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| Making Connections Get Closer to Clients with CRM Customer Relationship Management |
July 1, 2001 |
By Mark Evans
Precisely defining Customer Relationship Management is a tricky exercise. CRM is not only a technology, it is also a customer-interaction methodology as well as a business mindset. And what it means to a particular company can vary by industry, software vendor, user expectations and specific implementations. There's no question, though, that CRM is an industry phenomenon. Sales of CRM products and services worldwide are forecast to rise from US$8 billion in 1999 to US$24 billion by 2003, according to the industry analysts Aberdeen Group. Gartner Group analysts are even more optimistic, predicting worldwide CRM spending will reach US$76.3 billion in 2005, up from US$23 billion in 2000. So what exactly is CRM? It has been described as sales force automation software on steroids; a variety of technologies that help companies communicate better with their customers; and a way that companies can boost sales and increase profits from their best clients.
In reality, none of the above describes CRM, a system that employs technology, but also touches a company's culture, strategic direction and business processes. CRM is a business strategy that encourages companies to become more customer-centric in all sales, marketing and service initiatives. "It is not about installing software that will solve all your problems," says Cameron Dow, a senior marketing strategist with enterprise software vendor SAS Institute (Canada) Inc. "It is a business strategy to help you acquire and retain the right customers. It's built on the notion that at the end of the day, the only sustainable advantage you have is the customer relationship."
CRM has become a hot commodity because companies are anxious to develop closer and more profitable relationships with customers. In theory, a CRM system generates greater customer loyalty and higher sales by giving companies a better handle on what clients want, what type of information they are interested in receiving and how both sales and service programs can therefore be customized. In a sense, CRM is a high-tech approach to developing the types of relationships that many people used to have with their local merchants, who knew each customer's birthday, buying habits and special needs. Building that kind of close relationship these days can be difficult, and CRM vendors sell the idea that technology is the solution.
Reality check
But is it possible that CRM is just the latest corporate software fad, following enterprise resource planning (ERP), which was all the rage in the late 1990s? "A whole bunch of consulting firms got together and said, 'We can make a lot of money from CRM now that ERP is fizzling out and Y2K is gone,'" says Steve Horne, president of New York-based Analytici, the CRM arm of advertising agency FCB Worldwide.
Recent studies by prominent research firms have reinforced this skepticism. A survey by Insight Technology found that more than two-thirds of CRM projects failed to produce meaningful improvement in company revenue; half of that group claimed CRM systems did not improve sales, while half found sales grew by less than 10 per cent. The Gartner Group, meanwhile, forecasts 55 per cent of CRM projects will fail by 2005, mainly because of poor implementations and unrealistic expectations.
Bill Hicks, chief technology officer with Fort Lauderdale, Fla.-based Precision Response Corp., argues that CRM failure rates are probably even higher if you take into account the projects that never made it past the approval process. "If you are talking about vision to implementation, failure rates are in the 70 per cent range."
Of course, for competitive reasons, few companies will come clean about the failure of any high-tech project, and when they do they often blame the technology suppliers. Grocery giant Sobeys Inc., headquartered in Stellarton, N.S., initially blamed ERP vendor SAP AG for problems last year with its supply-chain system, then acknowledged that part of the problem originated in Sobeys' database.
Companies that take the CRM plunge often discover that the software can be a challenge to implement and integrate into existing systems. Most importantly, without the right training and incentives, employees may be loath to adopt and use CRM technology, thereby negating the benefits of multi-million dollar investments. "In most companies, there isn't a reward for behaviour," says Analytici's Horne, adding that a company's employees must be encouraged not only to use a CRM system, but to make the customer their first priority.
Different Views
While research firms such as Insight and Gartner wave the failure flag, CRM software makers and service providers argue that failure rates are overblown in a market just starting to emerge. They point out that ERP implementations also got off to a slow start.
Tracey Thorne, an analyst with the Hurwitz Group Inc. in Framingham, Mass., says a big problem with many CRM implementations is the lack of management vision and leadership. Without a total commitment from top executives, she says it can be difficult-or even impossible - to implement a successful project. CRM failures have little to do with technology, says Thorne. Instead, many companies lack clarity in what they want out of the system and end up feeling as though they are not receiving all the expected benefits.
For all the critical scrutiny now being directed at CRM systems, plenty of companies claim to have had success with them, and are committed to making investments to build on the technology's benefits.
Among this group is Canada Post, which has installed a CRM system from SAP within its retail outlets across the country. Cal Hart, vice-president of business transformation at the Crown corporation, says the project was a success and has resulted in Canada Post now receiving daily sales reports at its 1,508 stores. This allows it to better manage the outlets' operations and promote different kinds of products and services across the country. Buoyed by this experience, Canada Post is launching an internal SAP system within its human relations, financial and electronic logistics and procurement units.
Hart says CRM is playing a crucial role in Canada Post's efforts to improve customer service and remain competitive. Technology is essential, he says, because the corporation's customer service reps field five million phone calls a year, make 500,000 outbound calls and access data from six different sources. The corporation needs a system that can handle this information and still deal with customers on a personalized basis.
The same customer service issues are being addressed by Sears Canada Inc., which is working with Vantive Corp., a unit of PeopleSoft Inc., to give its call centre representatives access to an extensive amount of customer data. Bruce Clarkson, a general manager at Sears Canada, says the retailer's employees have more information than ever about customers' histories and buying habits. This enables staff to take orders and use knowledge about the clientele to sell related products at the same time.
So what lies ahead for CRM? The two key emerging trends are attention to implementation speed and return on investment (ROI). SAS' Dow says a growing number of companies are taking a more practical approach to CRM by implementing projects in stages, then measuring the ROI before deciding whether or not to move on to the next phase. "We are hearing more customers talk about ROI and making sure they can realize that in a short period of time."
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