A cause of CRM under-delivery in UK?

MyCustomer.com

An interesting research study (commissioned by Total DM, with fieldwork by MarketingUK)crossed our desk last week, looking at how UK companies (by sector) invest in CRM. In particular, is there a significant investment in the quality thinking and expert people that is so frequently identified as being required for a successful CRM implementation?

The following graph outlines, by UK industry sector, the percentage of companies that had a ‘Head of CRM’ (blue + white), and the percentage where that Head was dedicated full-time to CRM. The graph shows up some interesting discrepancies.

However, before we get on to the results, let’s briefly outline the research methodology.

Primary research was undertaken by MarketingUK in July/ August 2003, amongst the UK’s top 1000 companies and with key trade bodies and research organizations. In addition, corroborative secondary analysis was conducted. The research determined the level of penetration in different sectors of:

  • Dedicated Heads of CRM
  • Heads of CRM with another job function
  • Loyalty Schemes
  • Database Marketing Manager

So as well as identifying dedicated (and non-dedicated) heads of CRM, the study identified which companies had loyalty schemes, and which had staff dedicated to Database Marketing.

The terminology of CRM has never been terribly consistent, and this is highlighted by this use of the terms 'Database Marketing' and 'Loyalty Schemes' as well as CRM. For us, database marketing and loyalty schemes have always been part of CRM (as well as Call Centres, e-channels, and a host of other functions), but it is still interesting to see how different industry sectors incorporate these different terms:

So what do these two graphs tell us about the commitment to CRM in the UK?

Firstly, if we look at the graph exploring the proportion of investment in Heads of CRM by Industry some interesting facts emerge.

  • As one might expect, the retail financial services sector is the most significant investor in CRM, but with significant differences between banks / credit-card companies and direct insurers. Nearly 90per cent of banks / credit-card companies have a Head of CRM, and nearly 70per cent have a dedicated Head of CRM. Direct Insurers have a lower level of investment with just over 70per cent having Heads of CRM of which less than 45per cent or dedicated heads.

  • The hotel industry and travel agents / tour operators are the only industries surveyed where more than 50per cent of companies don’t have a head of CRM.

  • There are a number of industries where CRM is seen as a part-time occupation, at least at 'Head of CRM' level, in particular: Direct Insurers, Restaurants, Retail Multiples (excluding groceries), and Utilities. Utilities seem to have a particularly low penetration of dedicated Heads of CRM.

    The graph on penetration of Loyalty Schemes and Database Marketing seems at first sight to be a little more suspect:

  • It claims that less than 25per cent of UK Grocery multiples have a Loyalty Scheme, and yet I find it hard to think of one which I use that doesn’t ask, every time I check out, whether or not I am a member of their loyalty card scheme.

  • It claims that 100per cent of hotel chains have loyalty schemes, but yet again personal experience suggests that many of the hotels I use don’t have such schemes in place.

    Perhaps the most interesting finding of the survey is that 'it was generally found that the industries with a high proportion of heads of CRM with another job function were less successful at CRM than those with a lower overall percentage of heads of CRM (standalone plus other job functions) but a higher proportion of dedicated CRM senior staff.' This correlation between a dedicated head of CRM and success is a really interesting finding. Unfortunately, the version of the report available to me doesn’t include the data to back up this claim, but perhaps we will be able to get more detailed information from the report’s originators. More on this soon, I hope.

    The report also has some interesting comments to make on the differences on CRM in the various industry sectors:

  • Airlines: There is 'a polarity that exists within this sector between best and worst practice. The most obvious example is between traditional air carriers and the plethora of no-frills airlines that have cropped up over the last five years. Cheap airlines are exactly that – their focus is on price not customer commitment or service.'

  • Banks / Credit-cards: 'Retail banking has a very low customer turnover (<10per cent per annum) and this has led to a focus on customer development rather than acquisition. But UK consumers are being increasing diverse in their purchasing habits of financial services, no longer relying on their main banking supplier for loans, mortgages, and pensions etc. Moreover, there is complacency when it comes to identifying and delivering what the customer actually wants. For example, most banks still have limited, anti-social opening hours and many internet-based credit card issuers only accept monthly direct debit payments, rather than invoiced payments.'

  • Direct Insurance: 'In order to compete with the new entrants to the market who traditionally have a more rounded view of the target customers, insurers need to offer policyholders initiatives of real interest in order to increase customer contact. One such solution is for insurers to affiliate themselves with 'exciting' brands that appeal to the customer base. Partnership marketing is becoming increasingly common as costs are reduced, new channels to the consumer are opened and complementary brands can attract responses from the consumer that neither party could achieve stand-alone.'

  • Grocery Multiples: 'Grocery multiples all claim to be customer focused; yet this is not reflected by the sector’s investment in CRM. However, the low percentages achieved by the industry are likely due to a polarity of attitudes within the sector. CRM is either viewed as being strategically vital or as a massive and unnecessary cost burden… A certain grocery giant, which has been hailed in the press as the sector’s success story, has been reaping the rewards of rich data by effectively employing its loyalty scheme as a means of data capture. However, it is crucial to remember that a CRM initiative is not a quick fix to winning customer allegiance but a long-term pragmatic approach. Grocery multiples that have shunned CRM in favour of short-term fixes such as price wars and giveaways will undoubtedly find themselves eclipsed by stores that know their customers if and when it comes to the crunch.'

  • Hotels: 'The industry has a massive regard for loyalty but a much lower level of commitment for CRM and database marketing. A possible reason for this is the industry’s enviable position to offer discounts for loyalty. Occupancy is very high margin. There are few overheads and it costs a hotel little more to service two hundred guests as it does twenty. Therefore, a small increase in bookings can have a massive impact on profitability.'

  • Retail Multiples (excluding groceries): 'Retailers have found a successful balance in their commitment to CRM and loyalty. The sector is exceptionally data rich and has the insight of how to use the customer information to influence consumer behaviour and spend patterns. Consequently, retailers are arguably the most successful industry at instigating, maintaining and strengthening customer relationships – possibly a result of the competitive threat experienced from online retailers.'

  • Restaurants: 'Ironically, given the sector’s desirable one-to-one customer contact, they are one of the worst industries surveyed at gathering customer information. Consequently, they have little understanding of the customer experience. Yet what are restaurants selling other than an "experience" far more so than a bank or supermarket? CRM strategies are often assigned to individual local managers who do not have the time or inclination to implement such initiatives.

  • Utilities: 'Deregulation of the sector in 1997 radically changed the industry, opening up fierce competition within the sector. Privatisation resulted in mass customer defection. OFGEM reports that after the introduction of competition into the domestic electricity market 19 million (38per cent) of the 26 million UK domestic customers have switched supplier at least once. Currently 100,000 electricity customers are changing each week and of these 56,000 are choosing to leave their former regional supplier. Customer retention and the ability to win back lost customers are therefore priorities of a utility supplier.'

    There is some interesting stuff here, and more in the report, which you can check at for yourself by reading in full: 'The problem of CRM under-delivery'

    The most interesting finding, of course, is that there is a correlation between the appointment of a standalone head of CRM, and a successful CRM implementation. We hope to get further evidence of that assertion from the report originators. More soon, I hope.

    One final point. Whatever happened to the Telcos?

    As always we’d like to hear your comments. Make them below or email me at [email protected]

    Regards,

    Richard Forsyth

Replies

Please login or register to join the discussion.

avatar
09th Sep 2003 16:08

At what stage on your CRM journey can you justify a dedicated Head of CRM? We are at the end of trial phase and just commencing implementation phase 1. I can't see this being a big enough job to split out from my role for at least another 12 months, but maybe we're missing a trick, perhaps the earlier you appoint a dedicted Head the faster things get done?

Thanks (0)
avatar
09th Sep 2003 16:46

Amanda

For what it's worth, here's my reaction to your situation.

I'm concerned that underlying your "I can't see this being a big enough job to split out from my role for at least another 12 months" is a question of busyness - i.e. efficiency - when the real question is results - i.e. effectiveness.

If you can be fully effective in all aspects of your role for 12 months, by assumption there's no clear imperative to make an appointment. But if you can foresee a situation where you're making significant trade-offs between CRM and other strategically important activities, you probably need someone in place before that happens - even if it only looks like an average of a day per week of essential work.

Jeremy

Thanks (0)
avatar
02nd Sep 2003 15:40

Sorry Jeremy, but that just won't do at all!

"The correlation coefficient is a measure of the closeness of relationship between two variables - more exactly, of the closeness of a linear relationship",(Snedecor & Cochran, 'Statistical Methods').

Since neither variable is considered dependent upon the other, it is just not correct to suggest that because they have a high correlation coefficient that implementing one (a Head of CRM) will automatically lead to the other (CRM success).

You need to establish causality and its direction before you can even think of suggestion that because you have a Head of CRM, that you will be more successful at it. And that you should immediately go out and hire one.

That link remains unproven as far as I know. Prudence would suggest a bit more rigourous analysis before you rush out to spend large amounts of money on another Head of position.

Graham Hill
Independent CRM Consultant

Thanks (0)
avatar
03rd Sep 2003 18:24

Jeremie

Moving on from the statistical methods discussion...

I do agree entirely about the complex inter-relationships that exist in any CRM implementation of significant size.

An organisation is a complex set of dynamic inter-relationships between its different business processes, system, data, organisation work-climate, etc. Research by Bruce Kogut and others have shown that understanding the inter-relationships - and how to move each of them at a similar pace when you are making any significant change - is the key to making CRM work. Put in a fancy new CRM system, but leave the old organisation largely unchanged (and I have lost count of how many major CRM implementations that essentially follow this recipe!) and the probability of CRM success becomes startlingly low. As we used to say when I worked for PwC Europe, OO + NT = EOO (Old Organisation + New Technology = Expensive Old Organisation!). These same dynamics are basically those that doomed TQM, BPR and ERP to the same 70% plus failiure rate that we see for large-scale CRM implementations today.

Enterprise-wide CRM is tough, takes time and requires the active committment of large parts of the impacted organisation to be successful. A good Head of should resist the rush to just implement the technology and claim victory. Unfortunately, research on leadership in the US has shown that many 'Heads of' are predominantly Theory X, highly political, results NOW! types. They need to be to get that far in today's financial market-driven organisations.

An enterprise-wide CRM project might be the biggest change that a typical FT1000 company will make this decade. If you are looking for a Head of CRM, I strongly suggest that you think very carefully about what sort of person is required. I bit less Jack Welsh than you are probably thinking of and a bit more Warren Buffett, will serve you, your customers and your shareholders well in the longer-term.

Graham Hill
Independent CRM Consultant

Thanks (0)
avatar
02nd Sep 2003 09:01

Richard

I read about the study with interest. And as ever I have a couple of questions.

What does the 'correlation between a dedicated head of CRM and success' actually mean?

Is 'success' defined as self-reported success in making CRM work (we all know about the problems of self-reporting), or is there a robust, longitudinal measure underneath that looks at company financial performance, or total shareholder return attributable to CRM?

I guess the bigger question is one of causation. Although the report seems to suggest that having a Head of CRM drives success in CRM, the opposite could be equally true, (we are successful with CRM so now we need a Head of CRM). Or both could be related to some other mediating factors.

My personal bet is on other mediating factors being the ultimate driver of success, both in terms of CRM and in having a Head of, rather than appointing a Head of per se.

In my experience, we are still too fixated on the need to have a 'Head of' in order to make things happen. This is often a spin-off from US-dominated business thinking, which idolises the pioneering hero who achieves things against all the odds.

All too often, Heads of do not make much of a difference down on the front-line where relationships with customers are really built during each contact. It's the front-line staff and middle managers who support them that really make CRM work, not the Heads of.

Graham Hill
Independent CRM Consultant

Thanks (0)
avatar
02nd Sep 2003 13:54

A small quibble on Graham's comment! If there's a statistically significant correlation between having a Head of CRM and having CRM deemed successful, that would tend to suggest appointing a Head of CRM is a prudent move regardless of the question of causation, if successful CRM is sought.

A business is a complex system of processes, activities and outcomes, and given the pervasive character of CRM, I think it's unrealistic to expect that there is a clear chain of causation to 'successful CRM.'

If the statistics are sound (like Richard I wonder a little at the data...) then at the very least taking the suggested action would result in a degree of thought and action on the topic, and that's a benefit in itself.

I foresee a wave of those non-accountable marketers reinventing themselves as Heads of CRM!

Thanks (0)
avatar
03rd Sep 2003 18:24

Jeremie

Moving on from the statistical methods discussion...

I do agree entirely about the complex inter-relationships that exist in any CRM implementation of significant size.

An organisation is a complex set of dynamic inter-relationships between its different business processes, system, data, organisation work-climate, etc. Research by Bruce Kogut and others have shown that understanding the inter-relationships - and how to move each of them at a similar pace when you are making any significant change - is the key to making CRM work. Put in a fancy new CRM system, but leave the old organisation largely unchanged (and I have lost count of how many major CRM implementations that essentially follow this recipe!) and the probability of CRM success becomes startlingly low. As we used to say when I worked for PwC Europe, OO + NT = EOO (Old Organisation + New Technology = Expensive Old Organisation!). These same dynamics are basically those that doomed TQM, BPR and ERP to the same 70% plus failiure rate that we see for large-scale CRM implementations today.

Enterprise-wide CRM is tough, takes time and requires the active committment of large parts of the impacted organisation to be successful. A good Head of should resist the rush to just implement the technology and claim victory. Unfortunately, research on leadership in the US has shown that many 'Heads of' are predominantly Theory X, highly political, results NOW! types. They need to be to get that far in today's financial market-driven organisations.

An enterprise-wide CRM project might be the biggest change that a typical FT1000 company will make this decade. If you are looking for a Head of CRM, I strongly suggest that you think very carefully about what sort of person is required. I bit less Jack Welsh than you are probably thinking of and a bit more Warren Buffett, will serve you, your customers and your shareholders well in the longer-term.

Graham Hill
Independent CRM Consultant

Thanks (0)
avatar
02nd Sep 2003 09:01

Richard

I read about the study with interest. And as ever I have a couple of questions.

What does the 'correlation between a dedicated head of CRM and success' actually mean?

Is 'success' defined as self-reported success in making CRM work (we all know about the problems of self-reporting), or is there a robust, longitudinal measure underneath that looks at company financial performance, or total shareholder return attributable to CRM?

I guess the bigger question is one of causation. Although the report seems to suggest that having a Head of CRM drives success in CRM, the opposite could be equally true, (we are successful with CRM so now we need a Head of CRM). Or both could be related to some other mediating factors.

My personal bet is on other mediating factors being the ultimate driver of success, both in terms of CRM and in having a Head of, rather than appointing a Head of per se.

In my experience, we are still too fixated on the need to have a 'Head of' in order to make things happen. This is often a spin-off from US-dominated business thinking, which idolises the pioneering hero who achieves things against all the odds.

All too often, Heads of do not make much of a difference down on the front-line where relationships with customers are really built during each contact. It's the front-line staff and middle managers who support them that really make CRM work, not the Heads of.

Graham Hill
Independent CRM Consultant

Thanks (0)
avatar
09th Sep 2003 16:46

Amanda

For what it's worth, here's my reaction to your situation.

I'm concerned that underlying your "I can't see this being a big enough job to split out from my role for at least another 12 months" is a question of busyness - i.e. efficiency - when the real question is results - i.e. effectiveness.

If you can be fully effective in all aspects of your role for 12 months, by assumption there's no clear imperative to make an appointment. But if you can foresee a situation where you're making significant trade-offs between CRM and other strategically important activities, you probably need someone in place before that happens - even if it only looks like an average of a day per week of essential work.

Jeremy

Thanks (0)
avatar
02nd Sep 2003 15:40

Sorry Jeremy, but that just won't do at all!

"The correlation coefficient is a measure of the closeness of relationship between two variables - more exactly, of the closeness of a linear relationship",(Snedecor & Cochran, 'Statistical Methods').

Since neither variable is considered dependent upon the other, it is just not correct to suggest that because they have a high correlation coefficient that implementing one (a Head of CRM) will automatically lead to the other (CRM success).

You need to establish causality and its direction before you can even think of suggestion that because you have a Head of CRM, that you will be more successful at it. And that you should immediately go out and hire one.

That link remains unproven as far as I know. Prudence would suggest a bit more rigourous analysis before you rush out to spend large amounts of money on another Head of position.

Graham Hill
Independent CRM Consultant

Thanks (0)
avatar
09th Sep 2003 16:08

At what stage on your CRM journey can you justify a dedicated Head of CRM? We are at the end of trial phase and just commencing implementation phase 1. I can't see this being a big enough job to split out from my role for at least another 12 months, but maybe we're missing a trick, perhaps the earlier you appoint a dedicted Head the faster things get done?

Thanks (0)
avatar
02nd Sep 2003 17:41

Graham

I think we're at cross-purposes! If there's a statistically significant correlation between two variables then by definition the presumption is a (direct or indirect, causal or non-causal, systemic or localised) relationship.

So we shouldn't conclude that changing one directly causes a change in the other, but from a system point of view the relationship may tend to be maintained. The movement of the club causes the ball to go into the hole; getting a good night's sleep before the game doesn't - but it correlates statistically with higher performance.

For something like this, the suggested action has no obvious problems - so I'd simply argue it deserves consideration without worrying about the red herring of causation.

Thanks (0)