December 9, 2002

Doing CRM right

My spin:Initiating a customer relationship management solution can go very well or very bad. Optimize Magazine offers some good insights - four steps - to ensuring your plan goes well.

Name a company that doesn't want to do a better job of serving its customers. Can't come up with one? That's not surprising. These days, companies worship at the feet of the deity called Customer.

Understanding consumer needs and identifying the most profitable customers are driving forces in most companies. Executives from sales, marketing, product development, and strategic planning are pitching in together to get a better handle on the customer. That's why customer-relationship management practices and applications hold so much promise. Bain's Global Management Tools Survey of senior business-technology executives found CRM application usage is expected to double this year over lastófrom 35% of respondents to 72%.

Who wouldn't want to adopt tools and methodologies that promise to quickly identify a company's top customers and target them with marketing campaigns to increase their purchasesóespecially in these difficult times? Key goals underlying CRM investments are an attempt to strengthen customers' affinity with particular brands while lowering the cost of interaction. One CRM vendor promises 90-day CRM implementations while another indicates success is guaranteed in nine days.

Yet few CRM users achieve quick success, and many initiatives have failed to help companies better understand their customers. Last year, Gartner found that 55% of CRM programs failed to pay back on programs that typically cost $60 million to $130 million. And CRM ranked 21st among 25 tools evaluated by 451 senior executives on the Bain survey. One-fifth of CRM users had abandoned the tools altogether.

So how do you fix the problem? Four steps are required: Start with an effective customer strategy that clearly identifies the opportunities to create value for the business. Next, redesign key business processes to carry out the customer strategy. Only when you have these two crucial steps under way should you go in search of technology that maps to your strategy and business processes. Use technology where appropriate to implement the new business processes, focusing on value-creation opportunities. And, of course, don't forget to measure your results. This is something your CFO will want to hear about. Also, develop incentives to ensure the program is carried out by all relevant parties.
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