Much has been written over the past half decade about "customer
relationship management" (CRM). Web sites, libraries, and
conference agendas abound with white papers, books, and interactive
discussions of CRM concepts and practices. And companies have
invested massive amounts of time, energy, and money supporting CRM
initiatives and developing and implementing CRM systems.
The reason for this investment is simple: CRM promises highly
valuable business outcomes. Unfortunately, a great many of these
promises remain unfulfilled.
Promise and over-promise
The benefits that may result from a CRM implementation are
enticing. What CEO wouldn't want to "enhance the effectiveness and
efficiency" of his or her marketing spending? Who would turn away
from an opportunity to "maximize the value of the customer
relationship?" What sort of responsible company leader would ignore
a chance to "seamlessly coordinate all customer touchpoints,"
thereby "forging more powerful and profitable customer
relationships" for the company?
These and other promises have been made by CRM marketers, and
they are clearly attractive. CRM's performance against these
promises, however, leaves much to be desired. In fact, reports show
that more than of 60% of CRM programs have fallen considerably
short of company expectations.
These failures aren't the result of inadequate investment.
Companies have poured about $3.5 billion a year into creating the
systems and databases to support CRM initiatives. Yet in spite of
these often-hefty expenditures, the results continue to
disappoint.
In 2000, the Insight Technology Group surveyed 226 companies
with fully implemented CRM programs and reported that 25% of these
companies detected no noticeable improvement in their operational
performance. A Bain survey, also conducted in 2000, found that a
mere 15% of the companies using CRM were "extremely satisfied" with
these programs.
A recent crm-forum survey of 700 members concluded that,
overall, CRM programs produced inadequate ROI. This survey examined
users' perceptions of CRM payoff in potential benefits that ranged
from enhanced customer retention to decreased service costs. The
survey report concluded, with considerable disappointment, that
"there is a significant gap in all cases between the importance of
the objective and the success in achieving it."
Clearly, companies have committed the required dollars. And the
software provided and installed in company CRM programs does not
appear to be at fault. In fact, the crm-forum survey found
that only 2% of the failures could be laid at the software
doorstep. So what has gone wrong?
Aiming at the wrong target
CRM's reported failures and shortcomings aren't caused by
inadequate software or systems, which suggests that remedies of a
far different sort are needed. Companies must rethink the goals set
forth for CRM and the benefits CRM programs are asked to deliver.
For instance, according to the Insight Technology Group survey,
companies are counting on CRM somehow to improve customer loyalty,
but their No. 1 stated goal is to increase their sales
effectiveness.
So companies face a choice. Whose needs come first? Will the
customer benefit from this enhanced information resource, or the
company, or -- somehow -- both? Should CRM help cement stronger
customer bonds, or should these efforts be aimed at improving a
company's direct marketing efforts? The first goal requires a focus
on the customer and the factors that strengthen customer
relationships. The second goal, in contrast, requires a focus on
the company and how it can sell more products or services to the
customer. This sales goal may not represent a perceived benefit to
the customer.
If increased loyalty is a stated company objective and a key
criterion for determining a CRM program's success or failure, then
the company first must understand the real nature of its customer
connections. It also must grasp how these relationships can be
strengthened. (Hint: The key to a stronger customer relationship
won't be found in intensified telemarketing.)
Customer relationships cannot be improved simply by increased
spending on advertising, packaging, product research, or
technology. Money alone is never the answer. What counts is not how
much is spent, but what it's spent on.
In addition, technology and information systems, however
sophisticated and elegant they might be, cannot by themselves
ensure that a company will create stronger customer bonds.
Enduring customer relationships result from a multiplicity of
company activities that combine to forge a stronger bond with the
customer - one that is emotional as well as rational. Recent
research by scientists at The Gallup Organization sheds important
new light on customer engagement and underscores what it takes for
a company to build and sustain a fully engaged customer base. With
all due apologies to Marshall McLuhan, when it comes to building
relationships, Gallup has found that the content is more
important than the medium. And content is where CRM often falls
short. More information is not the solution. Better
information is. If the customer information obtained and compiled
is irrelevant, no amount of system sophistication can compensate.
If it is neither useful nor usable, there can be no return on this
investment.
Companies can compile extensive and expensive databases
detailing their customers' past purchase activities. They can add
myriad data about reported or observed customer habits and
activities to this purchase history catalog. But these data provide
companies with a picture of the past. They do not necessarily yield
insights into what it takes to establish or maintain strong
personal customer connections -- and that, after all, is the
purported holy grail of one-to-one marketing.
Instead, what companies must add to the customer behavior
database are indications not only of what customers have been
doing, but also what they are feeling. As Gallup researchers
have found, these feelings provide vital clues to what is likely to
happen next -- and why.
If companies seek to engage their customers, and not just
to sell to them, then they must view their customer
relationships not from a marketing perspective, but from the
customer's viewpoint -- because that is what truly matters.
Increased customer communication doesn't ensure that the company's
messages will be either welcome or relevant. More entries into a
customer database won't ensure that the company's employees will
have any idea what to do with this information, or what to focus
upon, when they access that database. Inundating customers with
increased sales opportunities won't create stronger emotional
connections any more than doubling an advertising budget means that
the campaign will be more compelling or that it will result in a
more powerful brand.
Technology can provide the company and the customer with a
conduit for dialogue. But technology by itself is not the
solution.
Has CRM failed? Partly. In many cases, companies' expectations
have been unrealistic and have been grounded in a limited or
superficial view of the nature of the customer relationship. CRM
proponents must accept some of the blame for this.
Is CRM doomed? No. But it certainly must be rethought and
reengineered, not as a mechanism for efficiently dumping more
product on an existing customer base, but as a mechanism for
potentially enhancing the customer relationship. That's a more
challenging road, to be sure. But it's one that may at last lead to
a real return on this considerable investment.