How to Avoid a CRM Failure

First, decide what realistically constitutes success.

Theres never been a worse time to implement CRM packages. Theres also never been a better time.

Customer relationship management has been hit by a double whammy: Bad economic times have forced companies into a major spending retrenchment, compelling them to put projects that dont have an immediate and obvious return on investment on the back burner; and though many companies have begun implementing CRM solutions, they are still losing customers in droves, begging the question of whether CRM implementations were worthwhile in the first place.

These factors have driven some CRM vendors out of business while others are fighting to consolidate, leading to a moderate instability in the CRM market.

But the situation is not all bad. There are numerous success stories, and the number of CRM failures has been exaggerated. Meanwhile, the economic downturn has forced vendors to consider lowering the cost of their goods and focus on solving critical customer issues rather than developing features that are more or less luxuries. The result is that CRM packages are better and less expensive than before.

It also turns out that CRM is indeed necessary, mainly because companies are having trouble keeping their best customers. The average company loses, according to various studies, between 20 percent and 50 percent of its customer base every year. With tech companies, these percentages are even higher.

However, a Bain & Co. Inc. study shows that companies can boost revenues by as much as 85 percent if they can retain only 5 percent more of their best customers. A CRM package, in other words, will pay for itself in its first year if its only 5 percent effective.