Good News, Bad News
By Arthur O’Connor.
I recently saw this factoid on a Web site: “Only 1 percent of CRM implementations succeed.” No source was provided, as if the statement needed no attribution — assuming it’s common knowledge that CRM is a complete disaster.
According to some well-documented research, it appears that the news about CRM is far from being so one-sided. Recent developments represent an interesting mix of good and bad news. Here are some highlights:
1. CRM seems to be in the process of being re-defined as smaller, more incremental initiatives — not quite the big-scale cultural transformation it was once promoted to be.
If fact, according to a market research study by the Gartner Group on European companies, only 3 percent of companies are implementing “true CRM.” The study found that 45 percent of the companies surveyed are “still wondering what to do” and 35 percent have launched a grab bag of different projects.
This is both good news and bad news. The good news is that the “go-big-and-fast” argument propounded by the big, enterprise framework software solutions providers — responsible for some of the bigger and nastier “failed implementations” over the past few years — seems to be effectively repudiated by the marketplace.
Most organizations that have successfully implemented CRM have started small — experimenting with many different pilots — before rolling out larger scale implementations of these new systems.
According to a May 2001 survey of business executives by the Cutter Consortium research firm, 40 percent of respondents were “satisfied” with their CRM efforts and only 6 percent said that they were disappointed.
2. CRM isn’t a done deal. In fact, it’s just beginning.
Despite all the presentations by CEOs to Wall Street analysts over the past couple of years about “re-organizing around the customer,” “creating a customer-focused strategy” and recognizing that “customer relationships drive shareholder value” the fact of the matter is that most corporations are not finished implementing CRM. In fact, some research indicates that businesses are just beginning.
The May 2001 Cutter study of corporate executives found that 66 percent of the CRM programs identified were less than a year old and that only 11 percent of the companies surveyed had CRM initiatives in place for more than two years.
Another report indicates this same trend. A Gartner Group December 2000
survey of 56 retailers that was released in June 2001 indicates that while most retailers believe CRM to be a top business priority. Fifty-two percent rated CRM as their highest priority, 43 percent rated CRM as a moderate business priority and 34 percent acknowledge that they are deploying a CRM initiative. Only 5 percent rated CRM as a low priority.
3. People are using different “metrics” to judge the relative success of their CRM efforts.
Contrary to the popular belief that all major IT investments require a rigorous and carefully thought out cost/benefit analysis, it turns out that CRM projects are bought on faith, not on numbers.
According to industry research (a study by Cap Gemini/Ernest & Young), only a small percentage of corporate managers have developed solid performance metrics for measuring the value of CRM.
As many business people are quickly discovering, it is difficult — if not impossible — to isolate and measure the timing and amount of economic benefits generated from CRM. As a result, many “ROI (return on investment) studies” are nothing more than high-level strategy assessments, which conclude that CRM isn’t an option — it’s a necessity in order to compete.
Instead, businesses are starting to think about and develop customer metrics — bypassing the whole issue of feasibility studies — which include the following categories:
Customer intelligence and analytics
These metrics track the commonalities of high-value customers and how this information can be leveraged to attract and retain more of the same type of customers.
Customer interaction management
These reports indicate how customers use your different channels, and for what reasons. This information helps companies ensure a consistent message and fully leverage customer intelligence-gathering and communications while understanding the predominant channel of influence of different customers (i.e. the preferred and/or most effective form of interaction).
Customer profitability management
This business intelligence deals with measuring the relative profitability of your customer segments and how potential revenue streams and gross margin costs vary across these different segments. It is used to maximize profitability for both a short-term and long-term basis.
Customer management reporting
These metrics are perhaps most commonly used today by sophisticated marketing organizations to report on a regular (usually quarterly) basis regarding the increase (or decrease) in sales in any given period. These reports can distinguish changes in revenue as a function of both the acquisition of new customers as well as an increase in wallet share of existing customers.
Benchmarking
These studies measure the retention/loyalty and defection/churn rates of a company relative to those of its peers, and provide reasons for variances.
In short, there’s plenty of news coming out of the CRM sector. And most of it is good.
What are your views? Please send them to me at [email protected].
Arthur O’Connor is one of the nation’s leading experts on customer relationship management (CRM) and customer-facing IT systems and strategies. He’s currently the national columnist for eCRMGuide.com and this year serves as the chairperson of the Institute for International Research’s CRM Conference. Arthur has over 20 years leadership and management experience in the area of customer management, strategy and new business development, including 15 years as a senior corporate officer of two NYSE-listed inter national corporations, and over five years experience as an independent management consultant and Big 5 firm practice manager selling and managing large-scale IT engagements.