CRM: How to Get Beyond the Hype

Align people, processes and technology to realize return on investment, avoid ERP all over again.

It is next to impossible today to open a business publication without seeing an article about CRM. But while many have been quick to describe customer relationship managements potential and offer advice about how to make it work, only a handful of companies have succeeded in doing so.

One of the challenges is the countless number of definitions for CRM. The companies that have succeeded with their CRM initiatives have rallied around a common definition: CRM is a customer-centric business strategy that requires alignment among people, processes and technologies to achieve growth and profitability.

Although theres disagreement on the definition, everyone can agree that CRM is complex. Many companies struggle with implementing and integrating CRM tools, only to then find that they are not seeing any return from their CRM investment. These struggles are resulting in cries that CRM is just another large-scale, overly complex, doomed-to-failure systems initiative, much like ERP (enterprise resource planning).

For CRM to work, more emphasis needs to be placed on CRM execution vs. CRM infrastructure. CRM is failing because companies arent considering the ultimate business and customer segment strategies and how CRM will help them meet their strategic goals.

Companies dont rigorously evaluate the likely returns and economics of CRM investments based on accurate assessments of the true potential of existing and target customer bases. And they often ignore the human, procedural and organizational challenges that always represent the lions share of the hurdles to realizing return in major CRM initiatives.

To ensure CRM success, you must focus on three key issues:

1.) How much CRM does your company need?

What is the fastest path to increased revenue, profitability and customer satisfaction? If you do not understand who your best current and potential customers are and what CRM capabilities will enhance those relationships, find out before you spend one dime on infrastructure. CRM investments are expensive, and your company should not make them without understanding how you are likely to see a return.

If your company does not know how it is going to make money with CRM capabilities before it invests in them, there is a high probability it still will not after the investments have been made. Understanding the economics upfront will help you tailor your investments accordingly.

2.) What is your starting point?

Understand your current level of CRM sophistication and whats important. Companies that have successfully implemented CRM capabilities and are realizing significant returns from their investments can all answer the following questions:

—Do you know who your customers are (general profile information, including demographics, behavior, preferences and so forth)?

—Do you know where your customers are in their relationship with you (for example, in terms of awareness, evaluation, purchase, multipurchase and loyalty)?

—Do you know how quickly you are developing relationships and how to shorten the time frames (such as, knowing how long it takes to get a onetime buyer to buy again, how long it takes to get someone to buy for the first time and how effective you are at influencing behavior)?

—Do you know when customers stop being customers and why (including those who never purchased at all)?

—Do you understand the economics of each customer relationship over time, from awareness to loyalty (including how much you invest, when you break even on acquisition costs, and how much is returned to you in revenue and margin)?

If you cant answer "yes" to the first two questions, you need to develop a deeper understanding of your customer base to formulate your segment strategies. Until youve answered these questions, you shouldnt make any significant CRM infrastructure investments.

If you cannot answer "yes" to the last three questions, you should spend time examining how your operation functions and its capabilities and make manageable CRM infrastructure investments. In addition, you should work on developing and refining key performance measures and developing a customer score card.

3.) How can you get started quickly without making risky, career-threatening investments?

Eventually, truly world-class CRM capabilities require significant investments in time and money. However, rather than try to build your entire capability all at once, target a few segments, develop a small set of pilot programs, and build and implement a focused capability within part of your organization.

It is usually necessary to "prove the concept" to senior executives or the board of directors before making larger investments. Your pilot efforts will provide you with real return from real customers to prove that CRM can work.