Customer relationship management is a technology, a product, a philosophy and a set of best practices. To effectively collate all these concepts into one effective business solution requires collaboration, commitment, intelligence, accurate data and, most critically, management buy-in, understanding and cooperation.
Of all the customer relationship management (CRM) failures we have heard so much about over the last few years, a large portion of these died not from bad technology, poor staffing or dirty data, but from bad management.
A Gartner report from June 2003 states that through 2005, 75% of CRM projects that do not deliver measurable ROI will have failed because of poor business executive decision-making.
"In addition to delivering measurable results and value, technology implementations must be aligned with strategic goals," says Joe Galvin, VP and research director at Gartner. "Alignment among enterprise strategies, business processes and applications of technology is often missing in CRM initiatives. To improve the chances of project success, focus on ensuring that technology implementations are tied to specific business benefits and the delivery of measurable ROI."
Scott McKenzie, MD of New Era Solutions, says the CEO is the only person qualified to drive a CRM strategy. "When a company wants to sort out its financials, it calls in auditors, specialists in that area to ensure the job gets done right," he says. "When implementing CRM, whom do we consult with? For most companies the answer is systems integrators, who are experts at installing applications and getting them running, but what do they know about your business? The tools they offer are only as good as your CRM processes and strategy."
To develop an effective strategy, requires that organisations understand what CRM is and what they want out of it; which then assists in planning the implementation to ensure they get what they want.
Unfortunately, CEOs do not see CRM as a mission critical application, which is a reason for the concept's place as second-class corporate citizen. "Management runs on numbers and the revenue figures are what it is all about for them," adds McKenzie. "What many fail to realise is that having happy customers generally leads to an increase in revenue, which leads to happier shareholders, which means happy management."
The trinity of CRM
With management support and oversight, a CRM project not only has the business input needed, but will be more likely to include the three elements necessary to ensure success. Dimension Data's Mike Fairon says the three parts that make up successful CRM are: consulting, technology and project management. All three need to be present in equal portions.
The consulting stage is necessary to determine the business metrics and understand how these can be delivered with technology. Without this consulting and discovery stage, the choice of technology and implementation partner can go horribly wrong.
"Organisations must put a stake in the ground if their CRM is to succeed," Fairon adds. They must start the project by understanding what they want to achieve and develop measurables they can use to judge success. Of course this means monitoring the project over the long term to ensure these measurables are met. Having the path mapped out is the best way to ensure the project does not stray from its goals.
AMR Research conducted a survey on customer management technologies and found that the majority of companies are still not reaping real business ROI.
The report notes: "At first glance, the survey results indicate that recent customer management implementations have been very successful, with 43% claiming their investments yield real business benefits and ROI. However, closer examination shows that only half of this group was able to cite solid measurements of their success, potentially dropping the 'successful with significant return' slice to 25%.
Many measure success in soft terms, such as project efficiency, performance and functionality, data accuracy/manageability and fast, problem-free implementations. Some 31% of our survey sample were unsure about the success of their project or said it is too early to tell whether or not they achieved ROI."
The conclusion AMR reached indicated that developing a metrics-based business case increases the overall effectiveness of a CRM strategy. "A successful business case includes vision, goals, alternatives, cost/benefit/risk assessment, ROI justification, key initiatives, critical success factors and an action plan. Create metrics that are simple, specific, and result-driven."
The technology must, as noted above, be chosen according to the results required. While there are many product options available, many people choose a CRM module from their current ERP vendors. This is the most convenient solution, but not always the most appropriate one, as a business application vendor does not necessarily know much about CRM.
Finally, Fairon says project management is also a vital element of a CRM implementation. "Many people ignore project management, but pay the price in terms of scope creep and the resultant cost and functionality mismatches."
In Meta Group SA's report on the local CRM market, Johan Jacobs notes: "It was alarming to see how many vendors provide CRM integration services without providing project management services and where project management services were provided, the project managers often do not have any CRM experience. META Group would strongly advise the use of CRM experienced project managers to ensure success in CRM project initiatives."
The song goes on
Another research report by Gartner, from 2002, revealed that 55% of European CRM projects were failing to meet expectations. Yet the spend continues because executives know that keeping customers close is a vital bottom-line function. Aberdeen group says the CRM market is expected to reach $17,7 billion by 2006, growing at an average annual rate of 6,7%. Not an amazing growth, but not a shrinking violet either.
The local Meta report states: "Currently, there is a wait and see approach dominating vendor strategies for 2003/4, but a projected growth and positive outlook for CRM integration services is anticipated in 2004/5.
"Most large client organisations have already purchased CRM products and are now focusing on integration. Most of the growth is expected in the mid-market where organisations are looking for innovative well priced solutions and services."
Fairon, acknowledging the downturn in CRM fortunes, says he sees an increase in activity and is bullish about the prospect for 2004 and onwards. CRM has been through the traditional hype cycle and is on the up-cycle again. However, he notes that activity we will see is very focused and "centred around exercises that deliver tangible, quantifiable business benefits".
The Meta report, however, while expecting an increase in CRM activity from 2004 onwards, shows that the local market does not really have a CRM leader. Jacobs says the market is "mostly represented by a number of integrators providing product related services on behalf of international CRM product companies".
He further notes that almost all the vendors have the same value proposition, and the strategies and vision that perceived to give them a unique competitive edge is, in actuality, very similar to the other vendors in the section. "Clients choosing vendors from this sector will therefore see little differentiation and will primarily negotiate on price. Vendors are, however, not very flexible on pricing options and will seldom drop the price to get a deal, which in turn presents a very interesting anomaly.
"Through 2004 there will be a shake-up of this market and we should see the emergence of a leader in terms of market share. Organisations should insist on CRM-related experience when selecting an integrator."
While 2004 may very well be a year of improved CRM fortunes, the industry will never return to the same level of activity as before the economic slowdown. Companies in the market for CRM solutions will be focusing on smaller projects with direct, measurable payback, not the large, all-encompassing 24-month (or longer) exercises of the past. Meeting a business need and delivering quick returns will mark successful CRM projects of the future; and if these are to be a success, they will involve and be driven by senior management from start to end.
True analytical customer intelligence pays off
There is a vast difference between basic customer relationship management (CRM) and analytical CRM - the former has simply not lived up to its promise.
"True analytical customer intelligence, on the other hand, does lead to increased revenue," says Retha Keyser, product manager at SAS Institute SA, leaders in business intelligence.
According to Alan Bonde, a CRM analytics consultant, CRM solutions are very good at automating processes, but they are less successful at optimising interactions.
"CRM is great for managing account information, helping people choose the channels for customer interaction, and tracking transactions within those channels," says Bonde. He says that CRM does not tell you what to do at a point in time. CRM does not really address the issue to maximise each and every interaction with the customer, whether it is during a campaign or during a customer-service call. That is the gap that has to be bridged. (Source: www.dbta.com
: Finally, CRM begins to pay off by Joe McKendrick.)
Analytical CRM does just that. Keyser gives an example of how this was achieved at South Africa's largest insurer, Old Mutual. The company implemented an analytical segmentation solution from SAS Institute, which assisted in defining the organisation's customer segments, as well as analytically defining strategies to develop each segment. The solution was designed to dynamically adapt to meet the changing needs of each customer division.
"By using analytical CRM, Old Mutual has successfully aligned its products and marketing campaigns to specific customers, allowing for strategic and accurate cross- and up-selling of products," Keyser says.
"Using analytical CRM, the company now has a firm grip on data and effective ways of analysing customer behaviour, together with the power to make projections based on that customer information."
For more information contact SAS Institute, 011 713 3400.