For many years, businesses have implemented customer relationship management (CRM) to increase revenue. Best practices and innovation in CRM strategies can help businesses gain and keep customers – and, therefore, profit. But simply using CRM doesn't guarantee business benefits. Using CRM successfully involves planning, identifying clear business objectives and, most importantly, focusing on customers. Here we'll take a look at some of the best CRM practices and how they can be used to boost a business's bottom line.

Webinar: The Biggest Picture: Knowing Your Customer Across Multiple Platforms - Sign Up Here

What Is CRM?

Customer relationship management is, first and foremost, a strategy that deals with the management of a company's actions and its interactions with clients, customers and prospects.

Contrary to popular belief, this software is not designed to manage a customer database. Instead, CRM assimilates all of the information a company has about a customer, whether it be from sales, marketing, customer service or any other company department. This kind of information pooling allows anybody in an organization to gain access to all of the information required to provide superior service, take advantage of up-selling and cross-selling opportunities and fine-tune marketing and sales strategies.

Thus, the aim of CRM is not all about the bottom line. Instead, CRM aims to reduce costs and increase profitability by boosting customer satisfaction, loyalty and advocacy. (Discover some of the ways in which companies are using CRM in Top 6 Trends in Customer Relationship Management.)

Why CRM Fails

In recent years, there has been a spate of criticism against CRM, with some estimates placing the failure rate as high as 70 percent.

So what happened? There are three main things companies do to doom CRM strategies:

  1. Focusing on technology, instead of strategy
    Many companies install CRM software without establishing a sound business strategy. They have all the tools and software in place, and assume that's all there is to it. A successful CRM initiative, however, focuses more on unified business objectives; CRM technology only acts as a support.

  2. Neglecting user needs
    When you deploy a software or system, everybody on board should know how to use it. The problem with CRM is that some people ignore it, yet they still do their jobs well.

    There are three situations that lead to poor CRM adoption among company employees:

    • Employees do not know how to use the system
    • They don't see the value in using the new CRM system
    • Employees are unaware of the benefits of using the CRM software

  3. Not having clear measures and success indicators
    Companies should implement specific goals and find ways to measure them as part of any business CRM strategy. Without this, CRM initiatives are set up for failure because employees do not know where their company stands and the types of steps to move it forward.

So how can companies overcome the obstacles that often cause CRM to fail? Let's go over a few best practices for using CRM effectively.

The Key to CRM Success

If there's one key to a successful CRM strategy, it's that top management must buy in to it. If a CEO does not believe that CRM is good for the company, coming up with a company-wide business strategy – not to mention gaining employee trust and engagement – is next to impossible.

Employees also need to buy into the idea, which must be adopted for themselves. For many companies, this involves building a team with staff members from every department to come up with a strategy for the selection of appropriate CRM software.

Once this is in place, a company can begin to define its business objectives and ensure they are reflected by CRM efforts. Now let's get down to the nitty gritty of CRM best practices.

CRM Best Practices: Customer Data Management

Managing customer data is a key aspect of any successful CRM solution. There are a few key best practices in this area.

  1. Know the customers
    Businesses need to define what a customer is to the various departments within a company. Sales and marketing staff might define customers as those that buy a company's products and services, but to front liners and customer service personnel, customers may include those that inquire about goods – or complain about them.

    These customers invariably have unique characteristics that must be understood by the company. Are they part of the baby boomer generation? Are they young? Connected to the internet? Do they have high disposable income?

    Once customers are understood by a company, they should be segmented into high-potential or high-value customers and prioritized according to this segmentation.

  2. Standardize the data
    In most companies, various departments may collect similar data. This should be standardized in terms of how the data collected and how various fields are named. Using just one set of integrated data ensures that it is understood by everyone in the company.

  3. Collect more data
    Once the basic CRM framework is in place, it's time to get more data from each customer interaction and be poised to identify attitudes, needs and behaviors.

  4. Use only necessary fields
    Companies should determine required information and trim other fields.

  5. Keep it clean
    Data should be kept clean and organized by removing outdated customer profiles. Typically, about 25 percent of data becomes obsolete over the period of a year.

CRM Best Practices: The Customer Connection

Ironically, many companies overlook the importance of the customer when implementing CRM. As a result, some of the most crucial CRM best practices center on creating connections with the company's managed customers.

  1. Just get personal
    Email marketers have long realized that customer communication is not one-size-fits-all. Generally, sending a generic message to thousands of email addresses does not result in higher sales or better profitability. In fact, throwing out the script might make a CRM initiative more effective. Instead, employees should be encouraged to learn about their customers' needs by looking at their profiles. This allows companies to more precisely target the actions that make their customers feel important (and they are!).

  2. Just get social
    Connecting with customers via social media is a relatively new method of interaction, but companies should use this as an opportunity for better understanding.

    Be it Facebook, Twitter, Foursquare or a personal blog, an increasing number of people are interacting, sharing and forming opinions based on social media. Companies need to use social media channels to engage customers while collecting more information.

    One caveat, though: This customer engagement is not a one-time thing, but an ongoing process and guiding principle. (Words of wisdom: Jedi Strategies for Social Media Management.)

CRM Best Practices: System and Staff Evaluation

No strategy is complete without a system to analyze whether it's working. Best practices in this area include the following.

  1. Review CRM software
    Always take time to review the performance of your CRM software and whether it adequately fits your customer interface needs. What's more, most companies use only 20 percent of their CRM software's features and functionality. This means that investigating CRM software capabilities is also important - particularly when companies are paying for functions that are not being used.

  2. Evaluate staff
    In most cases, the use and mastery of CRM software and processes should be a part of the annual review for each employee. Remember that CRM is a business strategy. This means that staff should buy into and support it. Staff should be trained on how to use CRM software and empowered to make use of the information gleaned through CRM to make their own customer decisions.

  3. Automate repetitive processes
    Essential and necessary tasks that are repetitive and boring should be automated as much as possible.

Successful CRM processes differ from business to business. Companies that want to increase their chances for success should begin with a solid CRM strategy and best practice implementation. When CRM strategies work, they can help companies keep existing customers and gain new ones, thus boosting the bottom line. When CRM doesn't work, it can become a costly and cumbersome initiative with a limited outcome. (For related reading, check out Using Product Management Features in a CRM Solution.)