to customers, but the customers "aren't getting it." Thus, companies conclude the sales force must be fumbling the ball at the goal line. That is, the sales organization must not be articulating the real value of offerings effectively to prospects; therefore, sales are not at projected levels. In some cases, sales training is entirely appropriate, but many other revenue performance factors often go unattended.
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(2) We need to offer solutions versus products or services.
Because success does invite imitation, many products are perceived as commodities over time. Or, as industries mature, products become so complex and feature-rich that "differentiation blur" sets in. With limited defensible differentiation, companies have responded by positioning themselves as solution providers. In many cases, this simply equates to bundling products with associated services accompanied with the declaration "we now provide a total solution for the customer."
(3) A combination of reactions 1 and 2.
The effort to transition to a solution (or value) orientation is often primarily focused on the sales force. In this case, some form of training is typically conducted to teach sales professionals how to "sell value" versus products and services. Or, the company deploys CRM technology with the intent of leading through automation.
In many cases, companies focus more on perception and point-of-sales issues than understanding their revenue growth problems from a systemic perspective. Many companies strive to be solution-focused at the point of sale while largely retaining a product-centric "DNA" at all other levels.
There is more to selling than salespeople, and yet many organizations place the burden of creating value-based relationships exclusively on the sales force. Research by CSO Insights, Aberdeen, and other research firms supports the belief that sales effectiveness is dependent on a number of factors. Their findings suggest the following:
* Many sales organizations have "hit the wall"--overall sales performance improvements have leveled off in recent years despite sales force initiatives.
* The sales organization is important, but it is one of multiple sales performance factors. Extensive win-loss studies and C-level surveys indicate the sales organization is one of several key factors in the ability to drive sustained revenue improvement.
* Marketing and sales integration offer significant potential for performance improvement. Integrating key elements of the overall "revenue engine" offers great potential ... if a structured approach is taken.
It is important to note that sales force improvement initiatives, such as training and CRM, can prove highly valuable in building successful customer relationships. However, it is equally important to understand that sales effectiveness is a systemic (versus localized) endeavor. It is critical to have a framework in place to understand where fundamental gaps in the revenue engine exist and how to take meaningful, prioritized action.
The Value Perception Gap
Many companies correctly recognize the need to focus on customer value and launch efforts to transform their marketing and sales functions into solution-centric organizations. Unfortunately, many also take a localized approach that is often spearheaded with a large technology project (e.g., CRM).
Experience and research have shown that this approach fails miserably the majority of the time. A holistic approach that examines how the organization creates, communicates, and ultimately delivers customer value is required. Customer relationship projects usually have an underlying goal of sustainable revenue growth and, linked to that, sustainable sales performance improvement.
A simple concept that many companies can relate to is the value perception gap. Companies believe their offerings to the market are valuable. The reality is that many prospects and customers do not share the same belief. In other words, a chasm exists between a company's decision to sell and a customer's decision to buy. The buyer chooses between offerings on the basis of which it perceives to deliver the most value.
Because customers are not willing to pay extra for value they do not perceive or even understand, the company's perceived value cannot be captured or relayed fully. Furthermore, this value is rarely converted in a way to meet revenue, market share, and/or profitability objectives.
The value challenge typically manifests itself in a set of near-universal marketing and sales dilemmas:
* Inability to position value and create customer preference,
* Difficulty in building a predictable opportunity pipeline, and
* Insufficient selling skills and sales process discipline.
Almost every company can relate to these woes.
Bridging the Gap
Six drivers typically impact a company's ability to bridge the value perception gap--thus achieving sustainable sales performance improvement and predictable revenue growth. The following six drivers comprise the Sales Performance Improvement Framework[TM]:
(1) Value Framework and Messaging
The extent to which value positioning and messages are defined around accurately perceived customer problems and needs, not just around offerings. Does the company define its offerings in a way that addresses customer needs, or does it engage in "product pushing"?
(2) Targeted Go-to-Market Approach
Whether a company's value propositions, market segmentation approach, and channel strategies are attuned with customers' perceived needs. Does the go-to-market approach meet overall customers' needs efficiently and effectively throughout the buying process?
(3) Aligned Marketing Communications
The degree to which broad-based marketing communications and lead-generation activities are aligned properly with field sales conversations. Do marketing efforts support what sellers do and provide what customers need to know to make a buying decision?
(4) Reinforcing Management Support Systems
The caliber and consistent use of management vehicles and enabling technologies (e.g., CRM) to improve skills and reinforce sales processes. Do management and the support infrastructure reinforce the desired selling approach?
(5) A Codified Sales Process and Methodology
The presence or absence of a formal sales process that aligns well with customers' typical buying processes. Do sellers sell in a way that fits how customers are prepared to buy?
(6) Skills and Knowledge to Engage with Customers
The quality of fundamental selling skills and knowledge at the individual seller. Can sellers sell well?
The first three drivers of the framework are marketing alignment "above-the-funnel" drivers; the last three may be broadly classified as sales execution "in-the-funnel" drivers. All six must be aligned before a company can optimize its sales performance.
When the six drivers are aligned tightly with customers' needs and with each other, a company is well positioned to start and continue a string of revenue increases. When the drivers are misaligned, revenue generation problems are inevitable. With misalignment, a company's internal perception of its offerings' value cannot match its customers' perceptions of value.
Leading with Technology
A common problem in building successful customer relationships is approaching the effort from a localized versus a holistic perspective--in other words, not harmonizing all six drivers within the framework described earlier. One of the most common pitfalls is leading with technology solutions (i.e., CRM) without first addressing the underlying business needs that prompted a perceived need for a technology solution in the first place.
Research indicates that more than 50 percent of all CRM projects fail. Failure means that the projects do not achieve their intended scope within predefined timelines and budgets. Or, failure means the CRM application is "implemented" on time and on budget but is not adopted by the organizations in a way that yields desired business results.
The most common reason that CRM projects fail is that companies attempt to implement them without first clearly defining the underlying sales processes on which the CRM is to be based. Unfortunately, the panacea of an ineffective sales process is often thought to be a new system. The reality is that automating a poorly constructed process just makes bad things happen faster. The answer is to first get the process right and then focus on the technology.
The essence of the challenge is to recognize customer relationship improvement projects for what they truly are--change projects. The basic goal is to change the manner in which an organization defines success--from selling products to solving problems. Although this sounds simple enough, such a change involves altering the basic DNA of an organization. And the change is never as simplistic and localized as implementing a CRM. If the answer were simply a technology fix, then the failure rate of CRM implementations would not be as high as it is.
Enabling Tools and Technologies
If CRM solutions alone are not the answer, what role do they play within the more holistic change process? In our experience, clients who made successful transitions from product-centric to solution-centric behavior viewed CRM (and related technologies) as an enabler of marketing, sales, and service process and methodologies--as opposed to a "silver-bullet" solution.
Sounds easy to follow in the footsteps of the successful, doesn't it?
History proves otherwise. Too many companies have fallen into the mind-set that it is not the process that is broken, but instead the enforcement of the process. And what better way to enforce a process than to implement a system that acts more like process police than process enabler. The obvious problem then becomes the negative view of a CRM system as an enforcer of what employees consider arbitrary business rules and procedures. Nothing builds apathy like the automation of inefficient sales processes.
[FIGURE 2 OMITTED]
But the impulse is to jump right to the system, often because of overwhelming pressure to do something fast. Anything.
The reality is that delaying a CRM implementation to ensure the underlying sales processes are sound will result in increased productivity over time and will avoid re-implementing the CRM down the road, time and time again. All too often companies become "burn victims" of technology rollouts without first taking a hard look at their sales processes.
For a CRM system to effectively enable a process, the process must first be designed. This is not to say that a process should not be designed with a CRM outcome in mind, but that the CRM system should be viewed as the enabler, not the driver, of the new process. Conversations starting with "the system will not let you do that," for example, inevitably set the stage for a process based on the features of the enabling technology, versus the business problems being addressed.
Consider the following tips when designing a process with an enabling technology in mind:
* Process streamlining often comes at approval points. When designing a future-state process, take a close look at where approvals are needed and where they are redundant. A powerful CRM feature is intelligent routing, which routes to an alternate approver when the primary approver is unavailable. This is a great example of how enabling technologies can make a solid process more efficient.
* Consider the decision points throughout the process. Is the logic applied to these decisions consistent? If so, consider developing business rules that emulate the decision points. If not, redesign the logic before automating it.
* Take a close look at points along the process where information may be gathered in an automated fashion. As an example, consider a creditworthiness process. A streamlined process may mean that only one person needs to approve the creditworthiness instead of two. But a streamlined and automated process could involve automatically determining creditworthiness by automatically linking to a credit data feed, such as Moody's.
* Verifiable outcomes are key to a process and can be easily tracked in a CRM system. While you want to avoid too many verifiable outcomes in the process, points where a process crosses departments or flows to external entities should always have a verifiable outcome to ensure a smooth and traceable handoff.
When designing and automating a sales process, the golden rule is to ensure the process is aligned with buyer behavior. Buyers that are ahead of sellers in their decision-making process will feel delayed, whereas buyers that are behind the sellers will feel pressured and rushed.
Selling the Value of CRM
Once your process is defined and the CRM system is designed, the next crucial step is to articulate, in compelling terms, its value to the organization. A key item frequently overlooked is the need to sell the value of CRM to the organization's key constituencies--to include sellers, sales management, marketing, services, support, and finance.
Sellers are usually the most impacted by CRM because entering CRM data usually rests with them. To sell the value to sellers, do not lead with the features of the CRM, but instead focus on the improved processes the CRM technology is enabling. A process that reduces order turnaround time, improves routing of customers' inquiries, and reduces administrative burdens is a fairly easy sell.
Access to information maintained by the CRM system, such as customer history and customer contact information, is also valuable to the seller, particularly when the seller does not need to manually enter the information. Another selling point is the sales dashboard offered by many CRM systems. These dashboards are highly configurable views to a wealth of information. Among other things, dashboards can help sellers monitor a critical performance indicator--quota attainment.
Selling the value of CRM as a process enabler to sales management, marketing, and finance is typically easier, because the amount of information entered by these groups is minimal compared to the information available. Features such as summary forecasts, sales dashboards, and automated marketing campaigns are all value-adds that are possible with a well-designed CRM system. These groups typically see favorable results from a CRM system, primarily from reduced requests for information from sellers (since the information is in the CRM system).
Bridging the value perception gap and making a successful transformation to a solution-centric organization can have a profound and lasting impact on the revenue engine of your organization, addressing the systemic aspects of connecting your organization with real problems and needs of customers. They can have a material impact on winning versus losing by addressing key aspects of your solutions and the ability to have consultative sales conversations with customers.
Before implementing a CRM project or launching your next sales improvement initiative, it is important to realize that the selling landscape has shifted in the past four to five years. Moreover, today's selling barriers are systemic and potentially upstream from the sales force. How the value offerings are perceived and how well you actually solve customer problems are as relevant to winning versus losing as selling proficiency. To take meaningful action that will have sustainable impact, you first must address your underlying business needs. Invest in a structured assessment to objectively understand the systemic reasons for winning versus losing and the degree to which your organization is either product-centric or solution-centric. Then, confront your commitment to changing your DNA--leading with technology solutions and superficial packaging will not improve sales effectiveness.
About the Authors
COLIN GUNTER, director at Sales Performance International, has more than 11 years of consulting experience, providing expertise in project management, business integration methodologies, and customer relationship management (CRM) strategy, process, and technology to leading companies.
WARREN D. SHIVER II, director at Sales Performance International, has more than 12 years of experience selling, developing, and implementing customer engagement solutions that help clients execute their sales strategies. For more information about Sales Performance International, visit www.spisales.com. Send comments on this article to firstname.lastname@example.org.
RELATED ARTICLE: A Tale of Two Clients
"It was the best of times, it was the worst of times ..." --Charles Dickens
The level of technology and automation today is greater than ever, but the extent to which enabling technology implementations fail is also greater than ever. This is nowhere more apparent than the advent of the CRM system. Originally developed as a next-generation contact management system, CRM systems have blossomed into marketing, workflow, order entry, custom service, and sales enablement systems. While the advantages of CRM are numerous, companies that implement them without an underlying process may easily become technology "burn victims."
Client One: A $500 million financial services company that wanted to centralize key customer information in a CRM system. The information was to be used to generate targeted marketing companies, resulting in increased sales revenue.
Although this sounds simple enough, the current process relied on phone calls to accounting, customer service, and sellers to determine information about customers, which was then submitted to marketing in order to create campaigns. When the CRM system was implemented, a process to address the current shortcomings was not developed first. The result was a CRM system that had no useful data. Attempts to manually populate the CRM system with information were unsuccessful, and the system was eventually discarded. Total software, resource, and other implementation costs written off exceeded $2 million.
Where did this company go wrong? It had the right vision--to centralize customer information for easy access and targeted marketing campaigns. However, this vision was translated first into CRM requirements, not a redesigned process. A process assessment would have highlighted disparate locations of customer data and inefficient flows of data--deficiencies that could have been rectified before a technology was implemented.
Client Two: A global enterprise application software company. This company started as an engineering-driven company that achieved rapid growth, though the strength of its product and the primary source of customer value were based on technical features and functions.
As demand for new features and functions increased with the popularity of the software, the application became extremely complicated and cumbersome to implement, and the organization was forced to transform into a solutions company. The value was then redefined toward the business processes that the software enabled.
With market saturation and the dot-com crash, the company was forced to reinvent itself by expanding into other business areas, broadening its solutions capability and offering enhanced services. The value provided to customers is now focused on providing a complete solution and driving more business with fewer, larger, and more stable providers.
As the company redefined itself, it looked first to the needs of its customers and then aligned its processes to meet customer needs. It implemented enabling technologies, including CRM, to support these processes. The results have been sustained revenue growth and the ability to make rapid course corrections based on market changes and customer needs.
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|Author:||Gunter, Colin; Shiver, Warren D., II|
|Date:||Dec 1, 2005|
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