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CRM Success Depends More on Strategy than Software

Patrick Totty - Credit Union Magazine
July 15, 2005

If you’ve recently installed, or are considering installing, CRM software and are wondering how to measure its effectiveness, here’s a bit of advice: Put down the CRM and step away. Proceed immediately back to square one, which is where you were supposed to have created a strategy for using CRM in the first place. That strategy would have provided you with the benchmarks and methods of measurement for gauging CRM’s success.

“In a nutshell, with CRM it’s not the software, it’s the strategy,” says Chris Braccia, director of product marketing at Harland Financial Solutions, which manufactures Touché CRM software. “CRM isn’t so much complex as it is something that needs to be carefully planned. If you try to implement it without tying it back to a strategic plan, you won’t be able to tell if it’s effective.”

Braccia says typical strategic goals might involve increasing assets, retaining members, or increasing sales or service levels. “Whichever goal you choose, you must get procedures, training, staff, and processes in place before you can use CRM’s modeling and profiling capabilities effectively,” he says.

John Kariotis, a principal at Chicago-based Inforte Corporation, (which collaborates with Members Development Company on its Common Model CRM Strategy), says that although one crucial benchmark in determining CRM’s effectiveness is to calculate return on investment (ROI), “your CRM ROI must be tightly aligned with your solution approach. You have to look for specific product penetration increases and for how specific segments are responding. Many credit unions haven’t thought through their offerings to specific segments. When they do, and begin to more effectively target members, their marketing and sales costs will decrease significantly.”

Two Common Goals


CRM strategies can’t be amorphous; they must focus on specifics, says Jay Kassing, president of marketing and sales at Marquis Software Solutions, producers of CallTrax CRM software. “Credit unions’ two most common goals with CRM are to improve retention and identify their best relationships, and to better track and follow up on referrals and new accounts,” says Kassing.

In the first instance, according to Kassing, the venerable “80-20 rule” doesn’t apply. “Typically, about 8% to 10% of member relationships deliver all the profit, and 90% of relationships are break-even or even unprofitable.”

Credit unions should build their retention strategy around their top 10% at least, perhaps their top 20%. “The average annual turnover for credit unions is 14.6% of their [member] households,” Kassing adds. “Say you’re able to reduce that to 11%. That gives you a tremendous edge, because you’re not wasting the money you’d be spending trying to find new members.”

The other most common CRM strategy, using it to better track the productivity of referrals and new accounts, allows for more astute responses to information about members. “An example would be acting on information that a member’s going to get a significant bonus,” says Kassing. “The credit union might encourage this person to invest it under its auspices. Also, better tracking provides opportunities for coaching: ‘You’re making the calls, but not scheduling enough presentations.’ Or, ‘You’re not making enough calls.’ Or, ‘You’re making presentations, but not overcoming objections and closing sales.’”

Besides jumping in with just the technology but no strategy, another problem some credit unions run into with CRM is not understanding its profound effects on their culture. “Cultural changes can include new segmentation models and how information is shared, including the opening of the information process within the enterprise,” says Kariotis. “Also, the move from a transactional to a relationship-based model that CRM inspires means allowing employees to take the time to deepen member relationships.”

Todd Ricci, operations manager at Members Development Company, says CRM technology can’t change the culture by itself. “That has to come before,” he says. “For instance, say your sales department sets a goal of X contacts with members over the next year, but fails to provide the quality of content or service that would justify that increase. You’re simply putting numbers before content—there’s been no change in the culture.”

Uncomfortable Revelations


Another important effect CRM has on a credit union’s culture is whether the front-line staff are eager and willing to use the new system. “People can get gun-shy when learning new software if they don’t trust its purpose,” says Ricci. “Reinforce that you’re truly moving from an emphasis on moving the line or quickly taking the next call to one on building the relationship.”

CRM also can deliver uncomfortable revelations. “It’s a two-edged sword,” says Kassing. “It not only segments your top members, it allows you to see that some relationships aren’t great. If 10% to 20% of your members are downright unprofitable, do you want to continue to waive fees on someone who’s losing you $400 a year?”

“It’s important that credit unions not go into CRM with a sentimental approach that disdains making hard decisions and where the ‘strategy’ is a cliché: ‘Treat members better and make more money,’” says Ricci.

The crunch comes when senior management looks across a portfolio and says, “We can do 5% better here, 10% better there.”

“The problem is you soon have 17 or 20 targets for improvement—an unwieldy number,” Ricci adds. “It’s better to pick four or five targets that are the most critical and manageable.”

Senior management is directly responsible for three elements crucial to CRM success, says Kassing. “First, the CEO and senior management have to be 100% behind this event, this revolution, this change. They have to be vocal about it and make it clear this isn’t just a one-shot deal. Second, they have to determine two or three measurable objectives. Those objectives will affect how a credit union organizes itself for CRM. Finally, who’s going to be the champion? Who’s your CRM czar? It must be someone who’s respected, has clout, and who has the power to hold people accountable.”

Kassing names other factors that can prevent success: “Bad data is one. If you don’t clean and share data, the people on the front line will have no reason to trust or use it. Another is hard-to-use technology. Make sure your CRM technology at the user end is easy to use and understand. Don’t ask frontline people to feed a lot of data into it and become slaves to it. Good credit unions and great credit unions all have the same information. The difference is that the great ones turn information into something that simply can’t be ignored. They have to take action based on it, so they do.”

Improving Understanding


CRM vendors understand they must perform an educational and a manufacturing role. “Many applications are straightforward and have specific functions,” says Braccia. “With CRM, it’s more complex. We’re talking about business intelligence, such as a better understanding of members and what products and services to offer them, as well as sales management. How do you deploy these insights in the field?”

One aid to that process is Harland’s Performance Advisors consulting arm, a group of experts with financial institution backgrounds who get into a client organization’s nuts and bolts to help it develop a strategic plan. “They analyze the market and see if a credit union’s goals are realistic, then help configure technology infrastructure,” Braccia notes.

The group also does a “cultural assessment,” he says, looking to see if the right training and skill sets are in place. “They also stress the importance of internal communication—letting employees know where the organization is going. It’s essential to grow, rather than overhaul, the culture.”

Similarly, Kassing’s “Go Marquis Team” does extensive follow-ups to ensure clients are happy and successful with the product. “We want to make sure they’re using it well, and know how and why they are,” notes Kassing. Kassing says the team itself is an example of CRM in action: “It certainly helps our client retention rate.”

CRM’s business intelligence component is a mature product. “Now you’re seeing productivity tools and management reports becoming more important,” Braccia explains. “You now can take complex, lengthy queries and simplify them so management can track progress toward specific goals. Also, users can look for more sophisticated modeling and channel management capabilities.”

Perhaps the best new development is cost. “CRM prices are dropping dramatically,” says Kassing. “Credit unions, especially small ones, used to stress over how to get an ROI on a $250,000 investment, not to mention subsequent costs of continuous training. Now, CRM is affordable: $15,000 to $25,000 will get you a good system.”

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This article first appeared in Credit Union Magazine at www.creditunionmagazine.com and is reprinted with permission.

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