Following a poll of its members, the Netherlands Association for Direct Marketing, Distance Selling and Sales Promotion (DMSA) announced in a press release on June 6th that 80% of customer relationship management (CRM) projects fail to deliver, despite professional third party expertise being brought in to assist in their implementation.
The DMSA says that its members in the automotive, financial services, insurance and publishing sectors in particular consider CRM to be extremely important. Why members in other industries have expressed less interest remains unclear it would be encouraging to hear that retail and leisure operators were equally keen, for example.
The DMSAs Strategy and Communication Council has decided to establish a CRM Expert Group, made up of experienced CRM users and software vendors, to contribute to the professionalization of the CRM discipline. The first initiative of the Expert Group is the organization of CRM dialogue sessions, intended to provide a platform where users and providers meet each other. Theyre to be held every two months in Café Restaurant Vak Zuid, in Amsterdams Olympic Stadium. The Group is to be chaired by Tim Koopmans of Target Interactive Marketing. Hes joined by Judith Bilsen (Loyalty Profs), Rene van Ijzendoorn (Amicon), Rene Bloot (Ben), Jelle van Vliet (Dell), Erik Visser (Albert Heijn), Robert Feltzer (Sanoma), Jan Lantink (NWO), Lisette Huyskamp (PeopleSoft) and Monique Vierdag (DMSA). The first CRM dialogue session was held on Thursday 25th July, from 16:00 to 20:00, and the next two are scheduled for 12th September and 14th November. Details can be found on the DMSA website.
So should we be heartened by the news that many Dutch companies are showing increasing interest in software systems to help improve customer relationships? Although wed prefer to be unequivocal, the honest answer must be well, yes and no. It would indeed be encouraging if more businesses in the Netherlands worked harder on improving customer service and the customer experience. Business visitors, tourists and expatriates alike invariably cite surprisingly poor customer service as one of this otherwise delightful countrys few downsides. Oake Communications provides customer relations consultancy to a number of enlightened Dutch corporate clients who wish to stand out from their peers in this respect. Unfortunately, as so often happens, the focus is in the wrong place. A thoughtfully implemented CRM system can be an extremely useful marketing tool, but it can also be an expensive waste of resources. Failure can be guaranteed if the business doesnt already focus on its customers. However well a customer relationship is managed from a technological standpoint, therell be no return on CRM investment if the real world relationship itself remains poor.
Were taking the opportunity of the recent first meeting of DMSAs CRM Expert Group to use Augusts Client & Partner Briefing to suggest seven reasons for the failure of CRM projects in the Netherlands:
1. Inappropriate project leadership
CRM projects are often initiated and implemented by IT management. Since they are frequently funded from the IT budget and their implementation and management requires IT expertise, this isnt totally illogical. But it means that marketing, sales and service managers arent given the leading role that theyd usually expect when the ultimate objective is enhancing and streamlining the companys interaction with its customers. Would you put your sales manager in charge of upgrading your accounting system? Or call on HR management to mastermind your new advertising campaign?
Of course its overly simplistic to merely ensure that people whose job it is to interact with customers are given key roles in the design and implementation of a CRM project. Unfortunately its not unusual, especially in larger organizations, for there also to be disputes between marketing, sales and service departments about which of them has the leading role or seniority in managing the companys customer relationships. Political wrangling distracts managements focus from corporate objectives. Sadly, the arguments are seldom concerned with how the business can better serve its customers. Often the department with the greatest available budget is given ownership of the project, and funding should not be deciding factor.
If a business cant assemble a collaborative, multi-disciplinary team to manage a project, including the necessary customer communications and IT skills, it has more critical problems to solve before it considers implementing a CRM system.
2. If a business doesnt already understand that it benefits from delighting its customers, CRM may only serve to automate defective practices
This is the big one for Dutch businesses. All too often, businesses use CRM to improve the efficiency of their operations but not to improve their effectiveness in managing their relationships with their customers. To ensure CRM systems deliver on the promise of their name, the whole culture of the business needs to have understood, accepted and absorbed a true customer focus. They need to have trained their staff to treat their customers with respect and regard their customers needs as their main drivers. They need to have taken the time to examine and improve their business processes to take account of what their customers want. If the framework of this basic orientation hasnt been put in place, then implementing expensive and complex CRM software programs will just automate the problems they havent yet recognized and addressed. They wont just be committing themselves to a new company cost, theyll be committing the company to a process that is likely to amplify existing problems and accelerate a wasteful drain on its resources.
The focus of many CRM systems is on matching products and services with consumer data and the profiles of existing and potential customers. This is certainly a worthwhile exercise of course, but informed and skilled communicators know that theres very much more to developing and managing meaningful and profitable customer relationships. Customers associate products and services at least as much with
feelings as with data. Your customers perception of the value of your relationship with them, your company and its products is governed by their emotions as well as reason.
Unquantifiable factors are crucial in deciding whether a customer responds positively to your company, your brand, your products and your employees. Effective corporate and marketing communications contribute more to a fruitful customer relationship than the efficiency of your operation. A well-managed company must obviously control its costs and streamline its operations, but it should also be aware of the potential pitfall of false economies. Enhanced internal operations and automated processes are certainly valuable to your management, but your customers have other concerns. If a company measures the efficiency of its call centre solely by the number of calls it processes, for example, it runs the risk of communicating less effectively with its customers. Rather than exploiting opportunities to enhance the customer relationship, it can frequently be damaged. Savings on payroll, training and telecommunications costs can be more than offset by reduced customer satisfaction, loyalty and revenue.
3. Inappropriate systems and implementations
As so often happens with new technologies, CRM has been hyped so much that expectations have become totally unrealistic. Victims both of their perception that they could be left behind by their competitors and of aggressive vendor marketing, businesses are buying systems that are inappropriate and/or implementing them inappropriately. Theyre buying too many features that are inapplicable to their customer management requirements. Theyre allowing vendors or IT consultants to drive CRM purchases and implementations. Instead of first choosing the most fashionable software, they should start out with a clear definition of their needs, and then invite suppliers to pitch for the contract with tools that will meet them.
A frequently made mistake is to deploy CRM in the same way that ERP was introduced as a fully integrated, company-wide system. The improvement of business processes can sometimes be confused with their standardization. While the former is positive by definition, the latter can stifle flexibility, agility and innovation. For this reason, the use a single CRM vendor to provide everything is seldom the best policy. It can be preferable to implement CRM as a series of separate projects, managed by the line managers who understand the processes and are closer to customers.
A typical example of a company which has become fooled by the false promises of imperfect implementations of CRM would be one that thinks its great that their CRM system helped them identify more prospects, then later finds out that the newly identified prospects arent converted into new customers, and that theyre spending huge sums on proposals that lead nowhere. Its because theyre foolishly thinking that at IT system is going to replace simple business common sense it never will. A well-designed CRM system can be extremely beneficial to a company, providing that it has already learned how best to service its customers.
4. Poorly defined business objectives
Perhaps surprisingly, failures often occur because systems are implemented before a CRM projects strategic goals are clearly defined and prioritized. Inappropriate CRM tools or implementations are frequently chosen when this happens. Typical goals which should first be decided upon and/or prioritized include:
- acquisition of customers
- retention of customers
- reduction of costs in dealing with customer enquiries
- cultivation of more valuable customers.
Firms often approach a CRM project with too much reliance on the technology and not enough on business planning fundamentals. They need to factor in time and budget parameters, for example.
Problems will also occur if the business did initially define the projects objectives, but too broadly. Overreaching CRM projects usually fail because the business is trying to serve too many interests simultaneously. Meanwhile, although project objectives should be specific and focused, they must still fit into an overall business strategy. CRM projects tend to fail when they are administered in isolation. Many companies implement CRM as multiple sub-projects, and problems arise when these arent integrated. They need to be coordinated, and there must be effective communication between the sub-project leaders.
5. Lack of Board level direction
For most businesses, the significance of the cost of CRM systems should be enough to ensure it. Nevertheless, the breadth and depth of the changes for which the company must be prepared when implementing CRM mean that its chief officers must not only buy in to the project but also exercise their authority in setting its direction and communicating its importance. CRM can demand that structural modifications be made to the business, and executive leadership is required to make this happen.
It should probably go without saying, but well say it anyway: the goals you establish must be measurable, and the operational system must have built-in measurement, monitoring and tracking systems. Some of the reported failures may even have resulted from lack of metrics being put in place to measure the degree of success of failure!
Even when metrics are employed, they are often misapplied. If a firms key focus is customer retention, for example, but it only measures the number of customers processed by its call centres, the objectives havent been supported by the metrics. Businesses should measure their customer management performance prior to implementing CRM initiatives, and plan for the later comparison of these internal metrics with external benchmarks. Diagnostic metrics should also be applied to ensure that employees are using making the CRM system appropriately.
7. Lack of awareness of the need for substantial change
One of the least understood yet greatest challenges which the business needs to address is the scope and degree of change required for and which will be incurred by the successful implementation of CRM.
Ensuring clear objectives for the project and its integration with the business strategy wont be enough if the company isnt prepared for the degree change that CRM implementation demands. It is human nature to resist change, so the expertise of the Human Resources department also needs to be utilized. Prior to the deployment of a CRM system, the business must amend core business processes and develop new ones. Many other internal management issues need to be addressed. Not the least of these is that it must train its employees. It must ensure not only that customer-oriented values are communicated but also that theyre understood, accepted, adopted and assimilated.