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.
Why CRM Packages Fail
Why CRM Packages Fail
Before implementing a CRM package, its necessary to understand why nearly half of U.S. implementations and more than 80 percent of European implementations are considered failures (see www.crm-forum.com/cgi-bin/item.cgi?id=50092&d=101& muscat). Its difficult to fathom failures of such monstrous proportions, especially when complete CRM installations can cost millions of dollars and then hundreds of thousands of dollars more per annum.
Why was all this money wasted? In fact, it probably was not wasted. The problem is that there has been a notorious failure to define the term failure. Many analyst companies, for example, assume that failure is an incompletion of a projects goals.
CRM implementations, however, consist of dozens of interrelated goals and projects under a single umbrella term. A CRM implementations failure to achieve a few goals may constitute an overall failure in some of the estimates when, as a whole, the implementation works as planned.
The lesson here is clear: When outlining the goals of a CRM package, companies need to be realistic. Companies also need to prioritize their CRM goals so that the most important actually get accomplished.
Of course, thats not to say there arent CRM failures. Whenever companies start to rethink how they do business, many CEOs attempt to imprint their strategies for increased efficiencies without considering customer needs. CRM vendors, meanwhile, attempt to speak directly to the CEOs, claiming they understand their predicament and offering a technological solution as their main tool.
Again, these solutions are aimed at increasing efficiencies without the key knowledge of whether these efficiencies benefit the customer. But the damage is done: Any problem with the CRM implementation can now be blamed on technology rather than management and personnel issues.
It often goes like this: The CEO, perhaps working together with the CIO, purchases a CRM solution for millions of dollars and sets down the corporate goals. Because CRM solutions are usually sold with service agreements, an outsourced temporary staff is brought in and starts work. Unfortunately, some of the existing IT corporate workers have not bought off on the package and naturally resist the efforts. They simply dont understand the corporate goals because they were never included in the earlier discussions.
Lack of internal buy-in is one of the main causes of CRM implementation delays but not necessarily failures. According to Gartner Inc. (www.gartner.com), one major cause of failure is a weakness in the program management required to rally the troops and to shift personnel in strategic ways.
CRM Forum Ltd. (www.crm-forum.com), meanwhile, lists three key reasons—in descending order—for CRM failure: organizational change and politics, a lack of the right skills and enterprisewide understanding of the initiatives, and poor initiative planning.
A Peppers and Rogers Group study cited by Gartner says that to combat these problems, upward of 40 percent of the entire cost of an enterprise- level CRM investment should be spent exclusively on the time and effort it will take to manage these issues.
The first step in any CRM implementation is not to take a strictly technological view of the solution. This is difficult because many of the vendors market their tools as software applications alone and promote technology as the only facet of a CRM implementation necessary for success. Its akin to a housewares vendor selling its customers pots and pans and claiming that theyll be great chefs simply by using them.
Implementing an effective CRM system changes every part of the business. IT managers must shift personnel around, sales assistants may become extraneous, everyone must become more adept at documenting calls, and employees may leave.
But there are positive aspects to all of this: As IT personnel get moved into new positions, new opportunities for success emerge. Those extraneous sales assistants, meanwhile, may effectively become sellers—that is, miniprofit centers instead of cost centers within an organization.
The trick is to anticipate and deal with these issues upfront and establish clear channels of communication. If management can mitigate the negative factors, a CRM system can provide vast benefits.
And there have been glorious successes. For example, The Limited Inc., including Victorias Secret and Lane Bryant, saw an increase in ROI of 400 percent when it implemented cross-selling opportunities using SAS Institute Inc.s analytical CRM software. Ford Motor Co. saw success with Siebel System Inc.s Call Center software and has plans to implement other Siebel technologies. Dow Jones Newswires has begun using Salesforce.com Inc. with at least some success and, by all indications, appears to be moving forward with new deployments.
Clear trends are emerging in the CRM world. The first is that companies require faster implementations, quicker times to benefit and lower prices. The poor technology climate should yield lower prices overall, but even when vendors do not lower their list or quoted prices, its still a buyers market. In other words, negotiate freely.
The trend toward quickness to benefit and a faster ROI and implementation also exists, but there are complications. Customers require faster returns, and vendors are happy to oblige. Thats why companies such as hosted solution provider Salesforce.com are starting to eat away at Siebels and other traditional CRM vendors sales. Likewise, SalesLogix, Onyx Software Corp. and Talisma Corp. have had remarkable success by selling customers on the advantages of a rich feature set coupled with quickness to benefit.
Companies considering CRM should realize, however, that no CRM solution will be the cure for all that ails them. While many CRM vendors can deliver quick benefits, the benefits derived may not do anything to help solve a companys most pressing problems.
For example, some CRM packages may only deal with tracking customer e-mail and calls. Others may be best at serving up mailing lists for cross-selling opportunities.
Few CRM vendors offer a complete CRM solution. If a company chooses to go the quick route and grab the low-hanging fruit without considering how to get at the rest of the tree, they will face problems later.
This leads to the next CRM trend: packaged CRM suites. A company can choose to implement individual modules of a CRM suite that solve some problems quickly. If the company likes the individual packages, it can go ahead and install the rest of the suite. The advantage is companies avoid the hassles of trying to integrate best-of-breed software, which costs more in entirety and is more difficult to manage later.
The disadvantage is most suites are just marketing strategies right now and are not fully integrated. Take, for example, SAS Institute and Blue Martini Software Inc., which are attempting to couple SAS analytics system with the Blue Martini CRM package. The two systems are packaged but are not completely integrated.
Expect to see the dissolution of these integration issues in the coming years, as well as tightly integrated best-of-breed applications from the smaller vendors that have avoided being targets of acquisition. For now, companies should take these products for what theyre worth and make sure they have extensive service level agreements in place before committing to any application suite project.
The final trend—toward rewriting CRM packages using more open Internet architectures—began several years ago, when PeopleSoft Inc. bought Vantive Corp. and merged the Vantive CRM platform with the PeopleSoft Internet Architecture. The result was an Internet-based CRM package that was scalable, easy to use and deploy, and that possibly saved PeopleSoft from going out of business.
Still, many nonhosted CRM vendors use client/server architectures that are difficult to maintain once implemented.
Siebel was the latest vendor to rewrite its code base and launch an Internet-based CRM suite, called Siebel 7. Expect, as with any package of this scope, to see quirks with the first releases of the product. However, although Siebel did not completely rewrite its core application server, the company now has the leverage to make efficient changes to its main package without forcing its customers to redeploy thousands of clients.