Early adopters of customer relationship management systems were often disappointed by high costs and elusive benefits. Now some companies are reaping strong returns on their CRM investments.
CRM Done Right
by Darrell K. Rigby and Dianne Ledingham
HROUGH THE LATE 1990S a n d illtO
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 2t>O2,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 18
IT investment whose Initial unmet promise nearly killed off the approach. But something miexpecled has happened: Senior executives have become considerably more enthusiastic about CRM. In 2003, Bain ik Company's annual Management Tools Survey of 708 global executives found that firms actually began to report increased satisfaction with their CRM investments. In 2001, C KM had ranked near the bottom of a list of 25 possible tools global executives would choose. Two years later, it had moved into the top half. In fact, 82% of surveyed executives said they planned to employ CRM in their companies in 2003-a large iumpfrom the 35"o who employed it in 2000. Today, CRM spending appears to be picking up. Gartner forecasts that overall CRM sales will rise another 10% by the end of 2005. So what's changed? Why has disappointment turned to satisfaction, pes-
simism to optimism, cutbacks to new spending? To answer t hese questions, we studied a wide range of companies that have recently been successful in implementing CRM systems, and we discovered some common threads in their experiences. Most important, they've all taken a pragmatic, disciplined approach to CRM, launching highly focused projects that arc relatively narrow in their scope and modest in their goals. Rather than use CRM to transform entire businesses, they've directed their investments toward solving clearly defined problems within their customer relationship cycle - the series of activities that runs from the initial segmenting and targeting of customers all the way through to wooing them back for more. T"hc successful users have also exhibited a healthy skepticism, discounting overblown claims that the ultimate payIIAliVAriD BUSINESS REVIEW
tional, and electronic connector manufacturer Molex. We'll also lay out some basic considerations that can help firms determine which CRM proiects are likely to yield the most value.
Is It Strategic?
There's no getting around it: A CRM program involves complicated business and technology issties and requires significant investments of time and money. CRM is in>t a tool for buffing a company's performance at the edges; it should be applied only to processes vital to a company's competitiveness-those that can distance a firm from its competitors or keep a function (such as call center response time) on par with the rest of the industry when parity counts. If the target is not ttrily strategic, the organization will be hard-pressed to summon the vigor necessary to tackle entrenched business processes or retool its organizational structure and gamer expected returns. Before spending a dime on CRM, therefore, executives need to make sure they have the right targets in their sights. Paul Fulchino knew the stakes involved when he brought CRM intoAviall after being appointed CEO in 2000. Fulchino had ambitious...