The Ovum View: CRM - I'll be back

Why do we care so much about customer relationship management? Are we putting the technology first, to the detriment of its effectiveness? Ovum principal analyst David Bradshaw looks at how to get CRM right.

CRM is irrelevant. All CRM projects have been complete failures. No one is doing CRM any more. All the CRM software companies have gone bust and all CRM consultants are on indefinite gardening leave.

That's what you might think if you believe everything you read about CRM over the last few months. And while there are grains of truth, there are plenty of falsehoods.

Anyone who is a customer (and that means all of us) knows that the vast majority of organisations, whether commercial, non-profit or government, have a long way to go before they can pat themselves on their back for the way they deal with us. Indeed, plenty of household names are renowned for the poor job they do. The need for CRM is as large as it ever was.

But there have been plenty of problems with trying to ‘do’ CRM. In particular, the benefits of installing and using CRM software have been grossly over-hyped. CRM technology on its own often does a poor job of fixing business problems.

To people with longer memories, this sounds painfully familiar. There was another three-letter acronym – BPR – that went through a very similar hype cycle. Nowadays BPR has been replaced by a whole new set of acronyms (6Ó, meaning Six Sigma quality assurance, anyone?), while the ERP technology that was used to power BPR has become universal.

Part of the problem is that there is still a lot of confusion over what CRM is. This is not helped by the profusion of definitions of CRM.

Yet the words behind the acronym contain an excellent definition. Customer relationship management: you manage your relationship with your customer. If you manage something, you decide what you want to do, take steps towards doing it and then measure how well you have done.

Far too many organisations leapt straight into the second part without thinking through the first and last parts. How can you measure how well you have done when you don’t know what it was you wanted to achieve? Post-hoc rationalisation of CRM inevitably means that the ROI is not going to please those holding the purse strings.

Making CRM work requires considering three areas:

Strategy: you have to make decisions about the kind of relationships you want to have with your customers and what metrics you can use to measure success.

Operations: you need to follow through on your decisions at the coal face, changing the way you work.

Technology: if you do not have them already, you need to acquire systems that give you the information you need to take strategic decisions and the tools your front-line staff need to do their work consistently and effectively.

Technology therefore comes last, not first. Indeed, you may already have all the technology you need. Many large organisations will have already spent on CRM systems anyway and will be wondering what they got for their outlay. The good news is that most CRM software is flexible enough for you to re-think the way you are using it – provided, of course, you have not customised it into the ground.

One final warning: be careful what you wish for. Too many CRM projects are being justified in terms of saving money but saving money should never be your main objective. Why? Because it is a very good way of making your customers go away. Indeed, it is almost as effective as throwing money at the problem without any clear objectives.