Strategic Customer Relationship Management

Creative companies are proving that CRM is more than a technology initiative -- it's an integral part of the strategic business plan.

If you're going to run a race, it's wise to start with a strategy. That's a fact Michael E. Miller understands well. He's the CFO of Louisville, Ky.-based Churchill Downs Inc., which owns and operates six horse racetracks throughout the United States, including Churchill Downs, home of the Kentucky Derby.

In Miller's industry, cultivating customer loyalty and boosting revenue are challenging in any economic environment. But the trend in recent years away from on-site wagering on horse racing and toward off-track betting has added a new dimension to the problem. The customer relationship management (CRM) techniques that used to lead the race just aren't getting horse-racing businesses to the finish line today.

"It's a tough competitive environment. Without thoroughly understanding our customers and tailoring products and services to their specific needs and interests, it is difficult to maintain profitability," Miller says.

That's why Churchill Downs embarked on an ambitious initiative that should spur it well past the $424.2 million in revenue it brought in last year. Beginning in the mid-1990s, the company created newsletters and highly targeted online messages aimed at specific market segments. It developed a customer loyalty program. And it began holding sweepstakes to glean valuable customer data. Early this year, Churchill Downs implemented a CRM software package to bolster these programs. The system tracks and stores extensive information about customers' preferences. So, for example, if a particular bettor follows races for two-year-olds or has an affinity for turf tracks, the company most likely has that information in its CRM database. If a fan follows a particular lineage or has a favorite race, the organization probably knows that too.

Churchill Downs is not alone in turning to CRM projects to boost profitability. Over the past decade, "know thy customer" has become a mantra for all companies, large and small, as they struggle to cope with a tough marketplace and growing competition for customers and revenue. Few business technology initiatives in recent years have drawn more attention than CRM software implementations. Yet, despite the sophistication of these systems, many organizations' CRM efforts have an abysmal track record. Companies have consistently failed to transform raw data into a win.

And the situation isn't getting any better. "There is far too much emphasis on technology and not enough focus on constructing the right underlying business processes," explains Chris Selland, a vice president of sell-side research at Boston-based consulting and market research firm the Aberdeen Group. Success comes only when organizations truly understand how to take care of their customers. "Computers and software cannot think through that equation," he says.

Scott Nelson, a vice president of Gartner Inc. in Waukesha, Wis., believes that companies have focused so heavily on automating processes -- through self-service, call centers and sales force automation, for example -- that many have lost sight of CRM's primary objective. "The end goal," he says, "is to have a unified view of customers, understand which ones are the most faithful and valuable, and put together a plan to serve the various market segments effectively and profitably."