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Skinny CRM
How to win on a budget in the face of
budget cuts


by David Bernard, Managing Director of
DB Marketing Technologies

You can boil down a lot of the talk about CRM and Big Data into three words--- spend, spend, spend. There is no shortage of hawking for the latest and greatest CRM software or hardware out there, and if you've managed to stash a huge chunk of budget in your proverbial mattress, you have no shortage of options on which to spend it.

But here’s the problem. It’s 2014, not 2004. Budgets are routinely slashed, either through year-over-year cuts or worse through forced budget give-backs mid-year. Despite these cuts, marketers are expected to do more, or at least the same, with less resources and cash. The big question is how to spend less and not lose your edge.

Ready, Fire, Aim: When things go wrong
Unfortunately, when confronted with a budget shortfall, many companies lose their cool and make some big mistakes:

Mistake #1: Scale Back Marketing Programs
It would seem that scaling back marketing programs is a reasonable step to counter a budget shortfall. But looking closer, it is best to take a few deep breaths before going down that path:

  1. Depending on the programs and the environment, the actual cost reductions can be minimal.

  2. More often than not, reactionary complexity and volume adjustments to marketing programs result in a considerable decrease in program effectiveness. This decrease can result in fundamental weaknesses in the overall CRM initiative, which limit the ability to demonstrate value to the business (and therefore risk future budget reductions).

Bottom line is that scaling back marketing programs should not be a CRM marketer’s go to option.

Mistake #2: Treat CRM like any other System/Technology
When confronted with a budget shortfall for CRM, senior management may turn to their IT/Commercial Operations organization to reduce costs. As expected, IT/Commercial Ops treat CRM as they do all other systems, using the following solutions:

  1. Migrate Platform to Internal Systems, Cloud/SaaS or Off-Shore Hosted Solution. IT/Commercial Ops view CRM Vendors as specialized vendors that deliver solutions at a high cost. The preferred option is to use a platform with low overhead and leverage personnel under their control to perform the ongoing management. This is either leveraging existing internal infrastructure, using a Cloud/SaaS vendor, or hosting the platform in an off-shore environment.

  2. Replace high cost expert vendor teams with low cost staff augmentation. And when taking into account the ongoing management needs of CRM, IT/Commercial Ops rely on staff augmentation vendors that provide additional technical resources to meet the needs of CRM.

There are certainly good intentions here. But in many cases, this turns out to be a big flop of a solution for a number of reasons:

  • CRM Systems are different than typical IT Systems. The data structures and processes needed to manage and reconcile customer marketing data require specialized skills. The commitment required to develop this expertise in-house is easily underestimated.

  • CRM Labor is different than typical IT Labor. Migrating the platform forces migrating the labor. Some CRM vendor resources can be replaced through IT staff augmentation. However, replacement of expert CRM resources needs to be done carefully. When the smoke clears, you must not lose all of your domain experts. If you do, any cost cutting you achieved will be offset by huge additional costs and error.

  • CRM capabilities must be managed beyond Technology. The typical IT/Commercial Ops management model does not provide sufficient overlaps to marketing and marketing process. As a result, significant gaps and errors emerge almost immediately.

Bottom line is that CRM initiatives driven by IT/Commercial Ops have a very low success rate due to exponentially more complex and difficult management challenges that are often not accounted for in their planning.

Making CRM Work—for Less
While cost cutting is a worthy (and at times necessary) goal, cutting has big risks that can far outpace any immediate benefit from lower costs. If you cut the wrong initiatives, for example, you may end up creating new problems that require additional spending or you may reduce marketing effectiveness and imperil your own job and your team. Companies must keep their heads and not just start lopping off programs and/or trading out people for technology. It may seem to be an easy and quick way to achieve budget goals at first, but it’s not necessarily effective as soon as three to six months down the road. In short, CRM Marketers must avoid “cutting into the bone” and instead find and eliminate the fat. And in CRM, the fat a business takes on is in the form of excessive billed labor.

Excessive billed labor is a treasure trove of cost cutting opportunity. In almost every case, if done properly, elimination of excessive billed labor not only resolves budget issues, but also improves performance, accuracy and quality of CRM practices.

Here are a few pointers to help you be a superstar when the money is tight:

Standardize Marketing Programs
In a typical environment, a huge chunk of cost is driven by reliance on a custom/one-off approach to Marketing. And this is no surprise given that Agencies of Record are not only the chief advisers to CRM marketers but also the chief beneficiaries of the “build every program from scratch” approach, which allows them to bill significant labor to clients. Yes, there situations where an ongoing reliance on “build from scratch” marketing is needed, but they are few and far between. In most cases, a set of standard campaign templates that are reused with modular creative for each campaign will sufficiently meet most needs, leaving custom development only for the most tricky marketing activities. The standard campaign templates not only streamline the creative process, but also include pre-defined operations and measurement specifications and interfaces. As a result, the build and setup for campaigns with other vendors are streamlined as well, reducing cost and error.

Streamline CRM Vendor Labor
Agencies of Record aren't the only place labor costs are out of control. CRM vendors that provide Marketing Operations staff augmentation are an obvious target, but even database hosting Marketing Service Providers use a considerable amount of labor at your expense.

Here’s how to identify the fat in your CRM Vendor Labor:

  • Billable Rates, Billable Hours by Task, Resource Allocation. An obvious place to start is billable rates. Inflated rates add up, and that can yield savings. But beware of CRM vendor “Three Card Monty.” A reduced billable rate accompanied by an increase in billable hours/allocation gets you nowhere. Benchmarking billable rates along-side billable hours by task against industry standards is an excellent first step.

  • Team Management Overhead. If the management resources on the CRM Vendor Team represent more than 20% of the total allocated FTE labor, chances are the vendor has over-allocated resources on your team and is wasting your budget.
  • Team Skill/Expertise Distribution. Teams that deliver effectively, both in terms of quality and in terms of cost, share three distinct properties:

    • Sufficient Expertise/Skills. Each team member must have sufficient skills to perform the tasks at hand efficiently. When vendors rely on lower cost junior resources with limited skills this drives up cost and error overall.

    • Sufficient Resource Allocation. Teams that deliver effectively have sufficient allocation of team members. When vendors provide a fragmented workforce with a large number of individuals allocated over small slices of time, risk of error and coordination overhead is increased, raising overall cost.

    • Sufficient Team Member Engagement. The anchor team members must have broad and deep knowledge of the business, skills they needed to complete the project and understanding of the project goals. When too many team members have too narrow a focus, incidents and errors are elevated, increasing cost.

Improve CRM Integration
The most important way to cost optimize your CRM capability may be in CRM Integration. What is CRM Integration? Well, CRM Marketers need to harness a whole bunch of vendors to make their programs work, including agencies, channel vendors and database vendors. More often than not, CRM Marketers just let the agency drive and the other vendors follow their lead. This is where costs can mount and marketing effectiveness takes a hit, as most agencies do not have sufficient skill in CRM Integration. Poor integration of project tasks, inefficient solution designs and unproductive processes across vendors increase resource demand, reduce performance and increase costs.

To improve CRM Integration, companies need a CRM Integrator, often a hired gun with domain expertise who manages the workflow between agency, brand and CRM vendor to ensure optimal use of each team’s core competencies. CRM Integrators optimize the operating model, how work is defined, allocated and executed. CRM integrators manage the individual vendors by filling in the gaps in instruction and providing marketers with honest evaluation of teams and skills. CRM integrators also eliminate the need for cross functional experts at each vendor.

Conclusion
There are many drivers of cost, and successful CRM Managers need to address these drivers directly so they can reduce costs while still achieving their objectives. And if you follow the guidelines in this article, you can too.

For more information about CRM Integration or  how DBMT® can help your group reduce its budget but maintain its marketing programs, please email us at info@dbmt.com or call us at 212-717-6000. We'll make your CRM infrastructure work, no matter the budget.

 

 

 

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