Customer Relationship Management (CRM) is a powerful concept that is often enveloped in confusion. Here we seek to set aside key misconceptions that typically attend efforts to undertake CRM initiatives.
- Myth 1
CRM is a buzzword devoid of meaning. Yes, CRM is a buzzword. The notion of Customer Relationship Management (CRM) generates lots of noise. The term is everywhere in the trades. But meaningless? No. CRM represents many things simultaneously. It is a powerful defining category for a set of practices and tactics that focuses attention on managing your company's most important asset, its customers — and their precious loyalties. What are its wider implications? Here we take our cue from Patricia Seybold. Companies are shifting their strategies away from being efficient and toward being effective. They are increasingly focused on finding ways to gain more control of the customer. Thus, having already invested heavily in tools that enhance internal efficiencies, enterprises in the coming decade will increasingly seek out strategies and systems that improve and coordinate the ways in which they relate to their customers. That is meaningful.
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- Myth 2
CRM is all about technology. False — and this notion leads to initiatives that are almost sure to fail. Technology represents a set of tactics. It is a means to achieve ends. You must — and we cannot emphasize this enough — prioritize your business aims before buying or building out technology. What you need first is a CRM strategic blueprint that points the way to improving how you value, track and deepen relationships with customers; a plan that enhances your retention of customers; a plan that grows customer value and customer yield; a plan flexible enough to adapt to changing customer demands; a plan that makes each relationship more profitable.
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- Myth 3
CRM is all about strategy. Also off the mark. You don't want to go too far in the other direction either. Software alone can't make a company reorient the ways in which its people think about customers. That requires cultural shifts, deep changes at the top and the bottom. However, that doesn't mean you shouldn't get excited about technology. You should: technical innovations in the last few years have opened up tantalizing new methods for interacting with customers across channels and across devices. Once you get your business priorities straight you must begin the equally important tasks of conceptualizing tactics and assessing which tools are best suited to your strategic needs. You should consider how to mine data about your customers, how to personalize your relationships with them, how to manage targeted promotions across channels, how to integrate the ways in which departments and your partners interact with customers. And you must plan how to track and measure your success.
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- Myth 4
CRM happens on the Internet. Yes, it can, of course, but no, not only on the Internet. As all of us who have worked at any company know, the Internet is one of many channels that businesses typically use to interact with customers. The value of Internet-based CRM — sometimes called eCRM — depends on how well it complements and is integrated with your other CRM processes and with the rest of your enterprise.
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- Myth 5
The Internet spawned CRM. This captures only a small part of the picture. Focusing on customer value pre-dates the emergence of the Web. What is more important to understand is that the latest move toward customer relationship management is bound up with deeper tectonic shifts — increasing globalization, accelerated commoditization, shrinking margins, and changing customer demands. It is part of the intense search for competitive advantage in an increasingly fast-moving world. What the Internet has done is to put powerful new tools in the hands of consumers. In the process of using those Internet tools — tools that, for example, allow for swift price comparisons — their expectations have increased dramatically. Always fickle, consumers now demand even more. Your CRM strategy should see this hyper-competitive, mobile, global situation for what it is: an opportunity.
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- Myth 6
By gathering more and more data about our customers via CRM tactics, we increase our chances to sell them more things. Not necessarily. One of the most intriguing things about the move to CRM has been the glaring lack of people trained to reap — and act upon — the resulting harvest of data. Despite what you see on TV, the numbers gathered by CRM tools don't magically organize themselves out of thin air at the touch of a button. The volume of CRM data can be overwhelming. It has the capacity to outstrip the very relationship it was supposed to improve — that between a company and its customers. The best way to protect your investment in customer data is to consider first how it can be used to achieve your larger aims. Don't underestimate the hard work involved in getting that data to serve your purposes. Ultimately, executing a successful CRM strategy may involve adding skills to your company that you do not already possess.
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- Myth 7
CRM is a matter of driving down a company's headcount. We tipped our hand in the answer above. Yes, there are CRM tactics that lead to reductions in personnel costs — think of how many firms have lowered headcounts in their call centers by providing online access to automated knowledge bases. CRM should complement efforts to increase operational efficiencies. However, the chief priorities of CRM typically lie elsewhere. These priorities revolve around how to keep the customer front and center and how to increase the value of your present and future customer relationships.
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- Myth 8
CRM has ambiguous ROI. At first glance, the notion of extracting optimum value from customer relationships might look a bit hazy. Yet part of what can be most gratifying about CRM is the quality and quantity of the payback. There is the obvious ROI — for example, watching returns on tactics such as personalized, integrated promotions — and then modulating them to reach their targets even more effectively. But there are potentially greater results from CRM as well. Companies are frequently inclined to try to solve problems from the perspective of technology itself. That approach tends to be costly and time-consuming. By shifting their focus to one that is customer-centric — and by making it easier for their employees to add value to client relationships — enterprises are finding that that there are often less risky, and less expensive ways to serve their customers more effectively.
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- Myth 9
CRM is the return of ERP. CRM is not child's play. Doing it well takes careful planning and hard work. Ideally, it is best executed with buy in from senior management and with grassroots support. As we just pointed out, however, the actual application of CRM strategies and tactics does not necessarily require an extended, exhaustive overhaul of your entire operation. There are different ways to get CRM accomplished. Compared to ERP projects, upfront investments for CRM tools can be far less — and the payoffs can appear within months as opposed to years. Small pieces of a CRM strategy may be rolled out even more quickly, providing almost immediate ROI. In fact, for those companies that are having difficulty demonstrating potential overall ROI for a large set of CRM projects, it is often best to roll out these very types of smaller initiatives. Pilot endeavors provide hard data that can inform larger efforts. The success of relatively modest projects works to build internal support and department-by-department momentum.
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- Myth 10
Big ERP vendors are your best bet for CRM. There are firms that will sell you big, full-featured solutions for CRM. All of these solutions promise the distinct advantage of rapid, out-of-the-box implementations. Some of the best of these come from companies that are large and well established. Yet there are serious trade-offs here. These solutions tend to be monolithic, proprietary (as opposed to based on open standards), relatively rigid and generic. Most importantly, these CRM-in-a-box solutions don't come configured to address your particular business needs. The vendors who sell them are not typically well equipped to help you set your business priorities for managing customer relationships — that's because (by and large) they expect you to conform your priorities to the features offered in their software. We prefer attractive alternatives that combine pre-integrated functionality and flexibility.
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