9 CRM Mistakes That Will Sink Your Business

Customer relationship management (CRM) is often treated as an arms-length tactic from your overall business strategy. Not directly integrated – but vital to growth. That said, despite the volume of content that’s been written to date on the subject of CRM, it still seems as though it’s not quite living up to its promise.

Often times, CRM’s promise is tough to realize and measure because businesses make too many mistakes when they are planning and implementing their strategy. Despite the time and effort put into creating brilliant systems, strategies fall apart as more people and processes are added to the mix. It can become complex and, sows the seeds of its own demise.

There are nine common mistakes that most businesses make when designing and implementing a CRM system. Pay attention to make sure you are not committing one of the following:

Mistake 1: Focusing on your worst, not your best customers

While it may be tempting to adjust your processes to cater to a hard-to-please or low-margin customer, consider an alternative. Successful business relationships are often built by identifying best or ideal customers – the people you like dealing with and those that like dealing with you.

The strategy is deceptively simple: give your high value customers an incentive and, in return, they’ll come back to your business and make another purchase.

How businesses understand who their best customers are will differ – it  depends on numerous factors. Here are some questions to ask yourself when determining who your best customers are:

  • Are your biggest customers your best customers? Will you focus primarily on them?
  • Will you only focus on your most profitable customers?
  • Will you find a way to figure out which customers will be the most profitable tomorrow and focus on them?

Once you know who you’re best and worst customers are, you are then able to start to assigning values to your customers to make sure your best customers (hint: they’re not always the biggest ones) are the ones getting rewarded.

Mistake 2: Failing to quantify the inherent value of your customers

Understand that every customer has an inherent value to your organization. More than just dollars and cents, each customer adds something else to the mix: a better working relationship, more efficient processes, etc. Often these intangibles are only noticed when they translate into social proof or referrals, but I’d urge you to consider them sooner.

By only considering the average customer’s cash (sales) value, you run the risk of actually rewarding your worst customers while penalizing the best. Take the time to assign your customers an appropriate value in your CRM strategy (including intangibles!) to avoid this mistake.

The first step to figuring out the true economic value of each of your customers is to include all factors that impact your business’s bottom line – how much handholding does each customer need, are some customers chronically making late payments and do certain customers frequently request their money back?

Secondly, you need to determine the lifetime value (LTV) of your customer base. As one of the worlds leading experts in LTV, Andrew Chen outlines two different formulas for calculating LTV for both retail that rely on transactions and social sites, sites that are highly dependent on ad impressions and user generated content.

First, for retail sites, he defines LTV as, “The stream of all previous and future profits that a user generates from their purchases.” For social sites, Chen defines a customer’s LTV as, “The stream of all previous and future ad impressions that a user generates from their usage.”

Understanding what makes your best customers tick is a leading success factor. If you got the gold nugget of wisdom into their purchasing behavior and why they come back, you can easily influence other segments into behaving the same way.

Mistake 3: Failing to become relevant to each customer

The benefit of segmenting your customers is that you will be able to reach them in a very real, personal way. You also need to realize that your customer’s needs will evolve and change over time – your business needs adapt as your customers’ needs change.

“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.” – Charles Darwin

This theory applies to business, too.

Think about how agile your business is. Are you quick to respond to your customers changing needs? Are you simply creating features you like without understanding why they are relevant to your customer? “In Agile methods, instead of building the whole product, you build the smallest possible useful part and give it to users, who tell you what is right and what is wrong,” explains Dan Woods for Forbes. “Agile development is an evolutionary conversation in which incremental steps of two to four weeks lead to feedback that allows requirements to be tested and adjusted. In addition, some functionality is available much sooner.”

Technology and consumer behaviour are changing how products are developed – your business needs to change and innovate, too.

Mistake 4: Fail to innovate with your customers in mind

What is innovation? Why is it important to your business at any stage? Innovation is an organization’s willingness to take a risk. To actively push boundaries and seek new opportunities. You can’t just innovate for the sake of it, it must be for the sake of the customer.

Kodak was once the leader in camera’s and photography. They held market share for a long time, without much change. When digital camera’s and a new digital era arose, Kodak turned a blind eye to the developments and maintained their status quo.

“Kodak did not take decisive action to combat the inevitable challenges,” explains Clay Christensen in terms of the move into the digital world. Despite a mass adoption of digital and a dramatic decline in film, their failure to evolve and their complacency, sunk the business.

Mistake 5: Not measuring customer experience

Evolving and listening are important, but you need to track how well your changes are being received by your customers.

You might ask, “I’m already listening to my customers, why do I need to bother with this step?”

Measuring your progress will tell you if you are actually listening to your customers instead of only hearing the words they are sharing.

There are five metrics you can measure to track how well you perform for your customers:

  1. Response time to customer service questions
  2. How long it takes to resolve customer problems
  3. The percentage of your visitors who find what they were looking for
  4. Ask customers to give you an overall customer rating
  5. Watch the sheer volume of customer communication across all channels

If you notice you’re not performing as well as you would hope, you should turn some attention to examining your strengths and weaknesses.

Mistake 6: Being over confident about your business’s strengths

If you are too confident about your business’s strengths you will overestimate your ability to impress and delight your customers. Worse still, this behavior could cause you to lose some customers because of your overconfidence.

Though it may be uncomfortable, you still need to sit down and take an accurate account of your business’s strengths and weaknesses.

To accurately identify your strengths, here are five things you can do:

  1. List the strengths you think your business has
  2. Ask your customers to rate those strengths and see if they agree
  3. Revisit older data and see if you’re improving
  4. Ask yourself if you would buy your product/service
  5. Modify your strength list to reflect what you’ve learned

Being honest with yourself and your stakeholders will allow you to better focus on your strengths when communicating with customers. This also will help you become more mindful of your weaknesses, to ensure you appreciate what parts of your process may require a bit of humility.

Mistake 7: Keep thinking it’s a mass produced world

The era of mass production is over and people demand mass customization. They demand it from businesses when they are purchasing products and they are now demanding it from customer service.

Five of Forrester’s top 15 trends in customer service for 2013 are about providing personalized customer service:

  • Businesses will have to pay attention to which channels their customers are using
  • Customer service mobile apps will become more common and necessary
  • Customer service will have to move between channels and follow the customer
  • Businesses will have to be more proactive in their customer communications
  • Customer feedback will need to be collected more diligently and there will need to be even more opportunities to provide feedback

Mistake 8: Focusing on products instead of customers

Feature rich products without data to back their reasoning often become so complex, users/customers get easily confused. Although Steve Jobs would disagree with the notion of asking customers what they want and building a product accordingly, there is some merit in doing so. Although you hold power over what direction your product takes; customer insight, data, feedback and testimonials will ultimately tell you what they want. It’s up to you to decipher it in a way that is relevant and useful to the core business.

Putting customers ahead of product will ensure you create what they actually want.

Mistake 9: Clinging to the 4Ps

The legendary 4Ps – product, price, promotion and place – are not as relevant as they once were.

The 4Ps were suited to the mass world, not the customer-driven world in which you currently operate. Where businesses once targeted customers, customers now target businesses.

Instead of the 4Ps:

If you can avoid making these common CRM mistakes, your business will realize the vast, yet largely untapped potential, that CRM offers. It will help your business by distinguishing you from your competition and it will help your customers by creating a smoother, more customer-centric experience.

Have you been a victim of these mistakes?