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Why CRM?
Despite the risk, the cost, and the time required to implement CRM, companies continue to take the plunge. What motivates them, and what do they hope to get out of it? A new survey provides some insight.
For the rest of the August 2001 issue of CRM magazine please click here
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Insight Technology Group (ITG), in conjunction with CRM magazine and CRM Insights, recently completed a survey of 222 companies, assessing the sales, marketing, and service challenges they faced and what they were doing about them.

This is the ninth year that ITG has coordinated this type of marketplace research effort. In previous surveys, we targeted only those companies that had an active CRM project underway. This year for the first time we expanded the scope of the study to include a broad, general section of firms. When we contacted these companies we did not know if they had a CRM initiative underway or not, only that they were interested in improving their sales, marketing and customer service operations.

The companies surveyed were a cross section of organizations spanning multiple industries. We also focused on getting a balanced view in terms of company size, targeting roughly a third each for large, medium and small firms. The information we gathered from these companies yielded some very interesting trends, which I would like to start reviewing in my column over the next several months.

Let me start by sharing a few statistics that might surprise some of you. We asked all the companies we surveyed whether they had formally evaluated CRM solutions. Of this group 61.8 percent said yes. We then asked those firms if they ultimately ended up purchasing a system, and 68.6 percent said yes. Of that subset, we then asked them to rate the results that they had achieved through their automation efforts. Of the companies that deployed a CRM system, 25.6 percent reported making significant improvement in performance, 47.0 percent minor improvements and 27.3 percent no improvements at all.

Now if you extrapolate those numbers--only roughly 62 percent of firms have seriously considered CRM, only 69 percent of those purchased systems, and only 25.6 percent of those firms are achieving significant results--and you assume that represents a reasonable cross-section of companies today, then you would also assume that only 10.9 percent of all firms are making real progress with CRM.

If that is the case, then is all the buzz surrounding the CRM marketplace over exaggerated hype, or is CRM really a critical part of the answer to all the sales, marketing and services challenges we face today?

Figure 1, below, summarizes the responses we got when we asked the study participants to share the top three goals they had for improving their sales, marketing and service operations. The chart highlights their responses as they relate to specifically increasing sales excellence.

Figure 1: Sales Excellence Goals

So what do these data tell us about CRM success? The top objective for the third year in a row was increasing the effectiveness of sales teams. Focusing on efficiency is no longer enough for companies. They have come to realize that it is not a matter of having sales reps make more calls. They need to make better calls.

Empowering Salespeople

We need to empower sales people so they only spend time with qualified accounts. We need reps to complete the needs analysis in one call versus two, three or four. We need to provide prospects with targeted product materials directly related to their needs. We have to be able to develop solid business cases for our clients to justify their purchases. We need to process their orders correctly the first time.

Also, consider goal number three--increasing customer loyalty. Very few firms today have a sustainable product edge. Competitors can match you feature for feature in an ever-decreasing amount of time because of collapsing product life cycles. To keep customers as long-term clients, we also need to provide world-class service to differentiate our company from the competition.

If we are successful at increasing effectiveness and increasing customer loyalty, then the other objectives should come as by-products. We should see revenues and margins increase, we should see sell cycles take less time, and we should see channel performance improvements, for example. But how do we do this, is the question.

Clearly, if we hire great people we can make advances in our level of sales excellence. Also, companies that have adopted a structured methodology for selling, such as Miller Heiman, Target Account Selling or Solution Selling are also making strides in increasing their performance through improving their processes. But is that enough to meet our ultimate business goals?

Let's consider for a second the roughly 10 percent of firms who are achieving significant improvements because of their CRM efforts. The results these firms are achieving by focusing on technology, as well as people and process, are spectacular. Of the projects I personally benchmarked this year, I found companies achieving 42 percent increases in revenues per rep, 22 percent decreases in sales and marketing costs, improvements in converting leads to sales from a 1:100 to a 1:5 ratio, customer satisfaction rating improvements of 23 percent, margin increases of 2.2 percent, decreases in the length of sell cycles of 33 percent, reductions in the time it took to get new sales people fully productive of over 51 percent and more.

Setting the Bar

CRM can, and is, helping to reinvent how companies are marketing, selling to and servicing their customers. As soon as any firm in any marketplace successfully implements a CRM solution, they set the bar of performance higher for all of their competitors.

So while CRM may not be fast, and may not be easy, and may not be cheap, it is also definitely not just an option. If one of your competitors starts to achieve some of the results mentioned above, you will have to figure out a way to match that performance or be at a significant disadvantage in the marketplace.

To help take some of the mystery out of how to achieve significant success through your CRM investments going forward, in next month's column I will outline the specific sales and marketing challenges companies report they face today, and then in the following months we will present specific case studies of how companies are leveraging CRM systems in dealing with those challenges.

Why CRM? is not the question to ask. How CRM? is. We have no alternative but to find ways to make these systems work for us. Hopefully by leveraging the experiences of others we can make success more pervasive over the next year.

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