New research reveals many corporates are unhappy with their customer relationship management software, writes Daniel Thomas.
Businesses will spend about £35m on CRM in 2005, according to analysts' predictions, yet dissatisfaction with the software remains high, new research from the consulting arm of IT services firm EDS has revealed.
Improving customer relations is a key aim for the majority of companies, but the lack of metrics to judge the effectiveness of CRM packages and poor internal communications has meant European businesses have made little progress with CRM, EDS Solutions Consulting said.
The research, based on responses from 355 senior directors and executives responsible for CRM in large organisations in 11 European countries, revealed that 33% of European companies are not content with their CRM implementations.
This widespread dissatisfaction is partly because companies have still not got to grips with how to measure the success of CRM projects, the report said. Despite the increased need for rapid return on investment on IT projects, 40% of companies still lack CRM metrics.
"The report shows that there is widespread uncertainty about how to establish a customer-centric business and that metrics are not in place to measure [CRM's] effectiveness," said Mike Fitzgerald, head of applied value chain services at EDS Solutions Consulting UK. "The business case for CRM is there - 87% of respondents give a high priority to customer relations - but actual progress in CRM at the enterprise level is seriously lagging."
The majority of initial CRM implementations are "tactical fixes", focusing on areas such as improving customer service or sales-force automation. This has made it difficult to measure overall success, Fitzgerald said.
"CRM has been largely tactical with lots of small projects but the connectivity has not been there," he said. "Enterprise-level CRM is where the real benefits are but linking all the systems together is hard work."
The report revealed that communication between IT departments and their boards on CRM projects is still poor. Even though 60% of companies now have a designated head of CRM, performance reports take at least six weeks to reach chief executives, it found, while 5% of chief executives never receive reports at all.
"We can only conclude that the board has yet to get a clear view of its strategy and seriously grapples with the need for joined-up thinking in the quest for successful enterprise CRM," said Fitzgerald. ''The board needs to get a grip and use top-down directives on what is expected of CRM."
Companies need a greater understanding of the true value of customers, Fitzgerald said. "The report shows that companies cherish their customers, while retaining unprofitable customers. Companies have to ask themselves whether they measure the true value of their customers and whether their systems provide them with a basis to do so."
The report showed that companies do not manage CRM projects tightly enough, make little effort to gauge return on investment on projects, and fail to understand their customers and how to get the most out of them.
"No wonder enterprise CRM has a long way to go before it can be seen to be successful," said Fitzgerald.
Key findings of the CRM Report
- Some 33% of directors are not content with their CRM systems
- Sixty one percent of directors do not know the projected return on investment for their CRM programmes
- Only 59% of directors measure the effectiveness of their CRM effort. Forty eight per cent measure customer lifetime value
- Sixty per cent of organisations have a designated head of CRM
- CRM initiatives targeting B2B outnumber those for B2C by 5%, continuing a trend shown by previous reports
- Banks and telecoms companies give the highest priority to CRM investment, while manufacturing and retail give it least priority. Overall, just over 33% of respondents said CRM receives a high priority in the competition for investment.
Source: EDS Solutions Consulting UK CRM Report
Leeds City Council's CRM success
While many in the private sector have struggled to exploit their large CRM investments, some public sector organisations are showing that it is possible to achieve major benefits by using the software.
Leeds City Council this week revealed that it has significantly improved customer service delivery and operational efficiency since rolling out Siebel's suite of e-government applications in 2000.
The local authority is using the suite, which includes CRM, Siebel Service, Partner Relationship Management and Employee Relationship Management software, as the platform to support its call centre, which receives 25,000 calls a week.
"We now have a single point of contact for citizens which can handle a multitude of enquiries," said Elaine Wainwright, assistant director for strategy and development at Leeds Council. "Our return on investment measurements are not in terms of selling more, but improving the service we offer to citizens, and Siebel is helping us to do this."
The council is planning a number of initiatives based on the Siebel platform, including improvements in social services, environment and job training schemes, Wainwright said.
In addition, the authority is planning a major initiative to improve the management of all incoming correspondence. "This is not just about managing correspondence that comes in but tracking what exactly our response and follow-ups are," she said. "It is not necessarily about centralising management but giving us a holistic view of what is going on."