Customer Relationship Management (CRM): Making it work
By Dr Stan Maklan
If being customer centric is a universally accepted article of faith, why do so many firms
think their investments in CRM aren’t delivering? There are compelling arguments
suggesting that today’s customer wants more than great products and services, they want a
relationship with their suppliers that enables them to extract the most value what they buy
and to stand by them when they have issues purchasing, configuring and using products and
services. Equally compelling is the evidence that loyal, long-term customers are more
profitable: they drive down your marketing, sales and service costs and ideally allow you to
maintain decent margins.
Huge sums invested in CRM
This win-win theory was the catalyst for huge Customer Relationship Management (CRM
)investment perhaps running as high as $50 bn per annum. But when asked a few years ago,
more than half the respondent organisations claimed that they were not getting the return
that they had expected. The early investments in CRM focuses on implementing new
business processes supported by sophisticated new IT systems and expecting these tools to
promote more effective marketing; typically measured as selling more to our customers.
Organisations have undoubtedly improved their performance, but nonetheless the question
remains: if the win-win of CRM is potentially so big, why do organisations find it so difficult
to capture this value and profit from it?
Why the failure?
CRM often disappoints because firms have a technology based view of it driven by the large
and complex nature of the supporting infrastructure: databases, mining tools, call centres,
sales force automation, web based self service and so forth. Marketers, often untrained in
systems design struggle to provide the necessary leadership of the change processes
required to reorient company operations to be more customer centric. Those with that
capability in the organisation are often reside in the IT function, but of course aren’t trained
or capable in the management of relationships in a competitive environment.
Technology enabled change in customer management risks falling between stools;
Marketing expects IT can specify the answer and IT expecting Marketing to define the
problem better. Indeed, our research suggests that prior to CRM projects going live, it is
very difficult for Marketing to understand the new capabilities that they will need to
leverage the investments; a real catch-22 situation.
My research concludes that CRM success does not start from a big-bang type investment in
technology first and expect the new marketing / customer relating capabilities will develop
automatically; quite the opposite. I conclude that companies must first develop new
capabilities and expertise, prove the case for change and then “backfill” with technology
investments to scale up successful CRM programmes. Instead of being investment led,
companies need to be learning and capability led. In this, I propose companies act like
venture capitalists and invest behind proven programmes and management teams.
Successful CRM projects often start off with companies identify a discrete opportunity, build
a team to exploit it, invest enough to learn if customers will react positively to the initiative,
fine tune the activities and then continually invest behind that which is working. Over time
an expert management team with enhanced customer management capabilities can work
effectively with IT to specify the nature of large-scale investments. This approach builds
capability and reduces the risk of IT led investment failure.
What capabilities are required? Part of the challenge of CRM is that it is very context
specific. What works for a car company where people buy every three or four years is far
different from an online betting company where people could be on the site several times a
day. What works for Tesco will be different from Dell or Apple because of the nature of the
product category and the customer’s involvement with it aside from the purchase cycle.
Therefore, be cautious about adopting by rote ill-specified notions of “best practice”.
Of course, a focus on purely operational improvements (e.g. cutting the cost to serve) may
be more amenable to standardised prescriptions, but for organisations seeking to change
the nature of their relationships with customers, to seek ambitious goals for co-creating
value and competitive advantage, one must determine the extent to which customer value
is created by your CRM programmes and how customers will respond to them. Who in the
organisation is capable of managing these new forms of relationships? Do you have the
skills, people and channels?
Move away from top down and go local
If there is one piece of advice I would make to companies intending to make CRM work, 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 approach, with
leadership from the middle managers who have to make it work with customers and let
them drive the pace of the programme and the pace of investment. This approach should
improve performance and reduce investment risk.
Dr Stan Maklan is a Senior Lecturer in Strategic Marketing at Cranfield School of Management