Many advisors and other businesspeople talk about their CRM software so often that they have stopped thinking about what it stands for, namely Customer Relationship Management.  But if you set aside the software context for a moment, that phrase looks far more like a business strategy than a technology. So what is CRM, really?

It’s a Business Strategy

A key limitation of technology is that it is only as good as the business improvement it drives and the readiness of team members to use it effectively. For an example, look no further than a motorist who paid extra for four-wheel drive in their car without ever using that feature or even knowing its purpose. The point of CRM is not to have advanced technology capabilities for their own sake but instead to deliver a client relationship experience consistently and profitably.

As a business strategy, CRM is about systematically embedding best practices and powerful ideas into the way that a firm does business, so that a consistent high-quality experience is delivered to every client, every time.  A CRM strategy is working if the principal can take a six-month safari in Borneo, and a junior advisor can fill in capably for her while she’s gone. In order to make this happen, that junior advisor would need to have access to the knowledge and thought process that the principal goes through, in all types of settings.

The first step in developing a CRM strategy is to define a client experience that works and is right for your clients and your firm.  Remember that “client experience” is shorthand for a wide variety of cases, e.g.:

• A meeting with an ultra-high net worth individual involves very different preparation than one with a middle-class retiree.
• Establishing a relationship with a family of five will require one type of client acquisition process (meetings, marketing materials, communications, and so forth); doing so with a small business investment committee will require another type of process altogether.

The second step is to decide how to deliver that experience.  This starts with being able to define the experience at a level of precision and detail that makes it executable.  Many advisors believe they already have a defined process. Suppose, however, it was a new employee’s first day on the job: Would the new hire be able to successfully follow the process – e.g., deliver the exact results that the advisor expects – independently and with minimal supervision? To make sure this happens, you will need to document answers to more specific questions. For example: Which roles carry out which tasks? How are team members to communicate with each other and with the client on each task?

The third step is to determine how to execute on the client experience scalably and profitably. This is where technology inevitably enters the picture.

Yes, It’s Also a Technology

One of the biggest mistakes we see made by advisors in selecting CRM systems is what we call the “check the box” mentality: when evaluating CRMs, create a matrix that details which products have which features, and then choose whichever system has the most features. This is a flawed strategy, as it represents the same logic used by the car buyer who buys the unnecessary four-wheel drive.

A more sensible approach is to consider your unique client experience, then determine those CRM software features that you need in order to deliver that experience in a systematic way. For example, if you have a large staff that requires close coordination, then robust workflow and notification features are a must. Once you have identified the features you will really use, then you can do a more focused cost-benefit analysis.

The key is how well the CRM technology enables the business benefits that you defined as part of the strategy, not how many bells and whistles it has.  Therefore, each firm will weight various capabilities of a specific technology differently, and those priority weightings will drive the right decision.

What are the benefits?

The specific benefits of CRM (both as business strategy and as technology) will depend in large part on what your client experience is. But some benefits are universal to a well-executed CRM strategy:

• An increase in the value of your business.  A systematized business commands a higher multiple for valuation purposes.
• An enhanced client experience. Your practice will be able to deliver more value for the client’s dollar.
• Greater efficiency and productivity. You and your staff will be able to deliver more value per hour of work, and have more time to spend with clients and prospects.
• More effective delegation and resourcing of work. Client-facing staff will be better able to focus on high value-add activities.
• Benefits for marketing and client acquisition. A defined process that is consistently delivered creates a competitive advantage.