As with every buzzword, there are believers and skeptics. There will always be some who will swear by the benefits that they have achieved by implementing a management concept. At the same time, there will also be people who will tell you that implementing the concept has been a disaster. The same is true for the concept of CRM.
Some companies using CRM programs have reported double-digit gains in revenues, customer satisfaction, and employee productivity, along with dramatic savings in customer acquisition costs. Across the United States and Europe, nearly 40 percent of the companies in high technology businesses, aerospace, retailing, and utilities have invested in CRM systems. Two-thirds of all US telecom operators and half or more of all US financial-services, pharmaceutical, and transportation companies are either implementing CRM or are already running CRM solutions.
Why is there a sudden interest in evaluating the effectiveness of CRM? Is it because now we do not believe in the importance of acquiring, developing, penetrating and retaining customers? I doubt this very much given the volume of rhetoric and the hard evidence that is available on the subject. Also, customer satisfaction and retention are probably the most written and talked about topic in management.
What about the basic concept of CRM itself. Is it illogical? Is it irrelevant? I doubt if there is anybody who doubts the logic behind the basic concept of CRM. Taking the numerous benefits of CRM into account, I am sure there are not many who will doubt the logic behind the concept of CRM and its effectiveness. Also, most of us do not realize that we have been practicing CRM since times immemorial.
How about CRM technology? As we are all aware, the concept of CRM along with its related technologies has the potential to bring tremendous benefits to every organization that implements it. Considering the benefits of CRM, there is no doubt in my mind that CRM will increasingly become an indispensable tool for large companies and companies with a large customer base. In fact, I believe survival of organizations will depend on how effectively they implement CRM.
Why the sudden interest in evaluating the effectiveness of CRM?
In spite of the above, I think there are a number of reasons why there is a sudden interest in evaluating the effectiveness of implementing CRM and related technologies which are as follows:
(a)There are many companies which have implemented CRM but they are still losing customers in droves begging the question whether investment in CRM solutions is a wise decision.
(b) A number of companies who have implemented CRM have actually reverted back to their old system. Why? Because CRM solutions instead of solving problems have created additional problems such as loss of sales and higher level of customer dissatisfaction. One manufacturer retailer, for instance, invested $30 million in a CRM solution in 1999 but scrapped it in early 2001 for the following reasons:
(i) Customers were dissatisfied because the system didn’t respond to their needs.
(ii) Employees also became irritated trying to deal with dissatisfied customers.
(iii) While the company was trying to make the CRM initiative successful, competitors strengthened their market positions.
(c)In addition, it also takes a long time to implement. At least 24 months. A company could lose a lot of time, effort and money if CRM does not get them the promised results.
(d)Companies have to spend huge amounts in implementing CRM. Companies around the world spend over $3.5 billion a year on CRM software alone. And this is just a fraction of the cost of implementing CRM when one considers the cost of making the technological system work, training of employees and integration of the organization with the technological solution. For instance, a highly sophisticated CRM installation can cost more than $100 million and take three years to complete.
(e)CRM solutions were sold to companies at high cost with promises that raised the expectations of companies implementing CRM. CRM was sold as a solution for all problems. When the results did not meet expectations, disillusionment with CRM was obvious.
(f) Theoretically, the system seemed perfect. A 24/7 single point of contact directly between the company and the customer with no intermediaries who could be the cause of delay. However, it is this single point of contact, the call centre, which is causing customers a plethora of problems which we will discuss in the following chapters.In fact, according to me call centers have created more problems for the customers resulting in higher levels of customer dissatisfaction.
(g)There is growing evidence that CRM is not working as is evident from following statistics:
(i)According to Gartner Group, a research firm, 55% of all CRM projects are ineffective and don't produce desired results,
(ii)According to Bain's 2001 survey which tracks the effectiveness of and satisfaction with management tools/techniques, CRM ranked in the bottom three for effectiveness and satisfaction out of 25 popular management tools/techniques.
(iii)According to a survey ofsenior executives, 20% reported that the CRM initiative taken by their companies had not only failed to achieve the expected profitable growth but had also adversely affected their relationships with old existing customers.
(iv)Only 20 percent of the US retail banks that had implemented CRM have been able to increase their profitability.
So when companies spend staggering amounts on CRM, they want to know how they have benefited. They want to know what is the return on their investment? Well, you can’t fault them for demanding appropriate return on their investment.
The promise of CRM is captivating, but in practice it can be hazardous. When it works, CRM allows companies to collect, store and analyze customer data in real time, identify the most valuable customers over time, increase customer loyalty by providing customized products and services, increase customer retention as well as enhance customer satisfaction by providing cost effective service 24/7 to its customers worldwide. But when CRM is not implemented properly, which is often, it can lead to disastrous results.
With the increased penetration of CRM concept in organizations and the increased spending on implementing it, I am certain that we will see some improvements in how companies work to establish long-term relationships with their customers. However, there is a big difference between spending money on implementing CRM and making it all work. Implementation of CRM and related technologies is lacking and no where close to what it should be. Everyone has his or her own stories about poor customer service to tell and some of them you will read in this book.
Notwithstanding the success stories, CRM has mostly proved to be a disappointment from both the customer’s prospective and that of the company. Lets find out why.
So where did we go wrong? Why is there disillusionment with the concept of CRM? There are people who have spent years studying why CRM fails? One could buy any number of books written on the subject by known authors or read one of the thousands of articles by experts. In fact, I have also read some of these. So what are my credentials? Who am I to discuss this subject? I think these are fair questions and need to be answered.
First, I am looking at this from a customer’s point of view. Just like everybody else, I am also a customer. I have had experiences as a customer that have suggested to me why CRM is not working. Second, I have developed a tremendous interest in the subject of customer satisfaction and retention, both as an academician and as a practitioner. I ill-treated one of my customers in 1997 and was lucky enough to learn from my mistakes which actually resulted in my writing three books on the subject of customer satisfaction and retention. Thirdly, I have some knowledge of how software works. I had the opportunity of practically evaluating in-depth the working of a software called FieldWatch in 1989 when I was in US working for a service company. I was amazed as to what this software could do. More amazing was how inefficiently and ineffectively the company was using the software. This experience was very beneficial to me as I understood how software worked. In addition, I have working with a contact management software for the last 15 years.
Reasons behind our disillusionment with CRM?
So what do I think are the reasons behind our disillusionment with CRM? Lets briefly discuss them.
Primary reason
The primary reason is conceptual. It is also generic as it can be used to explain why companies fail to reap the benefits of any new discontinuous technology or management concept or any other idea. Whenever we adopt a new technology, most people think that they are replacing their car with just another car. This is where they go wrong. In reality, when we adopt any new concept or a discontinuous technology like CRM, we are replacing our car with not just another car but with a helicopter. Just like when you have to think in a different manner when you are traveling by helicopter instead of a car, you have to think in a different manner when you adopt a new concept or a discontinuous technology.
For instance, when we become owners of a helicopter, the way we travel changes completely as compared to when we traveled by car. We have to hire a pilot instead of a driver. Also, we need a helipad instead of a road and a hanger instead of a garage. Further, preventative maintenance takes on a whole new meaning because you cannot afford to be stranded in mid air hoping to call a tow truck or a mechanic.
However, most of the companies which have adopted CRM concept and related technologies have not understood this. For them, it is business as usual. For instance, CRM demands that we resolve the complaint on first contact because all the information necessary to resolve the complaint is available to the customer service representative online. However, customer service representatives are not given the authority to solve customer’s problems. As such, they just take the message and pass it along to the concerned departments as they used to do when they had not implemented CRM. Needless to say, neither the company nor the customer has benefited as the process adopted after implementing CRM is the same as before implementing CRM. Only thing that has changed is that whatever we were doing before has now become automated. In the past, we were using customer care representative to manually write down customer complaints and requests and then physically pass the written requests to the concerned departments. Now, after implementing expensive CRM solutions, we are doing the same thing but the CSR is typing the information on the system and the complaint is automatically being forwarded to the concerned department. As far as the customer is concerned, he is getting his complaint resolved in the same time frame, that is, if he is lucky enough to get his complaint resolved at all. How should we think at the time of implementing CRM? How can I resolve the complaint on the spot? Can we turn CSRs from being “complaint clerks” to decision makers? Don’t be surprised because this is exactly what CRM technologies allow you to do. But you have to start traveling by a helicopter to achieve this.
Is it a surprise that most of us dread calling a call centre of a company for assistance? Is it a surprise that the corporate world is also disappointed with CRM as they are not getting the desired results by adopting CRM and related technologies? We need to realize that when we adopt CRM and related technologies, we are replacing our car not with just another car but with a helicopter. We have to think different. We have to do different.
Secondary Reasons
Now what about the secondary reasons why companies have not been able to realize the tremendous benefits of CRM. Basically, all the reasons are the result of our continuing to travel by a car instead of a helicopter. I will briefly discuss here some of the major reasons to convince you that its time to travel by a helicopter.
We do not understand meaning of CRM
First, we do not understand what CRM means. We have not understood what each alphabet in the term CRM or each word in Customer Relationship Management stands for. For instance, “M” stands for “management of old and new customers” and not just “acquisition of new customers.” “C” stands for a company’s most “valuable asset” and not a “replaceable commodity.” “R” stands for providing the customer “value for money” and not just a “one-night stand.” No wonder, we are disillusioned with the CRM concept and its related technologies.
We do not understand the meaning of customer loyalty
Second, the rush to adopt CRM and related technologies is based on the belief that CRM will create loyal customers who everyone believes are more profitable than disloyal customers. However companies have completely misunderstood what “loyal customer” means as well as how loyalty should be created among the company’s customers. For CRM to succeed we need to create “loyalty from the heart” and not “purchased loyalty.” As a result, companies are succeeding in creating so called loyal customers but profitability is a distant dream. No wonder they reach the conclusion that CRM does not work.
We treat systems and procedures as the end in themselves
Third, companies are treating systems and procedures as end in themselves whereas they are a means to an end, that is, achieving customer satisfaction and retention. Companies are automating their systems and procedures for customer service and complaint resolution without realizing that the effectiveness of such systems and procedures depends on their attitude towards the customer. If you have a negative attitude towards the customer, you will set up a system to resolve the complaint in a month’s time. On the other hand, if you have a positive attitude towards the customer, you will set up systems and procedures to resolve customer complaints on the spot or within a few hours. It is obvious that in reality you are actually automating your attitude towards the customer while implementing CRM and not just systems and procedures.
Lost sight of key benefit of CRM
Fourth, we are losing sight of the key benefit of CRM and related technologies, that is, it allows us to make “quick informed decisions on the spot” for enhanced customer satisfaction because all the information required to make quick decisions is available at the click of a mouse to the CSR. The problem here is that we have defined the position of CSR as a “mailbox” and “clerk” and not as a “decision maker.”
We do not understand the role of CSR in CRM
Lastly, our organization structure is obsolete as we have never given the frontline employees or employee handling customers the respect they deserve. According to me, employees with customer interface have the most important job in an organization, that is, of not only satisfying and retaining customers but also of increasing the company’s sales. But what is the importance we give to them? The only qualification that call centers require for hiring customer service representatives (CSR) is that they should be able to speak fluent English. Perfect qualification when you only want the CSR to note down the complaint and which the system will automatically transfer to the concerned department. The hotel industry pays minimum wages to front office staff, who as you will learn later, can be instrumental in not only satisfying and retaining customers but also in increasing sales. People implementing CRM have not understood that the CSR is the most critical component of the CRM concept and technology. CSR provides the only human interface with the customer and mostly everything else is technology driven and automatic.
Management buzzwords have come and gone. I am convinced that CRM is here to stay. I am convinced that it is not just another fad. It is a powerful idea, albeit a difficult one to implement. Why? Because it requires not just you but the whole organization to think and do differently as compared to the past. And we all know how difficult it is for us to accept change and it becomes a Herculean task when we talk about transforming the whole organization. But CRM is by no means impossible to use. It is no more difficult to implement than any other organization-wide initiative. If you remember the principles on which it is based and avoid the pitfalls in its execution, your CRM project won't end up diluting earnings, disaffecting employees, and damaging customer loyalty.
Companies pour millions into adopting CRM solutions, but most initiatives fail to deliver. We need to understand the reasons behind the failure of CRM so that we can learn to adopt and implement CRM solutions effectively. Since we have no choice but to adopt CRM, we might as well learn to do so effectively. We need to improve the probability of our success in adopting and implementing CRM solutions.
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