Marketers prefer investment in CRM

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More marketers would prefer to invest in customer relationship management programs than in mass media advertising, according to a survey conducted last month by, a marketing news site, and Insight Out of Chaos, a database marketing firm.

The survey of about 200 marketing executives found that 28% would prefer to invest the majority of their marketing budgets in CRM programs, compared with 22% who would select traditional mass media advertising.

The objective of the study was to assess what marketing people understand about CRM and how their experiences affect spending decisions.

Almost one-third (32%) of respondents said marketing strategy was the most important factor for CRM success, while 28% said executive commitment was most important for CRM success. Just 4% cited technology excellence for the success of CRM programs.

"We were surprised so many people understood [CRM] and would be aggressive about investing in it," said Spencer Hapoienu, CEO of Insight Out of Chaos. "These are traditional marketing people working in traditional marketing jobs, and to many of these people, CRM is a threat."

The survey also asked respondents which department led CRM initiatives at their companies. Fifty-one percent said the marketing unit typically leads CRM, followed by senior management (19%), IT (12%) and sales (9%).

While they understood the need for CRM investment, marketers had different definitions of what the acronym CRM means. The most common definition (listed by 59% of respondents) was customer relationship management, although other definitions included customer relationship marketing and continuous retention marketing. Regardless of the wording, respondents described CRM as accomplishing one of two tasks: Tracking customer behavior for the purpose of developing marketing and relationship-building processes, or developing software or systems to provide one-to-one customer service.

"Everyone has to be pushing their organization to be seriously addressing CRM, if they haven’t already addressed it," Hapoienu said. If companies have a CRM system in place, "marketing people are the best equipped people in the organization to be mission control of CRM," he added.

The survey was conducted online during the last week of April. Of the 197 marketing respondents, 20% were advertisers, 20% were from marketing services organizations, 17% were consultants, 8% were from promotions agencies and 7% were from ad agencies.

Who’s spending what

While many marketing organizations across a variety of industries have invested significantly in CRM systems and services, the manufacturing industry has held back on its CRM investment, said John Norkus, a partner with Deloitte Consulting’s CRM practice. The industries that have invested heavily in CRM include financial services and consumer goods, while traditional manufacturers and suppliers have lagged in their investments, Norkus said.

He added that when looking at sales figures from CRM providers such as Siebel Systems Inc., PeopleSoft Inc. and SAP AG, there has not been as significant a penetration in the manufacturing industries compared with other industries. That may be because many manufacturers have just a handful of very large customers and don’t interact with end users, so they don’t see a need for CRM, Norkus said.

Instead of putting money into CRM, many of these manufacturers are investing broadly in marketing programs, he observed.

"They’re spending between 2% and 20% of their revenue on marketing, but many don’t know where the dollars are going," he said.

Manufacturers typically spend across marketing, marketing communications and channel marketing, but "they have no idea of the efficacy of going through the customer channel," Norkus said.

To determine how to improve CRM, he recommended that manufacturers get back to basics and conduct an analysis of where marketing dollars are spent.

"With a serious six- to eight-week look of where money goes and the effectiveness of the marketing spend, you can align your strategy with your programs and with your operations, which is what we feel is the golden triangle," Norkus said.

For organizations that do have a CRM system, "most companies spend heavily on operations without having programs or strategies in place," he said. "What you have is an incredibly overbuilt system that has no direction."

Other companies have sound strategies and marketing programs, but no operations to support them.

"Organizations get two of the three right, but without the three, they all fall down," Norkus said.

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