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Getting CRM Back on Track
The path to enterprisewide CRM should be viewed as evolution, not revolution. Answering these questions will result in gaining a better understanding of what is required to generate value from your previous investments.
Posted Mar 24, 2003
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According to Gartner, 75 percent of CRM initiatives will fail in 2003. The 25 percent that succeed will be the ones that recognize CRM as an enterprisewide approach to maximizing the value of the customer franchise. Winners will implement initiatives that touch all their channels and services while embracing technology and process changes, new skills development, organizational redesign, and employee incentive and reward structures. Simply put, if you think of CRM as just another technology project, it will fail. Following is a list of the 10 most important questions that companies must be able to answer to realize the full potential of future CRM initiatives and get their existing ones back on track. 1. Why are we investing in CRM? Most companies fail to see a return on their CRM investments because they cannot answer this question. Most say they wish to increase customer satisfaction, but a successful CRM solution will only help you extract value from your customer relationships if you have resolved such variables as: (a) what specific change in behavior you are trying to engender; (b) how that change will reduce the cost to serve targeted customers or increase their value to your company; and (c) how to measure the value of these behavior changes against the cost of your investment. Building this kind of customer microeconomic framework not only provides the basis for an ROI justification of your CRM initiative, it also helps keep your initiative on track. 2. Are all my key stakeholders in agreement? All key stakeholders within your organization--spanning technology, marketing, channel owners, operations, and human resources--must understand the clearly defined purpose and the common vision of CRM for your company. It should never be left solely to the marketing or technology groups, and not a dime should be spent on technology until all stakeholders agree on the 'why' and the 'how' of the business behind the investment. One division of a leading global technology products and services company wanted to gain a better understanding of its customers' needs. The company's marketing department initially took responsibility for the project, but quickly discovered that without the support of the product and distribution teams, they were unable to gather relevant information. Once the company elevated the project out of the marketing department and secured enterprisewide support, the initiative progressed smoothly and efficiently.
3. Does our CRM initiative cover all customer touch points? Inherent in every CRM solution should be an understanding that customers expect consistent service no matter what channel they use. An effective CRM solution will address the various delivery channels, from your Web site to your call centers, and be scalable and integrated with each of those channels. 4. Have we considered taking a more incremental approach? Do not bite off more than you can chew. Taking an incremental approach to CRM initiatives allows companies to minimize the risk of cost-overrun and missed expectations, and gives them an opportunity to achieve quick, tactical returns and learn critical lessons along the way. For instance, a popular membership warehouse realized that the customer behavior that varied most widely across segments and had the biggest impact on customer profitability was the frequency of customer visits. By focusing the first phase of its CRM initiative on changing this key customer behavior, the company was able to fund the remainder of the initiative and convert the remaining naysayers around the organization. 5. Is our organization committed to change? Implementing a CRM solution does not immediately grant you better customer relationship management. Yes, the technology is critical, but the key to a CRM solution's success is how and if people will actually use it. You will benefit most by creating change management strategies that include employee training, incentives, and organizational momentum, but only if your organization is structurally and emotionally ready for change. 6. What is the state of our enterprise architecture? While there are a number of effective CRM packages available, no single solution can give you the results you demand if your current enterprise architecture isn't structured to handle it. Your company will benefit from creating an enterprise architecture plan that analyzes existing technology infrastructure, assesses opportunities for improvement, and provides a road map to achieve the desired end-state. 7. How will we drive adoption? Determining the most appropriate level of adoption by a company's employees or customers should be a key component of every CRM initiative. 7. How will we drive adoption? Determining the most appropriate level of adoption by a company's employees or customers should be a key component of every CRM initiative. A recent report from AMR Research identified user adoption and change management as the biggest threats to CRM success. If your customer-facing employees are not involved in the design of your CRM application, the solution will most likely not match their daily processes and work habits. The result? It will not get used and become just another technology initiative that doesn't deliver ROI. An adoption management plan aligns employee needs with organizational objectives and technology design to ensure successful usage. 8. Are our data requirements aligned to our customer economic model? Savvy companies understand that their customer economic model should drive their CRM data requirements. The analytics associated with customer economics: appropriate client segmentation, the dollar value of customer behavior, and the leverage points where customer behaviors can be changed, will help drive the technology and data needed to implement your CRM solution. Of course, all CRM solutions rely on the state of your customer data, so understanding the economics of each customer type and each behavior will ensure success. In one extreme example, a major credit card company once embarked on building a customer data warehouse by hiring someone to "find out every possible piece of data tied to customer profitability." This approach resulted in a billion-dollar estimate and masses of information, most of it worthless. After changing its strategy and focusing on specific customer behaviors and learning how to manipulate data to drive specific customers behaviors, the company was able to collect more relevant information and build a more effective data warehouse. 9. Does the cost of investment and time to implement seem reasonable? Do not be fooled into thinking all CRM implementations are multiyear, multimillion-dollar ordeals. Depending on your company's business case, successful CRM solutions can be implemented in under six months and at a contained cost. One way around cost and time overruns is to partner with an integrator on a fixed-time, fixed-price basis. 10. Have we realized explicit business value from our current CRM investment? If you have, congratulations; if not, do not give up. Take a step back and identify what is and isn't working, and where you can get more value. If you have not achieved the adoption rates you expected, take the time to understand why. The path to enterprisewide CRM should be viewed as evolution, not revolution. Many companies have taken an if-I-implement, I-win approach to CRM; as a result, many abandoned their initiatives upon discovering that what they thought would happen overnight did not. Answering the preceding questions will result in gaining a better understanding of what is required to generate value from your previous investments. About the Author Steve Hoffman is executive vice president and managing director of management for IT consultancy Sapient's Financial Services industry group. In this capacity, Hoffman oversees the group's operations, including business development, delivery, strategy, and people development. As Sapient's largest business unit, Financial Services serves all primary sectors within this industry, including capital markets, personal financial services, and insurance -- which includes the life, property and casualty and reinsurance segments.
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