Hastily planned CRM likely to fail

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Evidence is mounting that big customer relationship management software packages are producing a wealth of data about customers but a dearth of real insight into what will compel those customers to buy more.

A recent study by consultancy Booz-Allen & Hamilton suggests that marketers often roll out big, multimillion-dollar CRM packages hastily, driven by the belief that the technology itself will correct blind spots in a marketing plan.

That approach is fraught with peril, said Booz-Allen VP Mitch Rosenbleeth, lead author of the study. A major danger for marketers is the risk that the CRM applications will emphasize marketing activities that don’t produce the best results, simply because that’s how the software was designed. In these cases, the technology—instead of the business strategy—is leading the way, he said.

Before embarking on a multimillion-dollar deployment of CRM software, marketers should invest a few hundred thousand dollars to research which marketing activities are producing returns, Rosenbleeth said. "A lot of companies need to think through what insights they’re looking for before implementing the technology," he said.

For United Asset Coverage Inc., a Naperville, Ill.-based provider of maintenance contracts for telecom equipment, that research focused on how unified customer records and consolidated bills might aid customer retention.

Previously, UAC used two different pieces of software, both based on Microsoft’s Access database, to keep track of maintenance contracts. As a result, bills didn’t specify the equipment covered or how UAC calculated the amount owed. Also, because the software packages couldn’t easily adjust to changes in a maintenance plan, customer support agents had to manually change about 40% of all invoices before sending them out, said Brad Snook, UAC’s VP-CRM.

One software, no intervention

UAC’s research suggested that if one software package tracked sales, client contracts, financials and inventory, customers could receive detailed bills and manual intervention would be unnecessary. Detailed bills also would help UAC differentiate its services from the big telecom providers and help retain more customers, Snook said.

The research led UAC to rip out the separate customer applications and deploy a hosted version of Oracle 11i E-Business Suite, delivered by hosting company Agilera.

Rosenbleeth points to another example: a packaged goods company that developed algorithms to track and understand how different advertising and marketing campaigns resulted in sales. As a result, the Booz-Allen client found that it could run its campaigns just as effectively by cutting its marketing spend by 20%.

The exercise also helped the company determine which customer activity to track most closely once the CRM package was installed. "Now they can forecast demand much more accurately because they can trace money back to certain marketing events," Rosenbleeth said.

While the Booz-Allen report questions the effectiveness of CRM applications that focus on call centers, UAC says this view of the customer was vital to its CRM implementation, especially because UAC relies on subcontractors across the country to carry out maintenance contracts.

"When a customer calls me, it’s vital I know who they are, which pieces of equipment are covered, who their preferred [subcontractors] are," Snook said. "It’s my business to know everything about the client."

Mitch Kramer, a CRM analyst at the Patricia Seybold Group consultancy, agrees that in many businesses, high-quality call center service leads to better sales. "Satisfied customers are loyal customers, and loyal customers are profitable customers," Kramer said.

Slow approach pays off

Analysts Rosenbleeth and Kramer also agree that CRM software should be phased in rather than deployed all at once. Some of the biggest CRM disasters can be traced to companies that spent tens of millions of dollars before realizing that they weren’t gaining any insight into customer behavior.

"People who take a modular and incremental approach to CRM have succeeded the most," Kramer said.

In fact, Rosenbleeth recommends that existing CRM users take a "time out" once they recognize such a problem. "They have to get back to the roots of what will create value for them and the customer," he said.

CRM applications are on a growing number of corporate shopping lists, according to a March IT spending survey conducted by Morgan Stanley Dean Witter. CRM was cited as a top spending priority by 29% of CIOs, compared with 23% just a month earlier.

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