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CRM costs and returns: no substitute for optimism

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16th Jul 2007
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By Matt Henkes, staff writer

Considering the ever increasing sums being spent on newfangled CRM systems, it may come as a surprise to learn that roughly half of all implementations fail to achieve their stated aims. But with over £20 billion expected to be spent globally on CRM by 2010, the supposed 50-50 chance of success doesn’t seem to be frightening people off.

Some who have had their fingers burned may be forgiven for preaching that CRM technology is a flash in the pan that has mutated into a full scale nuclear explosion. And with some firms spending up to £14 million in one go, it’s not difficult to see their point.

Despite this defeatist talk, optimistic firms across the globe are still shelling out and expecting their project to slot nicely into the good half. Hopefully, what they are asking themselves is "what are the seeds of disaster and how do we ensure they remain unsown?"

Wrong implementation options

Andrew Wilmott, business director at customer strategy consultants Grass Roots BDR, believes that half the battle is that many companies take the wrong approach to overhauling their CRM systems, choosing the wrong implementation options and failing to properly consider the customer’s point of view.

“Failure is often the result of having an unrealistic expectation of the business case and not understanding the changes that need to happen from the customer perspective,” he says. “Firms change things without re-engineering them in a way where the customer has a changed and improved experience.”

"Failure is often the result of having an unrealistic expectation of the business case and not understanding the changes that need to happen from the customer perspective." Andrew Wilmott, business director, Grass Roots BDR

Careful planning and forethought needs to go into the implementation, he says. Big-bang projects, where a new system is implemented all in one go, often result in failure, with a large percentage faltering because they are too large an undertaking. Installing a new system in a more modular way has a much higher success rate.

“The problem with the big-bang approach is that where you try and replace the whole system in one wave, you end up enshrining the old broken business processes that weren’t working to begin with,” he explains.

It can work with a company that has a single product line, but generally doesn’t work well in a firm that’s operating across multiple vertical markets with multiple product lines. “You have to try in a small area and test,” adds Wilmott, “And through feedback from the testing, you can decide on your corrective action.”

It’s ok to get phased

Once his firm decided in 1998 to implement a CRM system produced by Onyx, Mike Lowe, IT director at Calor Gas, found that a two-phased approach seemed the best option. From a logistical point of view, he felt that the firm’s customer interface system was “too crucial” to risk switching all in one go.

The firm’s own business process research had highlighted two separate areas of customer interface: acquisition of new customers and retention of their existing customer base. “We saw those as two quite sensible chunks which we could effectively manage,” he says. Implementation of the first phase, the new customer, happened in 2002, then the existing customer services side got up and running in about 2003.

"We’ve expanded and grown the scope and complexity of the system, and progressively delivered more types of information to our people." Steve Burrows, IT director, JLA

JLA, one of the world’s largest independent distributors of commercial laundry equipment, is among the CRM pioneers in its field and highlights its innovative, hybrid version of the big bang. It dedicated substantial time to alter its new Pivotal system so that, to the user, it closely resembled the previous software. “Don’t underestimate the people problem because that is the biggest problem,” says IT director Steve Burrows.

JLA’s business aim centred around increased data segmentation and categorisation. Over a single weekend, Burrows and his team were able to “yank one system out and replace it with another”, but when his users came in on Monday they were presented with the same basic forms with the same basic information. From then on, it was a case of implementing new functionality features and slowly bringing the new system up to speed in a way that had no adverse impact on commercial productivity.

The phasing, he believes, has been one of the keys to the project’s success. “We’ve expanded and grown the scope and complexity of the system, and progressively delivered more types of information to our people,” he says. “But it’s been done on a progressive basis so no one has been faced with a revolutionary change.”

Burrows estimates that the entire project, including infrastructure and development, has cost somewhere in the region of £500,000 but, in terms of ROI, has achieved 100 percent of its goals. “There’s nothing that we set out to do that we’ve failed to do,” he says, “It’s improved our ability to know, communicate with, understand and relate to our customers significantly.”

The customer is king

One of the criticisms Wilmott levels at many projects is that they are generally driven by internal measures such as improving customer acquisition or reducing churn. He claims many firms neglect the customer-centric approach, concentrating on cost savings or product-centric issues and failing to address the reasons for churn or why acquisition isn’t running at the expected level.

For example, ‘first time fix’, where a customer query is settled on their first call, and ‘single problem ownership’, where a customer has a single point of contact in an organisation, can be tracked and measured for effectiveness. “What you can do is report back on the justifications you gave in the business case for the project in the first place,” says Wilmott. “Take the benefits you promised and track them from the beginning.”

"Any IT project, whether it’s CRM or anything else, has to have clear business ownership and buy-in. That means executive sponsorship, and that the business doesn’t take its eye off the development." Mike Lowe, IT director, Calor Gas

While Lowe says the Calor project wasn’t focused entirely on cost savings, he admits that the company doesn’t purport to be a totally customer-centric organisation. However, he emphasises: “We’re on a journey in that direction.” The total cash investment for the system was just under £1 million but the firm has seen a return on that in terms of improved customer service year on year – its primary metric.

Lowe believes it would be wrong to say that all goals had been 100 percent met, but this due more to the fact that the goal posts changed as the project unfolded, making different challenges apparent. “It’s been a success without a doubt,” he says, adding that Calor’s CRM system has become “the engine room of anything to do with customer interface”.

He also points out that executive buy-in has been the key to his project’s success. “Any IT project, whether it’s CRM or anything else, has to have clear business ownership and buy-in. That means executive sponsorship, and that the business doesn’t take its eye off the development.” Any other approach, he says, “sows the first seeds of disaster”.

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