Avoid the Four Perils of CRM

Companies pour millions into customer relationship management, but most initiatives fail to deliver. Here’s why—and what you can do to raise the odds of success.

The promise of customer relationship management is captivating, but in practice it can be perilous. When it works, CRM allows companies to gather customer data swiftly, identify the most valuable customers over time, and increase customer loyalty by providing customized products and services. It also reduces the costs of serving these customers and makes it easier to acquire similar customers down the road.

Why do CRM initiatives fail so often? We have spent the last ten years trying to answer this, analyzing customer-loyalty initiatives, both successful and unsuccessful, at more than 200 companies in a wide range of industries. Our research suggests that one reason CRM backfires is that most executives simply don’t understand what they are implementing, let alone how much it costs or how long it will take. If you find that hard to believe, try asking five of your managers to define CRM. The right answer: CRM aligns business processes with customer strategies to build customer loyalty and increase profits over time. (Note that the words “technology” and “software” are conspicuously absent from the definition.) Then try quizzing these same managers about the cost of implementing a CRM solution. Answer: $60 million to $130 million, according to Forrester Research. And finally, ask them how long it generally takes to implement CRM. The best estimate: at least 24 months, even though one vendor we know offers CRM in 90 days and an aggressive competitor has responded by promising it in only nine. More specifically, our research shows that many executives stumble into one or more of four pitfalls while trying to implement CRM. Each of these pitfalls is a consequence of a single flawed assumption—that CRM is a software tool that will manage customer relationships for you. It isn’t. CRM is the bundling of customer strategy and processes, supported by the relevant software, for the purpose of improving customer loyalty and, eventually, corporate profitability.The four perils that need to be avoided are:

Peril 1: Implementing CRM Before Creating a Customer Strategy

Peril 2: Rolling Out CRM Before Changing Your Organization to Match

Peril 3: Assuming that More CRM Technology Is Better

Peril 4: Stalking, Not Wooing, Customers

Source:  Avoid the Four Perils of CRM

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