The Idea in Brief
Frustrated by high costs and dubious payoffs, managers that used the first customer-relationship management (CRM) systems came to view them as overhyped IT investments. Accordingly, CRM spending plummeted between 2001and 2003. But now CRM system sales are soaring, as executives from a wide variety of industries tout CRM’s value.
What’s changed? Rather than trying to transform entire businesses through full-scale CRM implementations, companies are applying CRM in disciplined, focused ways—and getting more from it. How to realize the same benefits from your CRM initiatives? Use CRM to solve highly specific customer-relationship challenges—such as accurately diagnosing call center customers’ problems. Invest in real-time information—the holy grail of CRM—only where it’s needed. For example, a hotel manager requires real-time data on room availability, not on customers’ opinions about room decor. Equally crucial, use what you learn from successful smaller CRM projects to tackle larger problems.
By knowing where in your business to deploy CRM, and how, you stand to score impressive revenue gains—as companies like Kimberly-Clark, Ingersoll-Rand, and Brother have done.
The Idea in Practice
To decide where and how to use CRM technology, ask four questions:
Is It Strategic?
Before spending a dime on CRM, identify the processes that most support your company’s strategy. Target them for improvement through CRM. Example:
Aircraft-parts distributor Aviall Inc. needed a well-trained sales force to achieve its strategic objective: becoming the premier industry provider of supply-chain management services. The company installed only those CRM elements required to enhance sales-force and order-entry productivity.
Sales representatives now had instant access to customers’ credit history, a streamlined order-processing system, and the ability to deliver firm quotes immediately. They tripled their daily number of sales calls and expanded their customer base by one-third. The number of orders handled daily more than doubled—with no staff increase. And Aviall won an unprecedented ten-year, $3 billion supply contract with engine maker Rolls-Royce
Where Does It Hurt?
Where in your customer-relationship cycle do performance-sapping problems arise? Is it when you’re seeking to stimulate initial purchases? provide after-sale service? retain customers? Focus CRM efforts on your pain points. Example:
Consumer-goods giant Kimberly-Clark’s pain point lay in its retailer promotions. Running thousands of promotions annually, it couldn’t discern which promotions strengthened retailer loyalty and sales. It installed a modest CRM system that enabled managers to track the return on investments in individual promotions. In the initiative’s first year, Kimberly-Clark streamlined budgets and increased profits by redirecting $20 million in promotion spending.
Do We Need Perfect Data?
Accessing and responding to real-time information requires expensive, complex systems. Distinguish between activities that truly demand perfect data and those that don’t. Example:
Japanese equipment maker Brother International’s U.S. arm faced high product-return rates stemming from customers’ dissatisfaction with call-center service. The company launched a new CRM system that enabled service reps to identify customers when they called, quickly locate their purchase records, and provide codified responses to common questions. Call times shrank by 43 seconds, saving $855,000 annually. Product returns fell by one-third over three years.
Where Do We Go from Here?
Don’t rest on your CRM laurels. Rigorously analyze system-generated data to pinpoint new, well-defined opportunities to extend CRM’s power. Example:
Diversified manufacturer Ingersoll-Rand recognized that customers who purchased its golf carts might like to buy other divisions’ products, such as Bobcat mini-excavators and loaders. The company spurred cross-selling by expanding its golf-course division’s CRM order-taking function to include other divisions. The initiative generated additional orders of $6.2 million in its first few months.
Through the late 1990s and into 2000, managers plowed millions of dollars into information systems meant to track and strengthen customer relationships. Often built around complex software packages, these customer relationship management (CRM) systems promised to allow companies to respond efficiently, and at times instantly, to shifting customer desires, thereby bolstering revenues and retention while reducing marketing costs. But most firms failed to reap the expected benefits, and as executives dramatically reduced IT expenses in subsequent years, CRM sales plummeted. After rising 28% between 1999 and 2000, CRM sales dropped by 5% in 2001, 25% in 2002, and 17% in 2003, according to the technology market research firm Gartner. Many observers came to believe that CRM was destined to join enterprise resource planning (ERP) as another overhyped IT investment whose initial unmet promise nearly killed off the approach.
