Can CRM make a comeback?

In the late 1990s customer relationship management (CRM) was hyped as the next big thing and many companies invested in expensive software applications, often spending seven figure sums. As times got tougher in the first half of the new decade, those companies found themselves needing to justify such extravagant expenditure, and very few were able to do so. On the whole, the early CRM applications did not live up to expectations and CRM as a whole got a very bad reputation.

Yet, over the past year or two it has come back into fashion. Marketers have learnt what went wrong first time around, and now have a clearer idea of how to approach CRM in order to get it right. Even highly regarded research firm Gartner is enthusiastic, saying in a 2003 paper: “By 2007, marketers who devote at least 50 per cent of their time to advanced, customer-centric marketing processes and capabilities will achieve marketing return on investment that is at least 30 per cent greater than that of their peers who lack such emphasis.” This year may well see the return of CRM.

What is CRM?

Many of the problems with CRM stem from the fact that it was appropriated by technology salespeople. They tacked the term onto almost any application with the result there is a great deal of confusion surrounding the definition of CRM. Simply put, CRM describes how a company manages its relationships with the customer. Those relationships stretch across marketing, sales, finance, customer service, indeed every part of the company that relates to its customers. Managing them is about creating consistency in the way employees interact with customers, and this usually involves a software application.

What can it do?

While most marketers at large B2B companies have a CRM system, as Paul Kennedy, director of technology company ClarityBlue puts it: “For many B2B companies, marketing CRM has often been viewed as a front-end communication device only, and often focusing on direct mail. There is little point in attracting new business customers or developing existing ones unless they contribute in some measurable way to the bottom line profitability of the organisation. However, an increasing number of B2B marketers in the UK are now realising that unless they can demonstrate a clear return on investment for marketing activity, they will not get the support to continue investing in marketing.”

Indeed, the real value of CRM to B2B marketers is that, if you can gain a complete view of a customer’s relationship with your business, you will find it much easier to justify and then allocate your marketing budgets. To do this, you need data not only on how much revenue you receive from the customer, but also on how much it costs you to generate that revenue in terms of marketing, sales, account management, customer service, finance, technical support, and even manufacturing where appropriate. You can then use this profitability model to assess the likely implications of further marketing activity directed at each of those customers, and prospects who look similar to them.

The obstacles to implementation

In theory this may appear simple; in practice it is anything but. Firstly you need to find a software application that will help. The market is huge and confusing, so getting advice from a trusted consultant or from peers is essential. As is basic due diligence in the selection process. Too many marketers get excited by the potential offered by a new application and forget to check references and arrange an in-depth product demonstration.

As with all software purchases, you must be clear about what you want it to do. What is the specific problem you want it to tackle? Which are the key measures you want to capture? Also, you must be able to benchmark progress. As Peter Chaplin, VP for Europe at marketing technology company Bluestreak, says: “What does success look like? What are your aims with the system? Do you want a 30 per cent increase in outgoing mail, or a 25 per cent hike in conversion rates? Determining clear aims, even over a long period, will be vital when it comes to justifying the project.”

However, CRM is not primarily about technology. In the 1990s many companies fell into the trap of believing that technology, if it was expensive enough, would manage their customer relationships for them. In many cases it actually compounded existing problems with customer contact. CRM is as much about people and processes as it is about technology.

Heather Westgate, MD of marketing communications agency TDA, comments: “Good CRM is not achieved by buying the most expensive piece of IT equipment. It’s not even achieved through good marketing. It’s about ensuring the right attitude exists throughout the whole organisation. It’s about the way the brand is lived and experienced by employees and customers. Simply putting customer details onto a CRM system isn’t enough if it doesn’t work hard to support the rest of the organisation.”

Improving the way your company manages its customer relationships is an enormous task that often involves a significant cultural shift, and always involves a great deal of time and money. Crucially you will also need active support from your senior management.

Jeremy Jackson, marketing director at CRM software provider Siebel Systems, says: “The most effective deployments require the commitment of the most senior management to ensure that the change to working practices necessary to gain full benefit, is accepted with enthusiasm.”

Falling costs

The cost of most CRM applications has proved a major barrier for many organisations. This has led software providers to move away from offering enterprise-wide solutions that cost millions of pounds and take three years to implement. Increasingly they are offering solutions to specific problems, and ensuring that they are affordable and quickly deployable.

Cost is also the reason for the increasing popularity of hosting CRM applications. Richard Bee, head of CRM at Sage, says: “Only around 20 per cent of small companies have any CRM system, and the perceived cost is a major barrier in that market. Under a hosting arrangement they rent our CRM software for an agreed number of users and a certain period of time. There are no upfront costs, it’s quick and easy to deploy and it’s a good way to trial a piece of software.”

Despite some obstacles, take up of CRM systems looks set to grow in 2006. As Guy Tweedale, MD of Northern Europe for CRM specialists Saratoga Systems, concludes: “Business today is becoming more and more driven by the relationships that companies have with their customers, and the battle for competitive advantage is being fought over customer mindset. CRM plays a crucial role in ensuring consistency of experience for the customer, so companies who want to lead their markets must make CRM work for them.”

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