Another monster mauls the customer

Customer relationship management - who needs it? Certainly not everyone, says Martin Butler. For many businesses, it's just...

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. Well you don't need an MBA to understand this fundamental fact, 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 the merging of databases, re-education of the workforce, and spending as much money as the consultancies and technology vendors can get away with. I have good evidence for the difficulties involved in all of this.

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 net result of implementing CRM was reduced customer choice and increased costs
Martin Butler
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
Customers do not appreciate a more burdensome transaction with extra after-sales calls
Martin Butler
is probably not a good way forward. Where your products are highly differentiated, then CRM is much more likely to yield positive results. Some companies are using CRM as a device to get better responses to mail shots - and there is certainly evidence that it can do this. 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 ever more mail shots and sales calls then the results are going to be disappointing. The very name customer relationship management betrays the intent; those people out there are seen as customers, to be shorn in whatever way possible.

A more appropriate name might be SRP, or 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 one of "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.

Martin Butler is one of the world's foremost thought leaders on technology and strategy. He is the chairman and founder of the Butler Group, one of Europe's leading analyst groups

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