Seeing the Value in CRM

Study: More firms investing in customer relationship management

New York  August 29, 2001  More firms are adopting customer relationship management (CRM) programs, according to a new report from The Conference Board.

Fifty-two percent of the 96 global firms surveyed by The Conference Board have implemented a CRM system or solution. Among these, the top three strategic rationales for implementing CRM were:

  • Increase customer retention/loyalty (94 percent)

  • Respond effectively to competitive pressures (77 percent)

  • Differentiate competitively based on customer service superiority (73 percent)

For the survey, CRM was defined as "the business processes an organization performs to identify, select, acquire, develop, retain and better serve customers. These processes encompass an organization's end-to-end engagement with its customers and prospects over the lifetime of its relationship with them."

"Customer relationship management is a way to link customer needs with organizational capabilities so organizations can optimize their marketing investments," said Thomas Bodenberg, senior research associate in The Conference Board's Performance Excellence and Operations Management research group, and author of the report. "What our study revealed is that the most successfully managed CRM organizations are those that can re-align themselves culturally, improve their technologies and internal operations, and continue their dialogue with their customers."

"The chief lessons learned in the ongoing management of CRM often are keyed to the tangible elements of involvement, timeliness, and training/knowledge management. But the organizational transformation which accompanies CRM implementation can also involve less tangible corporate value shifts, and these must be communicated internally and externally to meet with ultimate success. Senior executives might consider whether, in virtue of their leadership in shaping corporate culture, the corporate communications and human resources functions deserve larger roles in the implementation and management of CRM philosophies and systems."

Why customer relationship management?

CRM has its roots in several trends:

  • The enterprise-level sharing, computing, and control of data

  • The rise of direct-response, data-based marketing and integrated marketing communications

  • The emergence of data-mining, analysis, and storage tools

  • A new awareness that marketing is relationship-oriented rather than transaction-driven

On average across all surveyed firms, half of the total marketing investment went toward driving revenue, while fully one-third went toward building relationships. The average strategic time horizon employed for the CRM project was almost three years, with an average estimated implementation time of four years.

The key strategic responsibilities of CRM organizations are divided among departments and divisions as follows: the CEO funds the CRM strategy, the marketing department leads the strategy, and CIO/MIS/IT supports the strategy. CRM often requires a firm to adopt a customer-centric philosophy and to change its corporate culture where needed. When introducing CRM, the top three areas of change are: attitudes of customer-facing employees (67 percent), corporate culture (60 percent), and attitudes of non-customer-facing employees (59 percent).

How Successful?

One-fourth of the firms claim to have been "very" successful in their CRM implementations. The chief departments impacting  and impacted by  CRM implementation are sales and marketing, customer service and support, and senior management. Those having the least impact are human resources and corporate communications. Marketing and sales usually have operational authority for CRM systems.

Survey participants cited capturing historical activities and experiences and tracking and distributing customer contact information as fundamentals of a CRM system. The leading planned or piloted projects are: enabling customer interaction via VoIP (Voice over Internet Protocol) and managing responses to e-mails and Web queries.

Near future implementation phases have a clear bias toward e-commerce, and this study reflects the trend. While Web-based business still represents only a small percentage of their overall business, the executives and firms surveyed expect that in two years, it will represent about one-fifth.

CRM is an information-intensive mode of doing business, and the technology that supports it includes every aspect of information management, including both integration with other enterprise-related systems and business intelligence methods that reduce the data to actionable information.

The chief data sources that feed into CRM systems and solutions are: customer service inquiries (77 percent), customer surveys (75 percent), and sales force input (71 percent). Some of this information is harvested through enterprise resource planning (ERP) systems. Twenty-eight percent of survey participants said that their ERP database integrated with some aspects of their CRM database. Forty-one percent anticipated that their CRM and ERP databases would be integrated in the future.

Fifty-five percent of CRM users report that the analyzed data comes from both internal and external sources. This means that prior to the application of business intelligence methods, data usually need to be harmonized. The goals of data harmonization are to make data comparable, consistent, and user-friendly for decision makers. Budget authority for data harmonization varies widely across organizations. Chief departments are marketing (40 percent), IT/MIS (33 percent), and Operations/Corporate Services (11 percent).

CRM and customer privacy

Sixty-two percent of organizations capture customer data at the point-of-sale (POS). They use data primarily to profile current customers and prospect for new ones. Seventy-two percent of firms claim to use "permission-based marketing," in which a firm asks a current or prospective customer for permission to contact and make product offers (usually via e-mail). Among the half of CRM firms that communicate their privacy policy to the customer, no firm has a newly created privacy policy, and just over half have revised their policies.

Despite this mixed record, 58 percent of companies report that customer privacy issues will have the greatest impact on customer satisfaction and loyalty. Firms seem to recognize that privacy is not only good business, but also "good for business."

Although consumer fears about privacy are a principal threat to the growth of e-commerce, survey participants are optimistic about the long-term prospects. The chief issues contributing to an outcome favoring e-commerce are continuation of present trends and technologies (38 percent), customer empowerment and education (29 percent), and hardware/software platform compatibility (17 percent).

Measuring CRM

CRM measurements cut across three functional areas: customer service and support, sales, and marketing. The metrics most often considered highly reliable and valid in each category, respectively, were: customer satisfaction survey scores (72 percent), new customer acquisition (65 percent), and communication and administrative costs (47 percent). The greatest concentration of workers involved in metrics is in the marketing department (17 percent).

Most respondents rated the following "severe" or "moderate" obstacles to CRM implementation: competition for time (80 percent), inefficiencies with MIS/IT service (54 percent), and lack of funds (50 percent). The report stresses the need for greater involvement and support at all levels.