Customer relationship management spending will see higher growth than other IT investments in the short term, according to a report from Jupiter Media Metrix Inc.
The report, which was released late last month, found that more U.S. businesses will spend $500,000 or more on CRM software during the next two years than on any other large-scale technology projects (such as supply chain management or content management).
In the longer term, CRM spending will grow from $9.7 billion in 2001 to $16.5 billion in 2006, Jupiter forecast.
The industry expected to make the largest investment in CRM software will be financial services, with spending projected to rise from $3.1 billion in 2001 to $5.4 billion in 2006. Jupiter attributes this spending boost to increased consolidation within the financial services sector, which has resulted in a need to invest in common systems and platforms.
Other big CRM spenders include the retail sector, which is projected to increase spending from $1.7 billion in 2001 to $3.2 billion in 2006, and the telecommunications industry, which is expected to boost spending from $1.9 billion in 2001 to $2.9 billion in 2006, according to Jupiter.
Jupiter found that while 97% of businesses say they plan to boost spending on CRM technology within the next two years, only 7% said they were doing so to improve profiling and targeting of their customers. A higher percentage of companies (26%) said short-term spending on CRM software would lead to long-term cost savings.
"Everything is based on cost justification in the economy, which, in part, is why CRM is still a popular investment," said David Daniels, senior analyst at Jupiter and lead author of the report. "With all of those types of [CRM] initiatives, from self-servicing to e-mail automation, cost savings are inherent if the applications are deployed correctly. The larger goal should be how those applications impact your customer profitability."
Plenty of challenges
Executives surveyed cited many challenges to implementing a CRM system. Fifty-eight percent of respondents said it was difficult to justify the return-on-investment for CRM software, and 36% said integrating CRM technology into existing applications was a challenge.
Jupiter warns that spending on CRM to reduce costs will not ultimately improve customer satisfaction. It advises companies to develop CRM systems that will create better profiling and targeting.
To maximize results, companies should implement an organizational structure that is supported by customer-focused rewards and incentives, Jupiter said. They should also appoint a company CRM "guru," reporting to the CEO, to lead CRM strategies.
One company that’s doing a good job with its CRM strategy is Apple Computer Inc., which created a Customer Operations Performance Center in 1995 to set standards for customer-oriented procedures, according to Jupiter. The group develops documentation, processes, job descriptions and metrics for customer support, human resources, marketing and training. Jupiter estimates the company has invested $100,000 in the program and that the investment has paid off with about $200,000 in cost savings.
The program was put in place before Apple deployed Clarify CRM software worldwide. "The technology is important, but what is more important is making sure everyone is working under the same strategy and using the same metrics and definitions before launching ahead with software," Daniels said.
"They wanted to make sure everyone was operating with the same goals, such as measuring customer satisfaction on the first inquiry," he said. "Those types of detailed processes are more important to the success of CRM than implementing a particular software application."