It pays to get the right mix

Successful corporate strategies for customer management and data exploitation are dependent on inter-departmental co-operation, appropriate software and effective quality control. By David Reed

Imagine you are standing on the platform at Bayswater tube station. You need to get to Queensway. If you look at the nearest Underground map, it will show you need to travel two stops with one change. Total journey time is likely to be around 20 minutes. But if you had a street map to hand, you would see that the two stations are only 150 metres apart – perhaps a two-minute walk.

What this story demonstrates is the principle that the founder of consultancy R-Cubed, Jon Epstein, expresses in the question: “What’s more important on a journey, the vehicle or the map? Your objectives are key – you need to know where they are taking you.”

The problem for many organisations that implement customer relationship marketing (CRM) programmes can be likened to buying a shiny new car without thinking about the destination.

As a result, you now have a very expensive asset but are completely lost. Headlines about CRM failures can nearly all be explained by the lack of clear objectives.

Many companies rush towards the new. IT systems are often thought to offer fresh opportunities and better outcomes as well as a way of side-stepping internal problems. That is why software vendors like to talk about solutions.

Creating problems

But the act of introducing a new technology is not enough in itself. “Any change you make in a company is not a destination, it is part of the journey,” says managing director of CRM application vendor MarketDeveloper, Simon Davis.

In rushing to adopt the latest “must-have'” solution, all sorts of problems are created. “It is amazing how often I come across clients who have done things on the hoof,” he says.

He points out that while CRM projects have attracted a lot of criticism for failing to deliver, this is not unusual. “Three-quarters of all transformational change in organisations fail. It is not unique to marketing,” he says.

Concentrating on software to solve CRM challenges is another root cause of failures. “Companies go and buy an application first. That is a mistake, because the functionality they want becomes dependent on the application. You need to divorce the two,” says managing director of data quality integration software company DataFlux, Colin Rickard.

He says the same issues can be seen in other big IT projects, such as enterprise resource planning, and manufacturing. Instead of coming up with a definition of how the customer should be managed and then mapping that onto an application, companies do it the other way around. “You can’t force your business into one application,” he says.

The whole point of CRM is that it should be an enterprise-wide initiative, ensuring that every touchpoint with the customer operates in a coherent and consistent fashion. That means bringing together functions which do not have a good history of working well together.

Bringing together the IT, marketing, services, sales and operations functions is a challenge. While it is suggested that top-down leadership is essential, in many cases projects are managed from the middle, and without sufficient political or budgetary power to insist on specific changes, the CRM project manager can get swamped.

“Organisations forget about this overlapping of functions, which is an unhappy one at the best of times. It can work, but often it needs a co-ordinator. I often do that role,” says the analytical CRM director at outsourced service provider Dataforce, Stuart Drucker.

By working with a third party, some of the political conflicts can be avoided. The reality is that many companies have become so big and complex that achieving any coherent action is a challenge.

Uncomplicated challenge

Drucker believes that the challenges of CRM are often over-stated, however. “Building a marketing or CRM database is not that complex compared to the average stock management system or management information system. It is relatively uncomplicated,” he says.

Even so, it is often data availability and quality that have undermined the effectiveness of new customer-facing systems. The whole point of CRM is to know everything about a customer, so that any contact is handled from a position of knowledge.

Creating that single customer view means pulling in data from a wide range of sources across the organisation. Systems that were never meant to be connected to the outside world can be highly resistant to data extraction.

Disparate data sets also have different formats and fields, making consolidation difficult.

“You have got to combine – in real time or regular batches – data from nine or ten sources. That is a massive job. Any changes in that data lead to breaks in the supply chain,” says the managing director at marketing database bureau Qbase, Ian Johnstone.

If companies expect their new system to resolve underlying data problems, they will be in for a shock. For one thing, most organisations have poorer-quality data than they realise. It is only in the context of customer-data integration that the problems get identified.

At MarketDeveloper, Davis recalls one data audit he carried out on a 250,000-record file that was being actively used for marketing. It included 3,178 deceaseds and 13,575 goneaways. Yet the client thought it had current, clean customer data. As he puts it/ “Data quality is the hydra of marketing. You have to keep cutting away.”

Data is not static, even if it sits unused in a repository. Its subjects marry, move or die, leading to inaccuracies. These in turn create mis-communications that run counter to the very essence of CRM.

“Businesses have a CRM strategy, but no data strategy. The two things are very different,” says managing director of database services provider EHS Brann Discovery, Dave Craft. “If businesses understood the impact that implementing CRM will have on their data quality, it would be a good starting point.”

The inter-departmental politics that can get in the way of a CRM project are just as visible when it comes to a data strategy. Functions may not want to share their records because they believe they own those customers. Or they may not want to give up rights over data capture and correction.

“Unless all the individual departments align behind it and understand that data quality is at a premium, it immediately collapses. That is a particular problem with the sales function – they are the least disciplined,” says Craft.

But they also tend to have the most political clout and are the most resistant to any change in their working practices. CRM programmes that have succeeded tend to be those that have demonstrated to the sales force that they will get a clear benefit, such as three hours of additional productivity for every hour of database administration, for example.

Paying dividends

If good quality data gets put into the system from the start, it will pay dividends later on. Yet only now is this being recognised as a worthwhile practice in its own right, with objectives, measurements and rewards that would not be out of place in marketing or sales.

Even so, data is not the be-all and end-all. Sometimes its importance is over-rated, says managing partner at data-led customer marketing agency Miller Bainbridge, David Miller. “Clients always say, ‘we want a 360-degree view of the customer’. I ask them, ‘why?’ What is the point of knowing every detail, when all you need are the features that determine what they buy, how often, at what value and their propensity to repurchase?” he says.

Changing internal processes to ensure the company acts on information and responds to customers is the single biggest challenge. It is not about systems or data, it is about people. They are what make the difference. They are also what make most managers nervous, so they don’t even try to change the corporate culture.

Instead, they often take the easy option and buy an application they do not understand. As chief executive of data consultancy Rocket Science, Alan Timothy, warns: “CRM systems ‘do exactly what it says on the tin’. But most people never read the tin.”