January 2004

Customer Relationship Management - A Panacea or a White Elephant?

With Gartner recently reporting that 50 per cent of US and 65 per cent of European Customer Relationship Management (CRM) projects have failed and Forrester Research estimating that €37.3 billion was spent worldwide on CRM during 2002, it is little wonder that anxious questions are being asked in the board room.

Many solutions were sold on the quick wins that better marketing effectiveness, lower costs of customer interaction and improved employee productivity would bring. Whilst savings can be made in these areas they will rarely cover the entire bill.

Behavioural changes amongst customers and employees will generate a true return on investment over time, perhaps as long as five years, reports David Reed, a freelance journalist and author of a number of publications on business and CRM strategies.

In a recent interview Fred Reicheld, a director emeritus of Bain and Company and a Bain Fellow commented:

"Retention is one benefit of building loyalty, but retention does not necessarily imply loyalty. Customers may be trapped in a long term contract, or have high switching costs. They are with you because they have no options. That's not loyalty."

"Similarly, some customers don't buy from you", he continues, "because they have no current need for your products or services, but they fully intend to buy from you again when they need to. That's loyalty."

However, there are success stories out there, companies such as: Dell, eBay, Harley Davidson and some of the major financial institutions, have all concentrated on customer loyalty and pride themselves on the visibility that their customers have of their businesses. They also all took time to understand their ultimate goals and how a CRM programme could help them get there.

It is evident that technology can help but it is never the answer in its own right. There are six key steps to consider when deciding on the implementation of a CRM system:

Understand what makes your own business successful.
Document and agree the key business processes that make up your key metrics.
Audit your existing customers. Understand their strategy and why they use your products or services.
Define the key customer data within your business.
Implement technology that will enhance the customer experience of using your products or services.
Implement a comprehensive review and training strategy for your workforce. Without them on board any new system will fail.

Each step has a number of deliverables but when put together the complete picture is known and decisions can be based on fact rather than guesswork. It is also important to not try to do too much at once. Going for a "big bang" approach will almost certainly end in disaster.

"Don't try a big bang. Take it step by step. Start where you can get quick wins, where you can show a quick return on your investment, and you'll get the green light for the next round. This approach has shown to bring the most success," says Bhullar.

For further information and an initial consultation on your current or proposed CRM systems, please contact Steve Stones or Simon Taylor and we will be pleased to help you deliver an effective system for the benefit of your business.