Vertical Focus: Retail

Retailers are learning from others' mistakes. Instead of investing heavily in full suite applications, retailers are nibbling on CRM and noticing bite-size successes, according to "Getting Retail CRM Right," a recent report by Forrester Research.

"Our survey of 30 retailers shows that unlike other industries, retailers actively run CRM projects, and although it's not always an easy process, most retailers are satisfied with early results," Carrie Johnson, an analyst at Forrester, says in the report.

The report states that the majority of respondents spent less than $5 million each on CRM for the 24 months leading up to September 2002, whereas only 6 percent spent more than $20 million during that same time. The top three investments are in marketing campaign tracking, customer segmentation with an analytics applications, and customer database modification and unification. Only 7 percent of respondents have completed full suite implementations, the report states.

The biggest obstacles retailers face are budget constraints (77 percent), synchronizing applications across channels (77 percent), and organizational issues (63 percent).

Sheryl Kingstone, an analyst specializing in analytics at Yankee Group, points out another, more insidious factor that retailers may not even be aware of: dirty data, or customer information that is old and inaccurate. "The 360-degree view of the customer is not there yet, because organizations are still suffering from garbage in, garbage out," Kingstone says.

The obstacles are taking their toll on retailers, Kingstone says. Regarding targeted selling in the retail sector, Kingstone says "no company is doing it that great lately. Some segments are doing it fairly well, such as discount and catalog houses, because they've been doing direct mail campaigns for years and have a lot of customer data. But the retail industry as a whole is struggling to collect customer data."

Despite the obstacles, cautious respondents to the Forrester study are noticing early benefits. The biggest anticipated returns on investment are optimizing marketing contacts (90 percent), increased loyalty (87 percent), and increased cross-sells and upsells (77 percent). Eighty percent, or 24 retailers, are satisfied and most plan to increase CRM spending this year, the report states. Twelve of the 30 respondents say that "early results are promising," 11 say CRM projects have been "a profitable way to spend our IT budget," and one retailer stated CRM spending has been "the best IT investment we've made to date." Not one retailer characterized its CRM efforts as "a waste of money."