CRM: Making it work
Stan Maklan
Steve Macaulay
We are going to examine customer relationship management, or
CRM, and in particular we are going to look at why it fails and maybe
some of the ways to make it successful. To help us do that is Stan
Maklan.
Now, Stan, you have spent over ten years looking at customer
relationship management. What is the benefit of it and why on earth
does it waste so much money?
Stan Maklan
Well like so many initiatives you can see waves; initially, when people
decided to invest in customer relationship management they bought
into a legitimate view that customers want more than just the
products they buy from organisations. They want a relationship with
companies who can provide them solutions over the long term to
meet deeper, more profound needs.
Customers who are happy with the service they were getting, finding
that not only their needs were fulfilled but they were being more
effective, whether they are consumers or businesses because of the
support of their suppliers, would be loyal to those customers, would
buy more from them, spend more, demand less discount, recommend
more. And so when you took a look at the advantage of loyalty,
reduced cost of service, reduced cost of marketing, the value of
recommendation, companies legitimately saw hey, we should invest
in our customer base because these people can really drive the
profitability of the business. So it really was a win-win; a win for the
customer, a win for the company.
Steve Macaulay
You have found that there has been a lot of money invested in this?
Stan Maklan
Yes, I was citing some books, Professor Adrian Payne’s CRM Handbook
talks about some 200 billion dollars invested over a five year period
recently in CRM, but when you look at surveys for managers about are
they successful, are they getting the return that they expected to get,
anywhere between 50% to 75% say they are not. So the question I
ask is, is the $150 billion just wasted or what can we do with it?
Now we are seeing a sort of second wave; the early investments in
CRM were very much let’s bring in some new systems, let’s hope it all
works and there has been some salutary lessons there. And I think we
are now seeing a more mature wave of investment or management of
customer programmes and I suspect if we could repeat those early
surveys we would find a higher rate of success now.
Steve Macaulay
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So why is the success rate so low, certainly initially, and what can you
do about it?
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Stan Maklan
Stan Maklan
I think the success rate was low because I think firms had a
technology based view of it, because there is a technology component
to the database – the mining tools, the sales force automation – the
rest of it was complex. What you found was that the marketers had
some vague idea, yes, let’s get closer to our customers but couldn’t
operationalize that into systems and structures. It is not the way
marketing people are trained. Those with that capability in the
organisation were the technologists, the IT people, but of course they
weren’t trained or capable in the management of relationships – how
trust forms, how you build that sort of trust.
So you fell into a bit of black hole here; you thought that the IT
department could specify a system, the marketing people couldn’t
really tell you what they were going to do with it until they played
with the system and so you fell into this little gap between those who
understood the customer and those who understood the technology.
Steve Macaulay
You have got some quite clear views about the antidote to this,
haven’t you?
Stan Maklan
Well, yes. What my research has shown is that the companies that
succeed are not the ones who start off with big investments in
technology first and hope the capabilities to manage customers will
follow; quite the opposite. They are almost acting like venture
capitalists; they are saying let’s do a little, let’s ring fence some
customers, let’s get the relationship right, let’s see what the benefits
are, let’s develop a team of people who know what they are doing.
Let’s create the business case from real situations, see what it is like
and then backfill with further technology investments to make it
better and to scale it up across the business.
Steve Macaulay
So bit by bit, steady as she goes, build the capability?
Stan Maklan
Definitely, I think people should be learning and capability focused
when investing in marketing type technologies; not asset focused.
The idea that you can spend a lot of money on a system, train
people in the technical aspects of the system and then their
capabilities to extract value from it will automatically comply, I think
is false. I would do it the other way round. And that way you
invest a bit of money, you have a team that knows what they are
doing and they can specify exactly the investments they need. You
really de-risk your investment in that way; it is almost like buying a
real option on your customer management.
Steve Macaulay
So if you were to pick a small number of those capabilities, what
would they be?
Stan Maklan
Part of the challenge of CRM is it is very context specific. What
works for a car company where people buy their car every three or
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Stan Maklan
four years is far different, for example, than an online betting
company where people could be on the site several times a day.
What works for a company like Tesco will be different from a
company like Dell or Apple because of the nature of the product, the
involvement, the purchase cycle. So there is unfortunately no
generic rule.
I think the first thing you have to do is to see to what extent the
customer does respond to the initiatives, what value is really created
to the customer with your CRM programme – not just value to you,
is there value to the customer? How to make it operational? What
things does the customer react to, what do they appreciate, what
don’t they appreciate? How much they are willing to invest in the
relationship? Who in the organisation is capable of changing the
relationship, in managing it? Do you have the skills in place? Do
you have the right people? Do you have the right channels? So I
think you have got to answer all those questions; so the answer is a
combination of channel, of skills, of customer, of proposition and
there is no one size fits all, which is why I say the experimental and
learning approach is more likely to succeed.
Steve Macaulay
So a key message on how to respond to the challenges of CRM?
Stan Maklan
I guess if there is one piece of advice I would make to companies, it
would be to move away from the idea of a top down, directed, single
hit investment approach to CRM and replace that with much more
of a bottom up, leadership from the middle managers who have to
make it work with customers and let them drive the pace of the
programme, the pace of investment.
Steve Macaulay
Stan, thank you very much.
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