• September 5, 2001
  • By Jim Dickie, research fellow, Sales Mastery

Why Companies Take the CRM Plunge

Insight Technology Group (ITG), in conjunction with CRM magazine and CRM Insights,
recently completed its ninth annual survey of 222 companies to assess the sales, marketing, and service challenges they faced and what they were doing about them.

This year for the first time we expanded the scope of the study to include a broad, general section of firms that did not necessarily have a CRM project in place. We knew only that the companies we contacted were interested in improving their sales, marketing and customer service operations.

The companies surveyed were a cross section of organizations spanning multiple industries. The companies divided fairly evenly into large, medium and small firms. The information we gathered yielded some very interesting trends.

We asked all the companies surveyed whether they had formally evaluated CRM solutions. Of the 62 percent that said yes, only 69 percent ultimately ended up purchasing a system. Of that subset, we then asked them to rate the results that they had achieved through their automation efforts.

Fewer than 26 percent of the companies that deployed a CRM system reported making significant improvement in performance, 47 percent minor improvements and 27 percent no improvements at all.

Assuming that represents a reasonable cross-section of companies today, then you would also assume that fewer than 11 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 need 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. 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 are making strides in increasing their performance through improving their processes. But is that enough to meet our ultimate business goals?

Consider the roughly 10 percent of firms that 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. Any firm in any marketplace that successfully implements a CRM solution sets the bar of performance higher for all of their competitors.

    So while CRM may not be fast, easy or 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.

    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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