Introduction

With increasing competitive pressures and high rates of customer churn, improving customer loyalty is of paramount importance to all companies, large and small, and across all sectors. Companies are realizing that customer retention is as important, if not more important, than the acquisition of new ones. Such market conditions have propelled Customer Relationship Management [CRM] into the spot light as a strategic imperative rather than merely a technological innovation.

CRM is premised on the belief that developing a relationship with customers is the best way to gain their loyalty. Indeed, CRM not only allows marketers to offer customers products and service with an enlightened degree of confidence, but enables the sales force to collaborate on opportunities and service representatives to manage customer support requests. Yet, it has been reported that as many as 70% of all CRM projects fail.

One suspected cause is that fact that more than half of all CRM development starts with information technologists, even though sales and marketing departments are the primary users of the CRM database. Such an approach is backwards, considering marketing and sales staffs should first determine the specific needs of the customers and relay that information to the IT department. This has led to a paradox surrounding the philosophy of CRM.

The CRM Paradox

Industry writers, practitioners, and even companies who have implemented CRM systems themselves claim to recognize the importance of including customer value generation as an objective for CRM. Yet what they preach often differs from what they actually practice. Indeed, a common mistake in CRM technology implementations is the misconception that simply having the technology in place is the answer to customer management. This approach neglects the importance of one-to-one relationship-building.

For example, if you get a sense that your customers value the time interacting with a representative of the company who knows their names, you may not want to replace that function with software. Perhaps the banking industry is most guilty of this. Many banks now are pushing their customers toward using automated teller machines [ATMs] and even punishing those who persist on using live tellers/representatives through additional services fees and transaction limitations.

The overall sense of this when it comes to the implementation of CRM systems is that customers are treated as an after-thought, and that customer service/care is merely a function of sales mandates, hence the paradox. The following are some exemplar quotes from leading consulting firms and/or companies who have implemented a CRM initiative that seem to highlight this paradox:

• "CRM is not about the customer… the end-game is not customer-centricity, in and of itself. Businesses wishing to take the ROI guesswork out of CRM projects should start with a shareholder value perspective and the fundamental determinants of shareholder value creation: revenue growth, margin enhancement, and asset productivity."
• "One of our big initiatives is driving as many customers as possible to self-service solutions."
• "For large customers, we need to optimize revenue; for smaller customers, we need to focus on reducing the cost of the service."

As evidenced in these comments, there appears to be a loss of orientation around customer service and value generation, which is surprising given the vision of customer relationship management. Adding to, or perhaps perpetuating, the confusion is the vendor hype that often leads companies into large scale implementations and to lofty expectations about the benefits of a CRM. These are the same vendors seeking to maximize product licensing while minimizing ongoing involvement with customers – another paradox given the message of “customer focus” embedded in their sales pitches.

Analysis of Case Studies

To investigate this apparent paradox of CRM, twenty-four conveniently sampled case studies on CRM implementation were analyzed. The case studies were downloaded from popular websites geared around the implementation of CRM initiatives. Each CRM project was evaluated on the strategic and/or operational purposes of a proposed system (objectives) and then compared with the resulting benefits of having implemented the system (success metrics). Conventional content analysis procedures were used.

Three broad categories of CRM objectives were used to evaluate each case implementation:

1. Revenue-oriented (e.g., to promote cross-selling or up-selling opportunities with customers through segmentation and targeting techniques, such as data mining and modeling);

2. Cost-oriented (e.g., to improve efficiencies of transactional processes and reduce costs (e.g., quicker, more consistent transaction times or reduce man-hours associated with each transaction); and/or

3. Customer-oriented (e.g., to better respond to customer requests and changes in behaviour with the goal of improving satisfaction through more personalized interactions to increase customer value.

Similarly, success metrics were aligned accordingly:

a. Revenue-oriented (e.g., having increased sales, revenues, growth, etc.);

b. Cost-oriented (e.g., having cut costs or reduced man hours to process customer transactions); and/or

c. Customer-oriented (e.g., having improved customer satisfaction or service quality).

Findings & Observations

The single most obvious disparity between CRM objectives and CRM success metrics pertains to what companies tend to preach and what they most frequently practice. While companies tend often to emphasize one or more CRM objectives, success metrics from the perspective of their customers (e.g., satisfaction or service quality) are often omitted from their evaluation process. In specific, while 80% of the companies made mention of some form of customer value generation as an objective for their new CRM initiative, in only 13% of these cases do companies actually use customers' evaluations as a basis of measuring the success of the project.

For example, in one particular case study, a company implements a CRM system to increase productivity, while delivering the highest quality of customer service possible. Yet, when evaluating the success of their CRM, the company reports only boosted productivity, slashed costs, and increased revenues. It is even more interesting to note that the company boasts that “the new system allowed 150% more contacts to customers to inform them of late or non-payments.” While It is certainly questionable how many customers actually value being told to “pay-up,” the larger concern is the general lack of insight gained into what aspects of the new CRM customers actually value and whether its implementation has led to overall improvements in customer service and satisfaction.

Moreover, other companies that alluded to having created value for the customers through the CRM system were unsubstantiated and based on managements perspective what the CRM should do be able to do for the customer rather than what it has actually done.

Conversely, while less than half of companies mentioned revenue generation as an objective for the CRM, it is obvious that most companies (about 80%) used some sort of revenue-oriented metric to measure the success of their CRM. This may result from the need to continuously justify technology investments and be accountable for ROI.

An obvious limitation to a case studies analysis approach is the limited number of CRM “failures” described. Typically, cases are prepared by CRM solution vendors, or in cooperation with their clients, and are used as a marketing tool to push their products. It is not surprisingly then that cases speak only of their success and the resulting improvements in revenues, cost reductions, process efficiency, ROI, and the like.

However, the general message is clear. It would appear that many companies have a narrow band concept of the customer relationship where management of the customer relationship equates to the collection of subscriber statistics, target marketing, and customer service agents’ response times. As such, the customer is little more than an object of a call centre script – and rarely valued as a “market of one”.

Concluding Comments

While many companies think of themselves as market oriented and go to great lengths to prove themselves so with CRM technology, few actually are. Businesses need to understand that it is not technology per se that governs customer satisfaction, but rather the human side that builds the relationship between a vendor and a customer.

If CRM is to truly deliver on its promise of personalized service and product delivery, customers must be included in the process of evaluating the outcome of its implementation. Companies need to ask:

• What value, if any, do customers perceive/achieve in their interaction with the companies automated CRM system?
• Do customers choose your brand over competitive offerings due to the benefits they perceive to derive from your CRM?
• What impact does the CRM have on customers’ satisfaction, likelihood of recommending or advocating the company to friends and family, and reported intentions to buy the same brand again?
• Are customers convinced that a company, through its CRM initiative, has their best interests in mind and deliver to them the most relevant service and products?

As fundamental as these questions may be, they are ones that need to be addressed and integrated into any evaluation of a CRM program. Moreover, to truly manage customer relationships well, companies need to understand the historical and potential value of their existing customers, as well as the factors driving this value. Non-technical attributes may be more important than precise technical differences. Automated processes may benefit the company, but not the customer. Ask customers what they value.