Based on various worldwide surveys conducted in recent years, approximately 50-70% of CRM projects resulted in losses, failure, or at best, no gain or improvement in organizational performance. With this article you will get a brief overview of the most serious mistakes in the implementation of a CRM IT system.
85% of all people as well as decision makers who (have to) deal with CRM solutions characterize CRM (Customer Relationship Management) as a software/database solution for sales. For the most part, this is wrong. Customer management is NOT a technology.
What is CRM? – A definition
Rather, customer relationship management (CRM):
“a customer-oriented corporate strategy that uses modern information and communications technologies in an attempt to build and consolidate profitable customer relationships over the long term through holistic and individualized marketing, sales and service concepts.”
In particular, this means that the company’s existing, individual processes, which are part of the corporate culture, must be mapped in a supporting software/database solution and not, conversely, that the sales-related processes must be adapted to a ready-made technology/IT solution.
Individually derived processes in customer relationship management are understood to mean how active and systematic analysis, selection, planning, design and control of business relationships are designed and lived in the company in the purpose of a holistic concept of goals, mission statements, individual activities and systems.
Global CRM Market
The growth forecasts for CRM IT systems are promising. Digitization is advancing. The latest enterprise software forecast from Gartner in the U.S. shows that customer relationship management will grow to a global market of $36.5 billion by 2017; a significant increase from the $20.6 billion forecast for the first quarter. CRM also leads all enterprise software categories in projected growth, showing a CAGR of 15.1% from 2012 to 2017, also improved from 9.7% in the Q1 forecast.
Despite the tremendous growth in CRM system acquisition over the past decade and the widely accepted conceptual underpinnings of a CRM strategy, critics worldwide point to the high failure rate of CRM implementations, as evidenced by commercial market research studies (see chart).
Market research studies / failure rates
Indeed, too narrow a definition of CRM often contributes to the failure of CRM projects when a company views CRM from a limited technology perspective or CRM is conducted in a fragmented manner. A CRM system is a technology-based business management tool for developing and leveraging customer knowledge to maintain and strengthen profitable relationships with customers. Therefore, a CRM system is an essential component of a global CRM strategy that emphasizes the creation of shareholder value by developing appropriate relationships with key customers and customer segments. The underlying premise of CRM is that companies accumulate customer knowledge in order to
- segment customers effectively,
- establish and maintain long-term relationships with profitable customers,
- determine how to deal with unprofitable customers,
- adjust market offers and advertising measures, and
- at best, stay “one nose ahead” of the competition.
In an international survey, those that have implemented CRM systems to support their sales force have seen significant performance improvements in only 25%, according to CSO Insights estimates. According to a Gartner survey, about 50-70% of CRM projects resulted in losses or failed to gain or improve organizational performance.
That’s why you might always ask: Why is the “outcome” so bad?
The 7 deadly sins in implementation
According to Kale*), there are 7 deadly sins for an unsatisfactory CRM result or failure:
- Companies view the CRM initiative as a technology initiative;
- lack of customer-centric view;
- Insufficient appreciation of customer value;
- Insufficient top management support;
- Underestimation of the importance of change management;
- Failure to redesign business processes;
- Underestimating the difficulties of data mining and data integration.
7 plus 1
There is certainly a lot that can be said and written about the individual points. From my many years of experience, there is another important point, namely the (lack of) user acceptance, which also has a major impact on the success of a CRM system. For example, Forrester Research states that the lack of user acceptance is responsible for 70% of failed CRM projects.
Kale further states that most executives are not even aware of these issues, even though they could spell disaster for their careers and for the company.
I will certainly go into more detail on individual important points in upcoming articles, discuss avoidance strategies or show ways to possibly improve CRM systems that have already been implemented to some extent.
By way of conclusion, it should first be pointed out here that customer relationship management systems can be a curse and a blessing. The software industry, with over 150 different CRM providers worldwide, sells “the perfect world” with great promises and great “case studies”. Of course, they advertise what they do particularly well; the weaknesses are lost in the complexity of the systems. Comparisons are hardly possible, especially when companies and their requirements exceed a certain size.
The application specialists and sales specialists of the software companies do not know your individual business processes. Ergo, they will only help you with the application and integration of the processes into the system, which have been defined and made known beforehand.
Do not get carried away with trying to squeeze individual processes into a system schema, or rather into “their” system schema, in order to save time. Such projects are definitely doomed to fail. Planning costs time, work and money. An investment that is worthwhile in order to be ahead in digitalization, efficiency and competition in the future.
Before deciding on a CRM system, get extensive and above all INDEPENDENT advice so that you don’t repeat the mistakes of others and can successfully focus on what you do best:
On your customers.
*)Kale , S . H . ( 2004 ) ‘ CRM failure and the seven deadly sins ’ , Marketing Management , Vol.13 (September/October) , pp. 42 – 46 .
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