E-CRM: The Good News and the Bad News

I recently read this factoid on a Web site: “Only 1 percent of CRM implementations succeed.” No source was provided, as if the statement needed no attribution. It’s assumed that it’s common knowledge: Customer relationship management (CRM) is a complete disaster.

According to some well-documented research, apparently the news about CRM is far from being so one-sided. Recent developments represent an interesting mix of good and bad news. Below are some highlights.

1. CRM is seemingly being redefined as smaller, more incremental initiatives — not the big-scale cultural transformation it was once promoted to be.

If fact, according to a market research study on European companies by the Gartner Group, only 3 percent of companies are implementing “true CRM.” The study found 45 percent of companies surveyed are “still wondering what to do,” and 35 percent have launched a grab bag of different projects.

This is good news and bad news. The good news is the “go big and fast” argument propounded by the big, enterprise-framework software-solution providers — responsible for some of the bigger and nastier “failed implementations” over the past few years — seems to be effectively repudiated by the marketplace.

Most organizations that have successfully implemented CRM have started small, experimenting with many different pilots before rolling out larger-scale implementations of these new systems.

According to a May 2001 survey of business executives by the Cutter Consortium research firm, 40 percent of respondents were “satisfied” with their CRM efforts and only 6 percent said they were disappointed.

2. CRM isn’t a done deal. It’s just beginning.

Despite all the presentations by CEOs to Wall Street analysts over the past couple of years about “reorganizing around the customer,” “creating a customer-focused strategy,” and recognizing that “customer relationships drive shareholder value,” the fact is that most corporations are not finished implementing CRM. In reality, some research indicates that businesses are just beginning.

The May 2001 Cutter study of corporate executives found that 66 percent of the CRM programs identified were less than a year old and that only 11 percent of the companies surveyed had CRM initiatives in place for more than two years.

Another report indicates this same trend. A Gartner Group December 2000 survey of 56 retailers (released in June 2001) indicates that most retailers believe CRM to be a top business priority. Fifty-two percent rated CRM as their highest priority; 43 percent rated it as a moderate business priority, and only 5 percent rated CRM as a low priority. Thirty-four percent acknowledge that they are deploying a CRM initiative.

3. People are using different metrics to judge the relative success of their CRM efforts.

Contrary to the popular belief that all major IT investments require a rigorous and carefully thought-out cost/benefit analysis, CRM projects are bought on faith not on numbers.

According to research (a study by Cap Gemini Ernest & Young), only a small percentage of corporate managers have developed solid performance metrics for measuring the value of CRM.

As many business people are quickly discovering, it is difficult, if not impossible, to isolate and measure the timing and amount of economic benefits generated from CRM. As a result, many return on investment (ROI) studies are nothing more than high-level strategy assessments that conclude that CRM isn’t an option, it’s a competitive necessity.

Instead, businesses are starting to think about and develop customer metrics, bypassing the whole issue of feasibility studies. The metrics include the following categories:

Customer intelligence and analytics. These metrics track the commonalities of high-value customers and how this information can be leveraged to attract and retain more of the same type of customers.

Customer interaction management. These reports indicate how customers use your different channels and for what reasons. This information helps companies ensure a consistent message and fully leverage customer-intelligence gathering and communications while understanding the predominant channel of influence of different customers (i.e., the preferred or most effective form of interaction).

Customer profitability management. This business intelligence deals with measuring the relative profitability of your customer segments and how potential revenue streams and gross margin costs vary across these different segments. It is used to maximize profitability for both a short-term and long-term basis.

Customer management reporting. These metrics are perhaps most commonly used today by sophisticated marketing organizations to report on a regular (usually quarterly) basis regarding the increase (or decrease) in sales in any given period. These reports can distinguish changes in revenue as a function of both the acquisition of new customers and an increase in wallet share of existing customers.

Benchmarking. These studies measure the retention/loyalty and defection/churn rates of a company relative to those of its peers and provide reasons for variances.

Plenty of news is coming out of the CRM sector. And most of it is good.