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Can Restaurateurs Tame the CRM Monsters They Create?

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June 01, 2002
Customer | Relationship Management
Mark Hamilton - mhamilton@evans-chastain.com

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© 2002 Hospitality Upgrade. No reproduction without written permission.

The industry is abuzz with the new promise of the ability to know more and more about restaurant customers and potential customers, leading to increased frequency, loyalty, market share and sales, through customer relationship management programs.

The core of these new offerings is the ability to tie together customer information with sales data and market demographics. This creates detailed profiles that become the framework of one-to-one marketing efforts for the restaurant. The idea is not a new one, but has become much more promising through the development of database marketing expertise and technology that is now readily available to most operators. However, implementing an advanced customer relationship management (CRM) initiative is about more than mere software that gathers and analyzes data. CRM is a strategy. It is a combination of technology and human resources that can enhance everything from sales and marketing to menu development and service. Implementing such a program requires that a restaurant operation closely evaluate its objectives related to the gathering and use of the data generated by a CRM solution.

CRM Options
There are basically three options for a restaurant operator wanting to enter into a structured approach to CRM. The first is the POS option, leveraging the CRM module provided through a POS manufacturer. Second is the outsourced option, engaging with a third party to manage customer data, apply data hygiene techniques and manage personalized marketing programs. The third option is a hybrid of the two, in-sourcing the CRM technology and associated processes by using a third-party application(s) in-house to gather data, cleanse the data and execute associated marketing efforts. As with most alternatives, each of these solutions has inherent good and bad points.

With the POS option the restaurant operation is basically in-sourcing CRM with a limited tool. POS technology is very sophisticated and the vendors providing these solutions know operations very well; however, CRM is not their core business. If operators are looking for robust frequency and loyalty programs, many POS solutions are worth a second look. The POS-based solution for CRM is one that must be managed in-house. If insourcing is the answer for the organization, additional data management tools may be necessary to augment those provided by the POS vendor.

The outsourced option has merit and is gaining popularity. This option entails the engagement of an organization to collect, cleanse and manage customer data and associated targeted marketing initiatives. Outsourcing these components of the CRM initiative provides expertise to the operator at a level that is rarely attainable within the organization. However, let’s be clear on this…we are not talking about hiring a mail house. These are companies with vast expertise and well developed tools that can be customized to meet the individual needs of each client. Companies to consider as partners have expertise in data collection, data cleansing, database marketing and the creative aspects of CRM. This all comes at a price. In fact, the sticker-shock normally triggers an operator to look closely at the other two options before making the decision to outsource CRM.

The final option, complete insourcing using a third-party application to manage data and applicable marketing programs, is also appropriate in some cases, given that the restaurant company is ready to commit the necessary resources to make the program a success. The drawback in this case (similar to the POS option) is related to how sophisticated the company wants to be with respect to CRM. The scale of the CRM program may limit the ability for such to be done solely on an in-house basis; however, in some instances, this may be the proper approach given that the objectives of the CRM initiative are well defined and the organization’s culture is receptive to its implementation.

One of the biggest myths is that CRM is all about technology. True, there is a considerable amount of hardware and software associated most CRM initiatives. However, successful CRM implementation is achieved through good training and managing the human interaction with the customer. It is well established that CRM requires the support of top-level management. It is not an idea to be borne by the IT or marketing director alone. But, CRM is not a crutch to lean on in absence of the tenets of customer service. In fact, in order for a program to be successful, management at the unit-level must hold stronger leadership capabilities and command a more dynamic presence than if there was no structured program in place. CRM must become a part of the culture of the organization; this begins and ends with the general manager of the unit. As my colleague Stephanie Gusmeri, vice president of hospitality technology for PGS-Tech said, “Restaurants must carry out recognition at the door and on the floor for any CRM program to be effective, otherwise they are wasting their money.”

Like many technology-based solutions for restaurants, CRM has the potential to be another program that is over-purchased and under-utilized. Therefore, the process employed to identify the appropriate solution is ever important. In an effort to keep this article moving, I will not delve into the technology purchasing process. There are plenty of sources for that information. The most important components are: determining your needs related to CRM; determining what the organization can manage; deciding on the proper approach; identifying the vendor that offers an appropriate solution; selecting the solution; and creating a tailored process for implementation. The two most important components then become determining the needs of the organization and the process for implementation.

There is no doubt that CRM is important, in fact, some companies go so far as to appoint a chief customer officer (CCO). The Gartner Group projects that by 2003, 15 percent of all U.S. companies will have a CCO or equivalent in place. This is a testament to the fact that many are taking notice of the importance of customer information and the prospect of building sound, one-to-one marketing programs. The restaurant industry is no stranger to this idea. Let’s face it, if it were not for relationship building and communication with the customer, people like the late Michael Hurst and Don “Coach” Smith would not have risen to the deity status that they have in the industry. They have ingrained in our minds the value of the customer and the necessity to retain and build customer relationships, understanding that the establishment’s reputation for quality and consistency in the customer experience is first and foremost in building business. These pioneers were practicing viral marketing before we had a name for it.

So, why is CRM such a monster? Consider the POS decision for the restaurant organization, one of the most significant technology purchases that a company makes. Research tells us that the majority of companies utilize only 10 percent of the capabilities of these systems. Now consider an encompassing customer relationship management solution. Such solutions have the potential to equal the cost of a POS system…on an annual basis. At this investment level, 10 percent utilization is not an option. This is an extreme example, but it does make a point. Organizations must determine the solution that best fits the operation’s needs. There are solutions that range from the simplistic to the elaborate; each requires a different level of commitment from the organization. It is tempting to “take it all,” creating an unmanageable and underutilized solution—a monster. A more prudent approach is to implement what you need, and need what you implement. Gain the greatest return on investment and build relationships and opportunities for one-to-one marketing that are tailored to the restaurant’s culture and capabilities.

Mark Hamilton is the director of hospitality technology for Evans & Chastain, L.L.P. He may be reached via e-mail at mhamilton@evans-chastain.com.

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