VideoThe three letters "CRM" stand for customer relationship management, but given all the recent bad press CRM has been receiving, one might imagine they stand for "costly, rotten mistake."
How did we get here? CRM software, sold by a long list of vendors that includes Siebel, SAP, PeopleSoft, Onyx, Pivotal, and, most recently, Microsoft, promises to automate and integrate the ways a company relates with its customers — essentially, sales, marketing, service, and support.
Yet despite billions of dollars spent on CRM products and services, as many as 12 percent of all CRM implementations are complete failures, according to AMR Research Inc., meaning the systems never even go live. Worse, AMR adds, only 16 percent of all CRM installations have actually improved business performance in a measurable way. In other words, roughly 85 percent of all CRM users cannot quantify any benefits at all. In today's tough, "show-me" economy, that simply won't fly.
Yet there's hope, say CRM users, vendors, consultants, and market analysts alike. They see companies that use CRM entering a new, more-advanced phase, one that could bring greater competitive advantage and return on investment.
Huge challenges remain, to be sure, and the need for CFOs to get involved is great. "The CFO plays a critical role," says Frederick Newell, a consultant and author of the book Why CRM Doesn't Work (Bloomberg Press, 2003). "The CFO represents the heart of the corporation and can be a real facilitator of CRM."
Of course, no one expects CFOs to create measurable value from CRM alone, but they do carry plenty of C-level clout with the companies that sell CRM software. And given the dismal times in the market — money spent on CRM products and services grew by only 2 percent last year, according to Aberdeen Group Inc., and many vendors posted substantial losses — an executive who knows how to drive a bargain can make a major contribution.
The spate of CRM failures has revealed some fundamental flaws that vendors and consultants are now racing to fix. One development to watch: greater integration of CRM software components, many of which today operate as stand-alone, "point" solutions.
Early CRM implementations focused on the front office: sales, marketing, and support. But with so few companies finding measurable benefits, the current thinking is that companies must now automate the back office (fulfillment, for example), create customer-information databases, and link it all up in a way that lets them treat different customers differently.
"The next step is about driving customer information and tailoring back-office activities around service levels for different customers," explains Darius Vaskelis, a vice president at consultancy Inforte Corp. "We're talking about injecting that customer and demand information into decision-making."
Survey research firm and software supplier Walker Information Inc. argues that the basic approach of CRM will shift to an emphasis on customer loyalty. The company uses surveys and business models to place customers in one of four loyalty categories, ranging from truly loyal to at risk. The idea is that once you understand a customer's loyalty, you can respond appropriately, kowtowing to the loyal and making nice to the disaffected. "There's a remarkable movement afoot called 'win-back,' " says Jeffrey Marr, group vice president at Walker. "Sectors and markets have matured to the point that if I have somebody I know is leaving, I want to win them back."
Software Isn't Everything
Better software may not be the complete answer. Some experts believe the true value of CRM will emerge only when the companies that use it change their business practices. One approach, says David Campbell, partner for financial services at IBM Business Consulting Services, is to "pull together your data in one place, aggregate it to get a consistent view, and then start to mine it for information that would better allow you to serve and sell to your clients."
That may be as useful as it is potentially expensive. Less costly, but not easy, is a greater focus on teamwork. Most experts believe that in its next phase, CRM will require disparate business units — sales, marketing, IT, and others — to work together in ways that previously have been unimaginable.
"The untold story is that CRM requires a substantial and broad transformation of the enterprise itself," says Claudio Marcus, research director for CRM and business technology at Gartner. "Being customer-centric requires a great deal of collaboration across different functional and product areas, since most customers view themselves as having relationships with the enterprise, not pieces of it. That's a big challenge."
David Goudge will attest to that. The senior vice president of marketing at office-products supplier Boise Office Solutions, in Itasca, Illinois, helped initiate a system successful enough to win Gartner's 2001 CRM Excellence Award. Yet he is quick to admit that getting Boise's business groups to cooperate was — and still is — tough. "For the first time in our culture, the lions and the lambs sat down together," he says.
It seems to be paying off. Boise has completed new infrastructures for inbound customer service and support as well as outbound sales, including a Web site that will let customers interact with the company while it collects that interaction data.
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