If only 15% of business leaders consider CRM to be critical, why
have 82% implemented it?
CRM is still a bandwagon that the IT industry is keen to board. A
recent Forrester report shows that 82% of companies claim to have
implemented a CRM strategy and Gartner says that in 2000 the CRM
software market alone was worth $20bn. Once implementation costs
have been taken into account, they estimate that somewhere between
$26bn (£17bn) and $30bn should be added to the figure.
Yet despite this tidal wave of enthusiasm, Gartner also reports
that 50% of CRM strategies are not working, which could mean that
the industry is wasting about $25bn per year on failed CRM
projects.
Furthermore, this figure omits the vast amount of money lost in the
missed opportunities that would have been available if successful
CRM strategies had been in place. The irony is that, while industry
is investing billions, the customer satisfaction index fell on
average by 7.9% between 1994 and 2000.
The failure of CRM can be explained by a paradox: 82% of companies
have implemented CRM, but recent research shows that only 15% of
business leaders believe it to be critical to their business. This
discrepancy reveals two things. The first is that many companies
have merely responded to the "must-have" hype around CRM, without
understanding why or how CRM is relevant to their specific business
strategy or how the technology must be implemented to maximise its
benefits.
The second is that, although business leaders have understood the
importance of good customer relations and customer retention, they
have not yet made the correlation between the end results and the
processes that will achieve those end results.
Furthermore, because companies have not decided exactly what kind
of data they require to enhance their customer understanding, huge
amounts of superfluous data have been generated. This mass of data
has begun to stifle business goals and damage their customer
relations. Businesses have started to assume that simply by having
data and technology they are implementing CRM, although they do not
have a clear understanding of customer requirements. In the
excitement surrounding CRM, the basic rules of understanding
customer requirements have been forgotten.
In the face of this bleak picture, however, the importance of
effective CRM must not be overlooked as it is vital if a company is
to achieve its goals. However, in order to ensure that they
capitalise on their CRM investment, companies should follow a
number of stages:
- Firstly, a base line identifying the company's current position
in terms of CRM success should be put in place to provide a
benchmark against which to measure achievements.
Companies must to look beyond CRM hype and decide whether CRM
technology is appropriate for their company's particular business
strategy.
They must identify targets for how their CRM strategy should
improve the success of their business strategy. At this stage,
companies should also implement processes for measuring these
achievements.
Companies should take independent advice on which is the best
software for them and the best ways to integrate that software with
their current systems.
They must engender a culture in which the principles of CRM are
understood and in which it is acknowledged that technology can only
enable effective CRM and cannot create it itself.
Finally, companies must evaluate their achievements so that their
customer understanding can continue to improve. Once a company
really understands what its customers want, it must use this
understanding to improve its offerings.
What this process stands to achieve is a true focus on the kinds of
services that customers actually require. Rather than business
needs determining the CRM policy, the two will become inseparable
as companies realise that customers' understanding is the first
step in successful business. Eventually companies will answer to
customer demand rather than try to create it.
As a result, the $25bn that is being wasted each year will become
money that is invested in business strategy, bringing about
substantial profit increase and ROI.
Mary Page Platerink is director of strategy at ICL