Small and midsize businesses can build smarter CRM systems, thanks to unified data sources, on-demand apps, and lessons learned from the big guys

Tony Kontzer, Contributor

August 12, 2005

6 Min Read

What's more, Canter not only has accomplished this without absorbing any hard costs, but employees have quickly adopted every tool he's introduced, something any big-company CIO will tell you is the most elusive part of a CRM deployment. The key, Canter says, has been a combination of incremental changes and interfaces salespeople already are familiar with. "It's not like implementing a CRM system where overnight their lives are changed," he says. "Little by little, they're getting a CRM system without even realizing it."

But creating de facto CRM systems out of other apps isn't for everyone, says Barton Goldenberg, president of CRM consulting firm ISM. Goldenberg is a firm believer that CRM software can provide data intelligence and support for front-end business processes that even the most carefully tweaked ERP system can't match. "Data in its own right is useless unless it's put into context," he says. "I can serve data up via pigeons, but it's the CRM application that adds the value."

A CRM deployment that's carefully thought out has done just that for Churchill Downs Inc., the $500 million-a-year operator of six horse-racing tracks, including its namesake, the famed home of the Kentucky Derby. The company has invested millions in software to consolidate customer records into a single source and squeeze value out of more then 1 million of its most-loyal customers. It's also converting its mass-market advertising to a more one-to-one approach.

Before Atique Shah joined the company in late 2003 as VP of CRM and technology solutions, Churchill Downs had simply assumed that the aggregate data culled from its Twin Spires loyalty club could be broken into four distinct buckets of customers. Shah wasn't so sure. So he got budget approval to obtain a range of technologies, starting with Epiphany Inc.'s CRM software and supported by SPSS Inc.'s Clementine data-mining tool and IBM's Ascential data-extraction and transformation software. Shah then ran the data through Clementine and discovered that there were actually nine aggregate customer types--an indication that its previous marketing efforts probably weren't as useful or relevant as they should have been.

To reflect the more-detailed profiles that emerged, Shah transitioned from generic labels for the old buckets--platinum, gold, silver, and bronze--to descriptions that hinted at the personalities of each segment. So a female customer who only visits the track a few times a year and is there more for the social spectacle than for the betting is now known as a "Seldom Sally," while a wealthy man in his 50s who spends more than $100,000 a year at the track and is confident in his racing knowledge is a "Smarty Steve."

Shah published that new intelligence to the company's various tracks and engineered a test campaign with Arlington Park near Chicago. Arlington's staff selected 55,000 households out of its database, and then broke them into the nine customer segments Clementine had spit out. Each distinct group of customers then received direct-mail advertisements that reflected its profile, with information and offers that jibed with its attributes. The response rate was impressive, with nearly 10% of those who received the mailing coming to the park during the following season. "What was more amazing was that the group of customers they had segmented generated $1.6 million in the first two weeks," Shah says. "A year earlier, the same customers generated $950,000."

The success of that campaign underscored the value of the data Churchill Downs had, in many ways, been sitting on. It also helped to formulate its current approach to CRM, in which it's working to make Epiphany the window into a front-end customer-data master list. Clementine provides the link between Epiphany and the company's Oracle database, pulling data that's queried and pushing updates from the application to the database.

Churchill Downs isn't finished. The company has identified 27 sources of customer data, and has loaded five of those--transactions, loyalty registrations, opt-in/opt-out preferences, E-commerce histories, and racing stats--into Epiphany.

The tales of both Berlin Packaging and Churchill Downs still are rife with a level of complexity that a small company like Designs for Health could never consider taking on. Initially, the company tried combining Inc. and NetSuite to give salespeople access to sales data from their home offices, but after a year of using both products, founder Jonathan Lizotte noticed it took a lot of duplicate effort to get at the data, as salespeople tried to keep data from NetSuite fresh in Salesforce, and vice versa.

Around that time, NetSuite was ramping up its CRM module, so Lizotte decided to switch to an all-NetSuite environment. The move has not only freed up salespeople to concentrate on their jobs rather than manage data in two products, but it also gave them increased ability to generate detailed reports on that data. For instance, NetSuite lets Lizotte's sales team run what he calls "90-day inactive searches," which tell them when a physician who had been ordering regularly hasn't placed any orders in the last 90 days, and then sorts those customers so that it's clear how to prioritize them. They're also able to view sales by medical specialty. If there's a product for maintaining healthy cholesterol levels, but a cardiology customer isn't offering it, "we can start to figure out why," Lizotte says.

Having that information has allowed Designs for Health to recover accounts that might otherwise have been lost. In some cases, doctors had switched to a competitor because it offered inventory-management services, unaware that Lizotte's company offered identical services but didn't have a local rep to make that known. A visit to such a doctor by one of the salespeople typically results in securing the doctor as a customer once again, Lizotte says. "There's no question in my mind that much of the growth we've achieved is because this information is now available," he says.

Lizotte believes access to various data has been especially important this year because the company has had a busy product-launch schedule. Salespeople are able to answer more questions about those products because they're able to quickly access new-product information. Meanwhile, having access to sales data lets them jump on potential issues faster. "If 15 reps are meeting sales goals and five aren't, then we know we have a problem," Lizotte says.

However small and midsize companies implement CRM, it's clear that data can translate into increased sales. But ISM's Goldenberg reiterates that companies need to make sure data is in order before launching any major CRM initiative. Even though he believes that in most cases, it's the CRM app, not the data, that's providing the real business value, it's also clear that one can't thrive without the other. "Without accurate, complete, and comprehensive data, any CRM effort will be less than optimal," he says.

Which brings us back to the prediction NetSuite's Nelson makes: that a few years from now, today's small companies will be running circles around their larger competitors, primarily because establishing a master record of customer data will prove to be a less-daunting task for them. The way Nelson sees it, the decision to jump on establishing unified sources of customer data will pay off for the emerging companies that do so. "Once you get your data in place, things that were very complex before become quite trivial," he says.

Maybe not as trivial as sipping coffee and nibbling on a Danish pastry, but wouldn't it be great if it were pretty darn close?

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