Succeeding at CRM

Based on a comprehensive survey of leading companies the superior CRM performance comes from integrating three components of the customer-relating capability: an organizational orientation that makes customer retention a priority and gives employee wide latitude to satisfy customers; information about relationships, including the quality of relevant customer data and the system for sharing this information across the firm; and configuration, the alignment of the organization towards building customer relationships, achieved though incentives, metrics, organization structure, and accountabilities.

Configuration was the factor that most separated good firms from bad firms. Day observed that relatively few businesses in the survey emphasized customer satisfaction and retention in their incentives. An exception was Siebel Systems which Siebel System which tied 50% of management’s incentive compensation and 25% of salespeople’s compensation to measure of customer satisfaction. The real payoff, he notes, is when all the elements of a configuration – metrics, incentives, and structures — are properly aligned citing General Electric Aircraft Engine Business Group’s attempts to improve service for its jet engine customers. A study of customer needs led GE to assign a corporate vice president to each of the top 50 customers, putting leaders of its quality program on-site with customers, using the internet to personalize delivery of parts, and incorporating customer service metric into- employee evaluation criteria.

Deloitte consulting reported in 1999 that 70% of firms found little or no improvement through CRM implementation. The reasons are many: The system was poorly designed, it became too expensive, users didn’t make much use of it or report much benefit, and collaborators ignored the system. One set of business commentators suggested the following as the four main perils of CRM:

1. Implementing CRM before creating a customer strategy.

2. Rolling out CRM before changing organization-n to match.

3. Assuming more CRM technology is better.

4. Stalking, not wooing customers.

Information is less important than orientation and configuration to distinguish leaders from followers. Big investments in CRM technology were yielding negligible competitive advantages. One of the reasons many CRM failures occur is because companies concentrate on customer contact processes without making corresponding changes in internal structures and systems. Change the configuration before installing CRM: The survey results confirm that a superior customer relating capability has everything to do with how a business builds and manages its organization and not much to do with the CRM tools and technologies it employs.

Other types of companies that are in the best position to invest in CRM are companies that do a lot of cross-selling and up-selling (e.g. GE and Amazon) or companies whose customers have highly differentiated needs and are of highly differentiated value to the company. It is used less often by packaged goods retailers and consumer packaged-goods companies, though some companies (Kraft, Quaker oats, Ralston Purina, and Nabisco) have built database for certain brands,. Business where the CLV is low, those who have high churn, and where there is no direct contact between the seller and ultimate buyer may not benefit as much from CRM. Some businesses cited as CRM success include Enterprise Rent-A-Car, Pioneer Hi-bred Seed, Fidelity Investments, Lexus, Intuit, and capital One.