The Rise and Fall of CRM, Part 2

This three-part column is about the birth and death of the CRM fad. In part one, we looked at the Internet craze, which in some ways helped spur demand for multichannel CRM software.

In this second installment, we’ll examine the early CRM hype. In the third and final column, we’ll discuss examples of a new generation of more practical, clear-headed approaches to CRM.

Easier to Buy Than to Do

Building more roads and highways increases (not reduces) traffic. Similarly, the widespread use of the Internet in the mid-90s created more interaction among consumers and businesses, spawning new opportunities for businesses to win over or alienate customers and prospects.

The concept was if companies could achieve an integrated view of their customers across channels, product lines, and business units, they could develop deeper and longer-lasting relationships by better understanding and serving customers’ needs.

CRM proved a lot easier to buy than actually do. Many commission-driven software sales reps were too eager to push immediate benefits of implementing CRM packages (Increase sales! Increase loyalty! Increase sales productivity!). Many corporate types were too eager to believe that implementing a software package could readily achieve what was otherwise an extremely painful and difficult process: to please and delight increasingly demanding customers. It all sounded too good to be true. And it was.

People got wrapped up in the concept and technology (I remember a lecture about the monumental difference between customer relationship management and customer-managed relationships). They were not concerned enough about what CRM really is: competing more effectively and generating superior financial performance by better identifying and serving customer needs.

Inherent Problems

Problems with nifty new software solutions were, as we now know, manifold. First, the new enterprise solution (like every new enterprise package before it) required businesses to recreate data from disparate data stores into a new, common (but often proprietary) data store. In many cases, the quality of client data was so poor that aggregating the information simply magnified data management problems.

Despite complex technical challenges, cultural and organizational issues doomed many CRM software implementations to failure. These same issues, ironically, were the demise of so many earlier enterprise packages, such as ERP and SFA.

Over-Customization

Most organizations weren’t organized around the customer, so business processes didn’t fit the simplistic and uniform workflows embedded in commercial software packages.

In some cases, CRM packages were overly customized to fit current processes (sometimes without bothering to learn or considering adopting the processes of the package). Unfortunately, processes were automated without being improved (the old phrase, “paving goat paths,” comes to mind), which means the benefits were limited. Also, costs were driven up.

Overly customized commercial packages gave corporate clients the worst of both worlds: the high initial price of a commercial package paired with the long-term costs and headaches of maintaining and upgrading a custom-built solution.

The Missing Ingredient: ROI

The real death knell of the CRM fad was a lack of demonstrable return on investment (ROI). Most organizations couldn’t demonstrate measurable improvements in financial performance because they never developed metrics or processes to measure performance in the first place.

The measure became anecdotal: Did CRM live up to its hype and expectations? The answer, unsurprisingly, was no.

Many organizations that embarked on global, enterprisewide CRM implementations discovered to their horror that providing employees with a global view of customer account information didn’t generate any competitive advantage or economic benefit. Business, like politics, turned out to be local.

Moreover, without an effective strategy to integrate transactional, financial, and other performance data and then make use of this knowledge to attract, transact, fulfill, and retain the highest-value customers and the most promising prospects, CRM applications were limited to sharing customer data across different front-office systems. Sharing data across customer-facing processes is not a bad thing, but it hardly represents a competitive advantage.

Like the dot-com boom, CRM hype didn’t prove itself in the reality of how customers actually behave. In the third part of this series, we’ll look at two examples of a new generation of CRM strategies.

Do you agree? Don’t agree? Got an interesting insight, opinion, or real-world example to share? What are your thoughts? Please to write me at Arthur.oconnor@reuters.com. And stay turned for part three!

Related reading

click
tencent_emily-ma_featured-image
bounce-370x229
site search hp
<