Six Steps for Successfully Buying CRM Software

While developing a CRM system in-house is not realistic for most community banks, there are a wide variety of options available in the marketplace, ranging from the simple to the intricate. Forming a strong partnership with the right outside vendor is essential to success with CRM, bankers and experts say.

Roy Balkus, vice president of technology for Naugatuck Savings Bank, has a "huge mountain" of data on the bank’s customers. "What we’re doing right now is data warehousing, which gives us a lot more in terms of details as to what customers do," he said.
But eventually Balkus, who chairs America’s Community Bankers’ Retail Banking, Operations, Security & Technology Committee, would like to take that data to compare customers, determine their profitability, and cross-sell appropriate products to them.

The $624 million-asset bank currently does not have the technology or software to do that. Customer relationship management software "would create the ability for me to know" what products to push to which customers, he said.

CRM, at its best, organizes the different areas within a bank, including information from branches, to create a unified memory of a customer and instructions on how to treat that customer. Many banks are finding that CRM software is becoming a must-have marketing tool.

Community banks are pretty good at knowing what their customers need, but their customer service and marketing efforts are often unstructured, said Kathleen Khirallah, TowerGroup’s research director of retail banking. "What a CRM system allows them to do is get it organized," she said.

While developing a CRM system in-house is not realistic for most community banks, there are a wide variety of options available in the marketplace, ranging from the simple to the intricate. Forming a strong partnership with the right outside vendor is essential to success with CRM, bankers and experts say. But navigating the seas of CRM software options can be daunting. Here are six steps banks can take to help guide their CRM software purchasing decisions.

Step 1: Assess Your Needs and Expectations

The first thing banks should do when considering CRM software is to determine the banks overall CRM strategy. Be clear about the goals of the organization, Khirallah said.

The term "CRM" can be vague and far-reaching. It can refer to methodologies, software, or Internet capabilities that help manage customer relationships in an organized way. The term is frequently used to encompass every interaction a bank has with its customers, especially all processes and procedures with the goal of customer service or sales.

The bottom line in all CRM systems is improved profitability, but banks can choose to reach that end through many different means. That could include cross-selling  products, working with existing household information, managing entire relationships, growing lending, or growing deposits. "Most people want to do all of the above," said Steve Kayser, senior vice president of marketing for COCC, a community bank outsourcing , development, and consulting company.

Paul Driscoll, executive vice president of $2.3 billion-asset Beneficial Mutual Savings Bank in Philadelphia, said that when his bank begins to look into CRM software, the planning group will be a combination of people at the bank, including representatives from technology, marketing, and banking. "It will be a mesh of all that … an enterprise-wide project," he said.

At this stage, banks should also decide who should be responsible for purchasing and implementing the CRM software. Khirallah suggested that two people at the bank, the head of business and the head of I.T., handle the project. "TowerGroup refers to this team as ‘Gemini pairs,’" she said. "This project cannot be delegated solely to the I.T. group."

Step 2: Decide Which Options Are Critical

At this point, banks should decide what they absolutely must have in terms of CRM software. They should also develop a list of important, but not critical, needs, and a list of things that would be nice to have in a system, like add-ons.

There are many levels of CRM software on the market. Weissman breaks the software down into five levels, ranging from basic to advanced.

The simplest systems just keep track of basic contact information. "It’s basically an elaborate, nice, telephone book," Weissman said.

The second level has the ability to track contacts. These systems take the concept of a universal telephone book and add the ability to track telephone calls, meetings, and e-mails. This and the universal telephone book are stand alone, meaning they don’t integrate with other databases in the bank.

The next level brings in account data. On these systems, when a bank employee looks up a customer, he or she can not only see the customers contact info, but also can look at which accounts the customer has with the bank.

Bringing in profitability data is the next step. At this level, the CRM system moves from one that houses information to one that creates information. These systems offer "an income statement for each account that each customer has" to show the bank "how much money they are making or losing for each account," Weissman said.

The highest level is a fully integrated CRM system. That’s where the CRM system is incorporated into the sales and marketing database  system and allows for analysis of each customer relationship for each account. Systems at this level look at customers to determine what new products to offer them. Systems at this level also have the ability to bring in external data, such as information on demographics and business graphics.

"We are firm believers that, at a minimum, you should have a level four" system, Weissman said.

Most experts and software providers agree that the best form of CRM software is enterprise wide. Enterprise-wide CRM systems interface with all of the bank’s other systems, so that the information flows through the entire organization. "If you’re going to do (CRM) right, you need the whole institution to play a role," Kayser said.

Step 3: Match Your Needs With Software

After determining the bank’s needs, the next step is to conduct due diligence to match those needs with appropriate vendors and services. Some vendors can match their technology with the software needs of many institutions. Other providers specialize in a certain area, which may or may not match the area of a bank’s focus. Either way, banks should require all vendors being considered to demonstrate how their software can meet the bank’s expectations.

"Work with a number of vendors to match your goals," Kayser said.

Banks should "cast a wide net" in this stage of the process, Khirallah said. She suggested evaluating about 10 different vendors at this point. Consulting groups can assist banks with vendor selection. Industry associations, such as America’s Community Bankers, also offer resources that can help. ACBs Buyers Guide, which is available online, provides contact information on 14 providers that offer CRM services  to community banks.

Step 4: Narrow Down Choices And Issue RFPs

At this point, banks should narrow down their vendor choices to about three or four. They should look for CRM software vendors with proven track records of success, Kayser said. They also should look for state-of-the-art technology.

"It’s important that they deal solely with financial institutions and have a very good knowledge of what financial institutions need and of the competitive landscape," Weissman said. "They should understand things besides CRM at banks," like teller systems, help desks, and the call center side, he said.

Banks should look for vendors that focus on financial institutions of their size, Khirallah said. She also recommended that banks visit the clients of the vendors they are considering, even flying to an out-of-town bank for a day visit. Once there, Khirallah said, ask the clients a series of questions about their CRM system, including:

  • Was the CRM software easy to install?
  • What did the training entail?
  • Is the system working as you expected?
  • How is the vendor to work with?
  • Was the vendors pricing accurate, or were there hidden costs?
    • Are you happy with the system?
      When issuing request for proposals, banks should be specific about what they are looking for, and make sure all questions and requests are addressed.

      Step 5: Evaluate the Vendor Proposals

      "The biggest mistake is buying CRM based on how pretty the screen is," Weissman said. "The screen should look pretty good, but what’s behind the screen?" he asked. Questions toask include:

      Does the system have profitability assessment and analysis?

      Is it based on relationship creation, not customer or house holding?

      Does it have a data warehouse for historical data?

      Does it include retail and commercial?

      Is it providing external data?

      Is it integrating all that into a consolidated view of the customer relationship?

      Is it a fully integrated system?
      A strong partnership between the bank and the vendor is key, Kayser said.

      Costs are big with CRM software, but the return on investment can be even bigger. There is a broad range of costs for CRM software. Cost is variable, based on the number of users and the size of a bank’s database, Khirallah said.

      "These are not inexpensive systems," Kayser said. Costs depend on how much software the bank wants to deploy, what pieces they select, and how much help on the implementation side is needed, he said. Costs can range from $50,000 to $250,000, and can reach up to $5 million for large banks, he said.

      "It’s a real wide range," Weissman said, adding that there are systems that are affordable. "We work with banks that are very small and very large. Our CRM is affordable to the small guys," he said.

      In Grant Thorntons 2005 survey of community bank executives, 64 percent said updating or expanding technology to better track customer needs was important to their bank’s success, yet only 33 percent were confident about their performance in that area.

      Step 6: Implement the CRM System

      Utilizing, not just having, a CRM system is critical, Weissman said.

      "One reason projected CRM returns are not being fully realized is because over 75 percent of companies are not fully using CRM once it is implemented," according to Doing CRM Right: What It Takes to Be Successful With CRM. a 2004 study by IBM. 

      CRM is done right less than 15 percent of the time across the globe, according to the survey, which polled more than 370 companies across all industries.

      "Differentiating steps are not the big-ticket items, such as technology implementation or customer data integration , rather, they are the human-oriented steps such as change management and process change," said the IBM survey.

      "Work with someone who is going to do all the set up for you," Weissman said. A key part of CRM training is working with the bank over the long haul to leverage the potential of the system, he said.

      Access is extremely important, Weissman said. "Frequently I see banks make this purchase and give only a handful of employees access. That makes no sense," he said. "You have to get this out to all the people that have direct customer contact… or what’s the point of having it?"

      Full-blown implementation is a fairly long, detailed system, Kayser said.

      Choosing and implementing CRM software is not the last step in customer service. Community banks still need to keep constant communication open between their employees and their customers, Kayser said. Implementation training should include a mix of vendor and business unit training, Kayser added.

      "This is about process. This is about workflow. This is about overall knowledge level. You need great people training, along with great skills and a great system." Kayser said.

      Even With Technology, It’s Still About People

      Community banks should emphasize training and incentives over technology when it comes to implementing a customer relationship management solution, said a May report from Celent Communications, a Boston-based research and consulting firm serving the financial industry.

      Also, "success isn’t defined by deploying the software, but by customer-oriented goals," said the report, Branch Automation: The Convergence of Teller, Platform and CRM, which focused on banks with less than $1 billion in assets. "Setting a strategy, training your front-line staff, providing proper incentives, and being able to measure and reward based on those incentives drives a successful CRM implementation."

      While technology shouldn’t dominate the discussion, it can play a role in cutting costs, the report said. Smart client technology, for example, can improve the response time of teller workstations, allowing banks to eliminate costlier branch servers, the report said. Instead of relying on individual servers for each branch, a bank can install "smart clients" that interface directly with a centralized server.

      In addition to boosting the speed at which a teller can access customer information, a smart client gives tellers offline functionality, which is not available with branch servers. If a branch server repair, "someone from I.T. must go to the branch to repair the server. This can be both costly and time consuming and can lead to extended periods of downtime  at the branch," the report said.

      As existing branch automation systems grow obsolete, more banks will begin to upgrade their technology with options such as smart clients, Celent said. However, "the market is warming up, but is by no means hot," the report said. As upgrades do progress, according to Celent, community banks will tend to purchase complete branch automation solutions from their core vendors. "These customers don’t have the ability or budgets to undertake integration or customization projects and will prefer a single source," the report said.

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