Customer relationship management - who needs it? Certainly not
everyone, says Martin Butler. For many businesses, it's just
another way to spend huge amounts of time and money, with little to
show in return
The unholy alliance between major technology vendors and large
consulting companies has created yet another monster. Not content
to maul us with business process re-engineering (BPR) and
enterprise resource planning (ERP), this dynamic duo have unleashed
customer relationship management (CRM) upon the world.
The central idea is that customers are very important and
businesses need to manage their relationships with them. You don't
need an MBA to understand this, but you probably do need an MBA or
higher to understand much of the lingo. Not since BPR have the
consultancies and technology vendors been so active with their
buzzword generators, turning the world of customer relationships
into the mother of all PowerPoint presentations.
Business managers should always be wary of grand schemes and
big-bang projects; they do not work. CRM is typically presented as
a "major re-orientation of business processes around the customer".
This is no trivial task. It involves merging databases,
re-educating the workforce, and spending as much money as the
consultancies and technology vendors can get away with.
I recently attended a conference on CRM where I got into a
conversation with two senior executives from two large
corporations. They had just implemented their CRM strategy and were
finding it contained a paradox. Both exercises had been so
expensive, and the cost of running the systems so large, that the
companies were looking for ways to simplify their customer
relationship processes. This meant reducing the range of products
their customers could buy, and hence reducing customer choice. So,
the net result of implementing CRM systems was reduced customer
choice and increased costs. They were not happy men.
The business benefits from CRM depend upon the nature of your
products. If your business operates in markets for commodity, or
near commodity goods, then CRM is probably not a good way forward.
When your products are highly differentiated, then CRM is more
likely to yield positive results. Some companies are using CRM as a
device to get better responses to mail shots. What these companies
are less willing to talk about is the conversion rates from these
extra leads.
Where a product is undifferentiated, customers are looking for
efficient service, low prices and a supplier that is easy to deal
with. They do not appreciate a more burdensome transaction with
extra after-sales calls to see if there are any up-selling or
cross-selling opportunities. With highly differentiated products,
however, the picture is quite different. A CRM system can be used
to provide valuable information to customers, and ensure that full
support is given if it is needed.
If CRM is seen as just another way to pester customers and
prospects with mail shots and sales calls then the results are
going to be disappointing. By its very name CRM betrays the intent;
those people out there are seen as customers, to be shorn in
whatever way possible.
A more appropriate name might be supplier relationship management.
At least in this way a business would truly understand that it is
in the business of satisfying a demand, and not "managing" its
customers. Despite repeated chanting of the mantra that the
customer is king, most businesses still feel that they know what
the customer wants, and CRM actually makes them less inclined to
listen to what their customers are saying. CRM will actually have
come of age when it re-orientates the business around communication
from the customer and not communication to the customer.
CRM: In a nutshell
CRM is a complex and expensive
undertaking. It will not suit all businesses - in many cases,
customers want only the best price with the least hassle. The
successful business will be one that listens to its customers,
rather than trying to communicate with them.