Common Causes of Failure

Before starting on the new journey to CMR it will be a helpful exercise to review some of the causes of companies’ failures to achieve benefits from existing CRM initiatives. Though the goal of the new CMR takes relationship building to a new level, the process relies on many of the same disciplines required for the old CRM, and we can learn a lot from past failures.

Too often executives want these initiatives deployed quickly and broadly because they want to see a prompt return on their investment. They see CRM as an easy solution to their business problems. It is only after the initiatives begin to unfold and become tangible that these individuals begin to realize the gaps in their expectations.

It’s Not About the Technology

Sure, CRM means obtaining customer information, understanding what different customers are worth, treating different customers differently, and improving efficiency. But none of these goals should define the route to success.

In 1998 three professors, Susan Fournier, Susan Dobscha, and David Glen Mick, wrote an article called “The Premature Death of Customer Relationship Management.” They said in part:

Companies profess to do relationship marketing in new and better ways every day. Unfortunately, a close look suggests that relationships between companies and consumers are troubled at best. When we talk to people about their lives as consumers, we do not hear praise for their so-called partners. Instead, we hear about the confusing, stressful, insensitive and manipulative marketplace in which they feel trapped and victimized. Companies may delight in learning more about their customers than ever before and in providing features and services to please every possible palate. But customers delight in neither. Customers cope.^{[11 ]}

In the four years since that article appeared little has changed. One of the reasons that so little has changed is that businesses continue to try to implement CRM as a technology, not as a marketing practice—a one-dimensional exchange of money for goods that one writer described as luring marketers ever further down a cul-de-sac. This is, all too often, due to the automation of obsolete processes and people believing that technology alone can change results without having to change what they really do or what they really believe.

For results to change, there needs to be a change in the process and the philosophy behind it.

The Challenge of Management Culture

In many companies, product-based management is so entrenched in management culture that the switch to anything different is a significant challenge. More than half of CRM failures have been blamed on the challenges of company politics, inertia, and implementing organizational change—not software and not budgets.

A study by CRM-Forum detailed the significance of nine different causes of failures for CRM initiatives:^[12]

Organizational change	29%
Company politics and inertia	22%
Lack of CRM understanding	20%
Poor planning	12%
Lack of CRM skills	6%
Budget problems	4%
Software problems	2%
Bad advice	1%
Other	4%

None of these causes suggests external reasons for CRM failure. With 29 percent of failures caused by problems with organizational change, it’s clear that the most difficult step for customer-based initiatives is the cultural change required.

In most companies, parts and pieces of the customer information base are sequestered in separate departmental silos, and department heads can be like tribal chieftains. The marketing tribe has its culture, IT another, and financial, operations, merchandising, human resources, and product managers still more. Turf wars have been the undoing of CRM, and will prove to be even more of an obstacle for CMR initiatives.

Remaking a company to be genuinely customer-centric is new and uncharted territory for many, and as with anything new, there is always resistance to change. CMR requires new ways of thinking for

everyone. It’s not something that can happen in a vacuum; it will affect the whole business. Companies must encourage the exchange of information, not just with customers but within the enterprise, yet it has been reported that only 5 percent of investments being made into CRM are going toward change management.

Sounds easy, and might be were it not for politics. In companies, politics polarize people and groups as people feel they may lose power, or even their jobs. Change often forces people to regress to what they know, and protect what they have always been comfortable with.

CRM Misunderstood

Even when companies survive the challenges of organizational change, company politics, and inertia, another fifth stumble on their understanding of what CRM is all about. Some think it’s all about technology and fail to align technology with strategy. Some think it’s all about targeting customers and customer groups for special offers. They see CRM as a simple matter of capturing names and addresses and linking this identification to customer transactions to cross-sell and up-sell. They don’t understand the importance of the customer in the process. META Group has reported that many of the CRM initiatives in the largest companies are in “serious risk of failure” because few are using applications that enable proper collaboration with customers. Gartner Group reports that although CRM will remain a key initiative within many enterprises, 65 percent will fail “to align senior executive, IT, management, functional/departmental management and customer outcomes.”

Lack of Planning

Poor planning is often the result of fuzzy strategy. The first question a focused strategy must address is who are the right customers for your business. Who are the customers that can provide you with the business rewards you need to grow, and which are the ones you can successfully serve? Where can you find them and what activities will you require to capture and keep them? Can you align CMR with your profitable growth objectives and company goals?

Goals are the broad statements about what you want your company to be when it grows up. Objectives are the specific measurable actions that will support your strategies. Financial objectives might include: increase incremental revenue, reduce operating costs, improve profitability, and provide a quantifiable process improvement. Sales and marketing objectives might include: increase sales and marketing efficiency and effectiveness; increase average customer purchase dollars; increase customer purchases; increase number of products per purchase; increase customer profitability; increase customer loyalty, retention, and lifetime value; and gain and sustain competitive advantage. Specific objectives translate the larger goal into measurable tasks. For example, if the goal is retention, the specific objective might be to reduce attrition by 15 percent in the most profitable customer segment.

Poor planning affects the company’s view of its interaction with customers and increases the opportunity of implementing an initiative that addresses the wrong issues. Planning for CMR must be based on creating new initiatives that will make doing business better for the customer. As you will see in Chapter 18, CMR planning includes taking small steps to reach the larger goal. The only good thing that can be said about poor planning is that without a strategy and a plan, failure comes as a surprise, saving you fear and worry.

Lack of Skills

The lack of CRM skills is understandable. Sales managers, product managers, sales personnel, and others interacting with customers have all grown in their jobs selling whatever the company wants to sell to as many customers as possible. Many companies are creating sophisticated customer relationship management technology without realizing that such sophisticated tools require sophisticated users and that their users will need training. For CMR they must develop new skills to create offerings based on customer needs and to develop customer-centric service strategies—a giant leap. To make the leap successfully, the right tools must be in the hands of line-level personnel who have been trained to use the tools for the customers’ benefit.

A recent study of 400 CRM implementations worldwide concluded that 25 percent of the explained variation between successful and unsuccessful CRM initiatives is due to variations in line-level training and support.^[13]

Inadequate Budget

Budget problems are only 4 percent of the causes of CRM failure. Six or seven-figure budgets, multiyear implementations, and swelling IT staffs are not inevitable. A study by the Seattle, Washington–based Data Warehouse Institute shows that 13 percent of companies surveyed spent over $10 million on CRM solutions, but 40 percent spent less than $500,000 and 16 percent of the companies studied are spending under $100,000 to realize measurable benefits.^[14]

Inefficient Software

So much progress has been made in recent years that we now see the software issues as a very small part of the challenge. Still some failures come from companies asking the in-house IT team to reinvent the wheel—creating a proprietary query tool that often ends up as an extension of transaction processing and fails to provide the analysis and intelligence that deliver the real value. With so many tried and true solutions available in the market today, good out-of-the-box programs exist for companies of almost any size. The few software problems we see today are not coming from faulty software but are a result of attempting to automate faulty processes. Most often it’s the process that needs to be fixed, not the software.

CRM-Forum’s Richard Forsyth likes to say, “If a company’s fundamental premise is that the customer is a bleeding nuisance, then all the software packages in the world are not going to improve the situation. All that’s going to happen is that the lousy customer service stance will become more automated so that companies can be indifferent to their customers more easily.”^[15]

ROI Expectations

There are more than enough elements with which to build an ROI (return on investment) model: incremental improvement in “share of wallet,” customer retention, increased margin, or expense savings. Telecom companies will want to reduce customer churn that can be up to 40 percent, and to sell more data and other communication services. Financial services companies will want to cross-sell more products, and reduce transaction costs. Insurance firms will want to increase customer retention. Retailers will want customers to increase their basket value. Yet, a study that interviewed CRM heads at fifty companies reported that 90 percent of them have no ROI model in place.^[16] This may be because so many CRM vendors tout their solutions as “plug and play.” In any event, the lack of measurable metrics—a lack of definition of what return on investment is expected—established at the start has been the cause of many failures. The importance of establishing metrics for the ROI model is discussed in detail in Chapter 17.

Lack of Commitment

Without a solid and total commitment from the most senior management, any CRM project will fail. The company must change its core strategy to focus on customer-centricity if the shift is to be made to customer control. This means the program must have a dedicated senior executive with the strength to sell the program throughout the organization as its champion, assuring the company’s commitment.

Profit from CMR will grow over time. CMR will require patience and a belief in the durability of the customer-centric concept. Without a champion to sustain this belief, the project will fail.

^{[11 ]}Susan Fournier, assistant professor Harvard School of Business; Susan Dobscha, assistant professor marketing, Bentley College; and David Glen Mick, Endowed Chair of Marketing, Dublin City University, “Preventing the Premature Death of Relationship Marketing,” Harvard Business Review, January/February 1998, p. 43.

^[12]Richard Forsyth, “Six Major Impediments to Change and How to Overcome Them in CRM (and Politics)” CRM-Forum, June 11, 2001.

^[13]Dick Lee, “Getting to ‘Duh’,” Customer Relationship Management, November 2002, p. 28.

^[14] “A CRM Blueprint: Maximizing ROI from Your Customer-Based Strategy,” Peppers and Rogers Group & Microsoft Great Plains Business Solutions, 2001, p. 4.

^[15]Richard Forsyth, “CRM Doesn’t Add Up for UK Plc,” CRM-Forum Weekly, March 28, 2002, p. 1.

^[16]Ruth Stevens, “Analyzing the Recipe for Success,” 1to1.com, January 3, 2002, p. 1.