Customers fall by wayside as CRM focuses on costs

Customer relationship management is a failure. According to the Giga Information Group companies spend $3.5bn (&£2.2bn) annually on CRM software alone, plus three to five times that sum on related implementation, integration and training issues. Large CRM projects typically take three to four years to complete – and cost and time overruns are common. Most companies don’t achieve hoped-for goals. You know things are bad when consultants like McKinsey discover a lucrative new market in CRM “remediation” projects: pulling irons out of corporate fires.

But why the mess? Yes, CRM was ridiculously oversold by software vendors. Remember the Financial Times ads promising global CRM in 90 days? Any company that falls for such hoopla deserves everything it gets.

But what about the real problems? First, the prerequisites of effective CRM are incredibly high. A single customer view across separate product lines, distribution channels and corporate divisions is just one of the early killing fields. Providing channel choice is another. Creating a consistent, positive brand experience at all stages of purchase and use, across all touchpoints, is yet another.

Not only do such hurdles pose huge operational and informational challenges, they also demand new ways of working: cross-silo co-operation embracing marketing, IT, human resources and customer service; changed staff working practices and behaviours. And that’s just for starters.

A second stumbling block is confused corporate objectives. Possible CRM goals vary widely. They include increased customer retention rates via improved customer satisfaction; boosted top-line growth and margins via beefed up cross-selling and up-selling; reduced customer contact costs (for instance, by migrating face-to-face contacts to call centres, and from there to internet self-service); increased direct marketing efficiency (better targeted, relevant messaging driven by more, richer information leading to lower costs and higher response rates); and the pursuit of a long-term vision of one-to-one marketing – of sustained competitive advantage via customisation of products, services and communications.

The trouble is, in reality such objectives don’t mix well. Fuzzy “we want it all” goal-setting is a recipe for costly confusion. A not-uncommon nightmare scenario goes something like this. Board agrees CRM project to increase customer satisfaction, improve marketing effectiveness and cut the cost of dealing with customers. Short-term payback considerations – “low-hanging fruit” – take pride of place in implementation to ensure a return on investment, so contact automation and direct mail overdrive take precedence over measures designed to improve access and channel choice for customers.

Meanwhile, data capture requirements impose extra work on staff who, faced with no benefit or reward, passively resist. And all customers experience is more hassle, more intrusive marketing and apparent incursions into privacy. As a recent McKinsey Quarterly article (How to rescue CRM) points out, “a failure to establish clear business goals before launching a CRM effort is the most common and important source of problems”.

What can be done to address these issues? One approach is to take the McKinsey line: focus on the few goals that are most important to your company right now and the top two or three initiatives that can really have an impact on these goals. Leave the rest for later.

Another burgeoning bandwagon is that of customer managed relationships (CMR), as opposed to CRM. This form of CMR empowers the customer to choose when to contact the company, how, when, and over what. It effectively jettisons the assumptions of control and direction that underly CRM, trading them off for lower “push” costs and increased customer satisfaction.

But the bottom line is this. Reconfiguring corporate operations to recognise and deal with individuals is a massive and complex task. At the same time, modern consumers are displaying an astonishing capacity to identify leading best practice where they experience it – and to demand it from everyone, pronto.

Nowadays, we simply expect to be recognised as an individual. We expect companies to have our details and transactions to hand, and to be able to talk to somebody knowledgeable about any problems or queries we might have. We expect our queries and problems to be handled politely, efficiently and in a manner consistent with what the organisation claims about itself on the TV. And we expect all this as a matter of course. We don’t see it as creating an important relationship with the company. We are simply disappointed if it doesn’t happen.

Which is quite often. Recent research by Detica, for example, suggests that only 20 per cent of consumers think that brands allow them to feel in control; only 26 per cent feel that the brand makes it easy for them to contact it; and only 20 per cent say their supplier makes them feel like an individual.

So here we have a classic example of diverging corporate and consumer expectations. CRM came into the world as a new business philosophy. But it was quickly filleted by companies which sought out the bits that would help them achieve traditional goals such as cost-cutting and revenue growth. According to McKinsey, for example, the average company expects ten per cent revenue growth as a result of CRM implementation.

In parallel, CRM has also been filleted by consumers seeking out the bits that make their lives easier – the single customer view and channel choice that mean we don’t have to explain the same problem twice, for example. This form of filleting points to more added cost than added revenue. Result: both groups’ expectations are set on collision course, and “failure” becomes inevitable.

McKinsey’s advice is, effectively, to complete the corporate filleting process by leaving fuzzy, confusing phrases like “customer relationship” aside to focus on concepts we know and understand. Such as customer retention, cross-selling, and channel efficiency.

That’s probably realistic, as long as we don’t forget that on the consumers’ side, the same filleting process is also proceeding apace. As consumers, once we’ve experienced more informed staff, easier access and greater responsiveness, we don’t want to lose it. The core ingredients of CRM were never a magic formula for profits growth. Today they’re a mere cost of doing business.