CRM failures: Don't blame the tools

The high failure rates of CRM projects have been much heralded. Technology isn't the problem, says Adrian Mello--it's the way projects are implemented.

Accounts relating the high failure rates of CRM are easy to come by.

A recent Butler Group report found that 70 percent of CRM implementations fail. A Gartner study found that approximately 55 percent of all CRM projects failed to meet software customers' expectations. In a Bain & Company survey of 451 senior executives last year, CRM ranked in the bottom three categories among 25 popular tools evaluated for customer satisfaction.

You get the picture. Many people believe that these "failures" are the result of the tools themselves--which is usually not the case. Another complication is that many of the reports define success based on management's impressions, rather than evidence of ROI.

A new study, jointly created by Crmguru.com, Mangen Research Associates, and Caribou Lake Customer-1, challenges these ideas by taking a closer look at CRM implementations and the factors that add or detract from ROI. The study found that only 35 percent of CRM implementations, when considered over their entire life, can be considered failures. That's less than half the failure rate noted in some analyst reports. In contrast, 45 percent of CRM implementations are producing a payback.

Most CRM failures are the result of poor implementations rather than a problem with the technology or the concepts that underpin CRM. The Crmguru.com study found that there are four key factors related to implementation that determine the success of CRM projects: adopting a customer-centric strategy, engaging line staff, being willing to reorganize, and setting measurable goals. No single factor is enough to significantly improve the odds of a successful CRM implementation; to achieve a solid return on investment, companies must do a good job on several fronts. This often requires profound changes in the way that a company does business. Here's a breakdown of the four factors:

1. Adopt a customer-centric strategy
This is the most important factor by far. "Companies lacking customer-focused strategies-- including many (that are) encouraged by CRM consultants and software vendors to proceed regardless-- rarely succeed," says Caribou Lake's Dick Lee, one of the report's authors. Today's customers behave very differently from customers of just a few years ago. They realize they have a choice and they can demand more from sellers. A lot of companies approach CRM as a way to mollify these customers rather than truly reorienting the company to customer needs. This leads to a tacked-on approach to CRM--because it is only viewed as a way of providing lip service.

2. Engage line staff
You can't force line staff, such as sales people and service agents, to use CRM tools. Companies that properly educate relevant staff members about the business benefits of CRM and train them to use it properly are more likely to achieve success. Figure out how the CRM system will make life easier for line staff so they can see how they will derive direct benefits from the tools. The best way to do this to interview them during the project's design phase to find out, for example, if the system can eliminate some of the work associated with forecasting or generating proposals.

3. Be willing to change the organization
Companies must also be willing to change their organizations to take proper advantage of CRM. For example, organizations that traditionally place all pricing authority in a central organization may not realize all the benefits of CRM technology unless they are willing to let sales people directly negotiate pricing with customers, and thereby close sales more quickly. Unwillingness to change organizational roles is more likely to contribute to a failed implementation than accepting the status quo.

4. Set measurable goals
It's difficult to monitor progress of a CRM project and its actual payback without first establishing metrics and evaluating performance. To establish metrics, most companies need to make a substantial investment in customer research. This research helps companies learn things such as how many customers defect as a result of late deliveries or how satisfied customers are with a response to a service request.

The specific CRM software tools that companies choose is not a significant factor for determining a CRM project's success, according to the study. That doesn't mean that all software is equal, or equally suited to different customers.. "What the data show is that in the absence of the four key drivers of success, any implementation will have difficulty achieving positive ROI, regardless of which software system is selected," says Lee.

Furthermore, CRM is not a good fit with short-term financial goals and a quick grab for ROI. Most of the financial benefit of CRM comes from projects that keep customers from leaving and encourage them to increase the amount they spend with the company. These benefits usually don't accrue for at least a year or two. Companies that don't see long-term advantages to CRM should probably avoid it altogether rather than looking for a quick fix.

Not all companies should undertake CRM. Companies more interested in limiting the damage caused by more empowered customers rather than becoming truly customer-centric, and those unwilling to change their organization, empower their line staff, or measure results, should stay away from CRM altogether.

What do you think makes a CRM project a success or a failure? TalkBack below or e-mail Adrian.