The failures associated with CRM are inevitable. The key: an in-depth knowledge of the company and its customers

A study carried out by the American company Bain & Company, author of the largest annual survey on the use that American companies make of management software, reveals that in 1989, not one communication medium alluded to CRM (Customer Relationship Management). Eleven years later, media references to CRM had shot up to over 14,000. 72% of the company directors that Bain consulted assured them at the end of 2000 that their company would implement a CRM program the next year. According to the research company Meta Group, the market for these solutions is duplicating annually, and it is now over 60 billion dollars.

What does all this data reflect? An unquestionable reality: different from other tools, more subject to trends, CRM has come to companies to stay. Precisely because this is a lasting phenomenon, it is vital for any company that the implementation of a CRM program be an absolute success. Only this way will it be able to save time, permanently satisfy its customers, and obtain greater profits.

However, approximately 60% of CRM’s end up in failure and achieve results that are diametrically opposed to those previously exposed: they make us lose time and investments of inestimable value to the company; they translate directly into a loss of time and money. In the case of Spanish companies, Daemon Quest puts these losses at more than 420 million euros.

Why do the majority of CRM programs fail? What must be done to prevent failure and achieve success?

First of all, it is necessary to define what we understand by CRM. This question is not as easy as it seems if we stick to the data. According to the survey carried out by Bain among more than 200 company directors, the majority of them are not capable of providing a specific, simple definition of CRM. However, almost all of them know that the necessary investments are considerable and that implementation time is very high. Figures from the technological consulting firm Forrester Research put a company’s average spending on CRM at between 60 and 130 million dollars, while data from Bain’s survey calculates that in total, it takes American directors about 24 months to entirely implement a program.

So the majority of American business leaders don’t know exactly what they’re implementing, but they do know that it requires a lot of time and money. This is definitely not the best way to start.

CRM adjusts all business processes to customer strategies in order to intensify their royalty and increase the profits of the company that implements it. This is a simple that consciously avoids terms such as “technology” and “software”, because one of the principal mistakes associated with CRM that directly affects its failure is thinking that it’s only an IT program, which will substitute for company directors in customer relations. CRM is a tool to be used by the company, but not the answer to all of its sales challenges.

When it is applied well, CRM allows us to intelligently use customer data, identify over time the most valuable ones and loyalize them, living them products and services adapted to their needs.

When poorly used, not only do CRM programs not offer solutions, but they can also become a big problem. The experts at Bain often cite a paradigmatic case: that of the online employment company Monster. In 1998, Monster decided to invest 1 million dollars in an ambitious CRM program, meant essentially to provide the company’s salespeople instant access from anywhere to enormous databases on current and potential customers. The system never worked. It was abnormally show and not one of Monster’s salespeople was ever able to download to famous databases onto their laptop. The company had to rebuild the program completely, giving an advantage to the competition, and losing time and money.

The Bain survey we referred to previously shows that one out of five of the executives consulted complains of problems with implementing CRM programs: they refer not only to operational problems, but also to added difficulties in customer relations.

When a company decides to implement a CRM solution, it must make sure it does not make key mistakes, which have led to failure for many companies.

Mistake #1: Implementing CRM without a clear customer strategy

Without in-depth knowledge of our customer portfolio, CRM cannot work miracles. The portfolio must be well-segmented and the marketing objectives must be absolutely clear. We mustn’t adjust our existing customer strategy to a CRM in which we have invested a lot of money and whose investment we must justify: the process is just the opposite.

Mistake #2: Implementing a CRM program before gearing our processes toward the customer

If a company wants to direct its business toward the most profitable customers, the first thing is to gear all of the company’s processes toward that goal: job description, measurement of personal performance, proper compensation systems, training programs… Recent surveys have revealed that 87% of company directors have faced problems with CRM programs. They alluded to management difficulties because of not having made necessary organizational changes.

Mistake #3: The more technology, the better

CRM may be technology-intensive, but not necessarily. A company’s objectives regarding its customer portfolio can be reached without making massive investments in software. The most advisable method is a “mixed” option: identifying all activities that are not very technology-intensive but work well, extending them to the entirety of customers, and simultaneously combining them with the appropriate software where necessary. Analyzing both aspects, the majority of companies will realize that they don’t require as much technology as they imagined. There are many simple but effective processes with customers that do without IT.

Mistake #4: CRM improves customer relations in and of itself

There are customers with whom we know we want to establish a specific type of relationship. But do we know what kind of link they want to establish? It is vital to adopt the exact focus of what a customer expects to obtain from us. Giving each one what they want and what they’re looking for. If this policy is not clearly defined in the company, the mere implementation of a CRM program won’t do it for us. A good CRM program can tell us who our most profitable customers are and who the least interesting ones are, as well as where and who our potential customers are, but it will never tell us how we must approach and treat each one of them.

Almost all CRM failures are associated in one way or another with mistakes that slipped by us previously. The majority of directors who are disappointed with how these programs work admit that they limited themselves to associating CRM with technology and with their company’s network and systems directors. They ignored the essential fact that a CRM program must involve every position that as direct responsibility over customers. In short, the success of a CRM program depends more on a good customer strategy than on the amount of money a company is willing to spend on software. If a company dedicates all its efforts to placing all its resources in the most intelligent way possible in the service of the customer, the implementation of a CRM program will have greater possibilities of working. Success is not possible without directors who are capable of leading changes and transmitting to their employees how to reach specific goals regarding customers. Since CRM was born to stay, its success will rely on how well a company can use it, and on the strategy that accompanies it.

Companies are already taking note of this reality. BearingPoint, a company focused on business consulting and system integration, has made public the results of its study “Dominating Changing Objectives”, regarding CRM solutions, in which it interviewed 167 companies from 14 sectors. The study has revealed that while a significant number of companies are re-evaluating their CRM initiatives under the pragmatic focus of management objectives, the weak economic situation alone is the cause of 22% of said re-evaluations.
In this somber context, many companies are going a step further than CRM in order to apply what are known as “Customer Intelligence” techniques; that is, information analysis meant to offer conclusions that serve to make strategic decisions. CRM is only technology. It is very useful software, but it is still only software. Without a previously defined customer strategy, without involving the entire company in this strategy and not just the systems department, without knowing who our customers are and what they want, without determining how they behave with their provider, there is no IT program, as expensive and sophisticated as it may be, that makes us sell more and better.

Knowing who that minority of customers is that generates 70% of a companies benefits; finding out how demographical, geographical, and social factors condition purchase processes; designing more accurate and economical marketing campaigns; calculating how much it costs us to add a new customer to our portfolio; predicting what customers have a high probability of leaving us for the competition… These are only some of the enormous possibilities that Customer Intelligence techniques open up for companies.

Underlying these analyses is a sophisticated technological framework that uses the most powerful tools on the market (Datamining, Geographical Information Systems, statistical analyses…), but is presented to the customer as an affordable, simple, and entirely manageable product. All of the information is summarized in a clear and concise manner, through a scorecard or an intelligence portal where any director can visualize his or her company on-line, and all the information its customers generate, in a simple and ordered way, and always based on absolutely reliable data.

Until very recently, the majority of our country’s business leaders have relied on two elements as old as they are questionable and subjective in their decision-making: experience and intuition. The Customer Intelligence techniques that more and more companies are incorporating into their sales and marketing departments avoid the wide margin of error that these two elements are subject to. They leave aside intuition and other emotional factors – necessary in a good director, but not sufficient – and focus on the data, on completely contrastable information. They allow the manager not only to decide, but also to offer the company a key quality in the current context: the ability to foresee. Knowledge, decision-making power, and the ability to anticipate are essential factors today for the success of a company and its leaders.

Customer Intelligence is the only valid solution to truly get to know customers, and its costs are infinitely lower than CRM, since it allows us to obtain the ultimate goals of any CRM strategy at a reasonable price, make the customer portfolio as profitable as possible, and effectively loyalize it.

In short, it’s a matter of choosing scientific knowledge over technology.