Actions, Not Words

We’re only beginning to see the effects of offering relevant, personalized value propositions to individual customers through their preferred channels. Results can dramatically increase loyalty and customer lifecycle values in the form of more frequent and larger repeat purchases, lower acquisition costs, and word-of-mouth referrals to friends and family.

It’s easy to sell the tremendous potential of customer relationship management (CRM). It’s a lot harder to deliver, as demonstrated by the high failure rates of CRM implementations. Unrealistic expectations about the ease, simplicity, and fast financial returns are a major contributing factor to the sad state of preparedness of most businesses when undertaking CRM.

I recently attended a CRM seminar, at which I got an unpleasant, firsthand look at just how unrealistic expectations can be set. The seminar was hosted by a triad of vendors: probably the best-known “strategic marketing” guru in the world, a Big Five consulting firm, and a very successful software supplier. The guru, on one of his whirlwind tours to evangelize CRM, made these two key points to a packed conference room at one of New York’s toniest midtown hotels:

• CRM can offer immediate financial benefits in reduced costs and higher revenue in a down economy.
• Technology is the easy part of CRM implementation.

For those of us in the real world faced with the hoary task of designing and executing successful CRM strategies and technologies, it was excruciating to hear such nonsense.

In the spirit of setting the record straight, let me rebuff these two points, lest someone actually believe them.

CRM Does Not Offer Immediate Financial Gains

Though CRM offers potential for significant long-term financial success, it is not a “quick hit.” In fact, one sure-fire way to ensuring CRM failure is to set unrealistic expectations of immediate financial payback.

If you want to cut costs in a down economy, forget about implementing a CRM system. You will find it is expensive and requires a tremendous amount of upfront thinking, change management, and business process re-engineering, as well as technology planning and strategy. CRM can’t be successfully implemented without a serious look at your customers, value proposition, true market position, competitive strengths, incentive structure, skill sets of your people, and the current state and future direction of your technical architecture.

Though some customer-facing strategies and systems can be implemented incrementally, the benefit will be incremental as well.

Holding off major customer-facing initiatives and refocusing customer service efforts to retain clients and improve satisfaction levels better serve businesses struggling to maintain profitability in a down economy. By retaining their current customer base and carefully managing expenses, businesses can generate enough revenue to maintain at least a modest level of profitability.

Technology Is Not the Easy Part

To suggest that technology is the “easy part” of CRM is ridiculous. Yes, CRM often means considerable work in strategy, change management, and organizational and incentive compensation design. Corporate leadership and governance issues are considerable — even massive for some organizations. With an inspired and competent leader who has the vision and guts to knock heads together and get results, a lot of cultural and organizational issues can be resolved.

The technology part of CRM is a major undertaking, requiring highly disciplined and informed strategy and execution. Let’s look at three issues — architecture, application integration, and data management.

Architecture

Most businesses live in two worlds: a two-tiered client/server legacy architecture of distributed desktop computing, which is expensive to maintain, not very scalable, and not geared for Internet interactivity; and a new multitiered, server-based computing architecture, the wave of the future.

Living with two different (and expensive) architectures is a major headache for most organizations, forcing difficult trade-offs and tough decisions in migrating from old to future architecture. With new technology constantly influencing the cost/benefit equation (new technology continues to enable a broader base of less-skilled workers to perform the tasks once required of highly skilled specialists), planning your architecture requires constantly re-engineering your existing infrastructure and making well-informed, smart bets (sometimes big bets) on where technology is heading.

Application Integration

Fast-changing developments in technology mean a plethora of standalone and proprietary “point solutions” and a furious pace of corporate restructurings (acquisitions, divestitures, and recombinations of people, facilities, systems, and business plans). Most medium-sized to large organizations own a hodge-podge of disparate, hardly compatible computer systems.

Systems integration is a manually intensive, painful, and inexact science of getting technologies that were never meant to coexist to work together seamlessly. This is often achieved through point-to-point custom coding between applications — although such solutions are expensive, hard to maintain, and not scalable. With the advent of application and integration servers, many of these issues can be successfully resolved, but this requires massive investment.

Data Management

The ability to integrate different customer views across multiple channels is a challenge for most businesses because of the following:

• Front-office systems of most large organizations are characterized by “islands of computing” in which old, inaccurate, and fragmented views of customers are held captive by a diverse assortment of proprietary customer-facing applications, each with its own data model and data store.
• Customer information is held in both structured (database) and unstructured (fax, memos, emails, reports, manuals, Web content) data, which is difficult to integrate.
• Most organizations do not have a data management strategy to identify and track what information is useful (economic value).

Even for smaller businesses, which have been able to enforce a single technology standard, achieving this functionality — the sharing of data among many different applications by replicating, repurposing, or both this information — still represents a major technical challenge.

Conclusion

At the end of his talk, this well-known guru predicted that over the next two years, we’ll read about major, multimillion dollar CRM implementation failures by corporate America.

If these same corporations listen to and believe what this guru tells them, that’s one self-fulfilling prophecy.