CONNECTIONS: Comment - How firms can avoid 'Can't Really Make it' work pitfalls of CRM

CRM - Can't Really Make it work? Is that what the acronym really stands for? CRM has become overused as businesses adopt it to describe every marketing initiative under the sun. The good news is the groundswell of companies adopting customer management strategies. The bad news is the reality surrounding the implementation of these, which in many cases has been exaggerated. Recent research undertaken in 12 Asian markets with hundreds of leading brands begin to expose some of the dichotomies:

by | 01/25/2002

- 50 per cent have an official CRM strategy yet only 11 per cent claim there is no room for improvement.

- 15 per cent of CRM strategies reside with CEOs/presidents. At nearly 50 per cent of companies CRM is owned by the marketing department alone.

- 65 per cent claim to have a 'good' database yet companies still segment by product/service only.

Most organisations are at infant stages of developing good customer management.

Benchmarks studies from CRM assessment consultants QCi, an OgilvyOne company, illustrates this with data from 400 companies that analyses 260 areas.

The results are startling with an average score of just 34 per cent: 90 per cent of companies do not have different contact strategies for different customer groups; 15 per cent calculate allowable acquisition costs based on future customer value; 31 per cent have key performance indicators used to compare campaigns; 57 per cent have no specific plans for the top 10 per cent of their customers; 62 per cent do not measure customer retention; 75 per cent have no incentive to maintain data quality.

So if CRM is so much hard work, why do it? The data shows a high correlation between companies that are performing best by customer management score who also have high corporate performance in terms of value. The opposite is also true. We tracked the 20 customer management companies and benchmarked performance against the S&P 500 between 1995-2000. They consistently out-performed with average value gains of 310 per cent versus 147 per cent across the index. Here's how to avoid the pitfalls:

Appreciate CRM is an enterprise-wide business strategy. This does not mean re-engineering of businesses, but if there is insufficient senior management involved then CRM initiatives are doomed. While marketing divisions can act as a focal point, if the remit resides solely there, it is unlikely all necessary parties will buy-in to the same point of view.

Distinguish what CRM is and is not. There is as much fiction as fact in the marketplace. The result is large doses of disillusionment from organisations with shattered expectations from poor results. Buyer beware - particularly of vendors with magic-bullet solutions who under-estimate the nature of the task. There are many temptations in the form of promised quick returns that can lead clients astray. The challenge of customer management may at times seem arduous, but there are bountiful rewards.