Mack Murrell has heard all the horror stories about failed customer relationship management system installations. Heck, he even has some of his own to tell.
A few years back, his company, The Dow Chemical Co., was involved in a big CRM project that ultimately cost a ton of money and produced few results other than red faces.
But rather than giving up on CRM, Murrell is one of its biggest boosters. After a breather to try to figure out what went wrong, he rallied the troops and tackled the project again. The obvious question is, why?
"We couldn't afford not to," says Murrell, Dow's global director of customer interface. "Our customer memory, or ability to view a customer's interaction, was not nearly good enough. We thought we were missing a lot of opportunities to build customer loyalty and grow."
Murrell's viewpoint is shared by the technology executives of companies in just about every industry sector. In fact, despite a Gartner report that estimates that as much as 60 percent of all CRM installations fail to meet their goals, companies are investing in large, highly integrated CRM systems like never before.
Research firm IDC estimates that CRM software sales will grow at a compound annual growth rate of 17.7 percent - from $6.2 billion in 2000 to $14 billion in 2005. Despite the economic downturn, IDC analyst Mary Wardley says recent talks with corporations indicate that CRM budgets are not being slashed. "Users are approaching it in a more staged manner due to economic reasons, but have not as yet cut their budgets," she says.
A report by Gartner in June also identified CRM as the top strategic initiative for retailers in 2001. "CRM initiatives, in a very short period of time, have gained significant mind share because they offer to fill two of retailers' most critical needs - understanding customer buying behavior, and providing better customer information throughout the organization," says Carol Ferrara-Zarb, Gartner's CRM research director.
That's not to say the industry isn't having its problems. Most companies involved in the sector have been forced to sharply reduce their earnings forecasts, and some, such as Clarify, now a division of Nortel Networks, are rumored to be on the block. BroadVision, E.piphany and Vignette all failed to meet early targets, while Open Market saw its second-quarter revenue fall to less than half its levels of a year ago. Conversely, PeopleSoft, SAP and Siebel Systems all reported strong quarters, largely based on the strength of their CRM business.
The CRM market is highly fragmented, with no one vendor controlling more than 24 percent. Siebel is the undisputed leader, with that 24 percent market share, or about $1.8 billion in annual revenue. Oracle comes next with about 5.5 percent of the market, followed by Clarify with about 3.3 percent.
The types of applications that fall under the CRM umbrella represent a broad mix. They can be broadly defined to encompass any application that automates customer-facing business processes, and can include software aimed at sales, marketing, customer support and contact centers. Some companies, such as Clarify, specialize in systems aimed at large call centers, whereas others focus on individual components of CRM, such as processing e-mail. EchoMail, eGain Communications and Kana are representatives of that sector.
What they have in common is the ability to help organizations better understand who their customers and business partners are and, ultimately, to serve them better.
Dow represents an excellent study in the types of issues companies face today in meeting those goals, and the potential benefits that can be gained through CRM systems. The chemical, plastics and agricultural product giant is active in more than 170 countries, with annual revenue of $30 billion and about 50,000 employees. Dow has invested heavily in technology over the past decade, and now boasts robust back-end systems standardized on Oracle, PeopleSoft and SAP. But on the front, customer-facing side, Murrell says, Dow "had nothing."
There was no central repository for customer information. It was stored in "hundreds - perhaps as many as 1,000 - different areas," he says. Dow launched its second effort to install a companywide CRM system - based on the Siebel platform - two years ago, with four goals in mind.
First, Dow wanted to develop a central repository for all customer information, which could be accessed by any employee providing service to a customer. Second, it wanted to offer its customers seamless interaction with Dow. When a customer is passed from one agent or department to another, Dow wanted the new agent or department to be able to pick up where the last left off and not have to retrace steps or waste the customer's time.
Third, Dow wanted to empower its customers to serve themselves, anywhere around the globe, at any time of the day. To accomplish this goal, Dow developed a Web-based interface to the CRM system that can be accessed by customers. Through MyAccount@Dow, customers can log on with a secure passcode, enter new orders, check order status, review the last three years of their business with Dow and pay invoices electronically. Customers can also access rich collaboration tools.
A measure of MyAccount@Dow's success is the fact that the company has lowered its support costs by $15 million, and technical support personnel have been redeployed into product development. "We've been able to take routine customer support questions off the plate of some very bright people," Murrell says. More important, Dow now does about $100 million per month in e-business.
The fourth goal is centered on what Murrell describes as "exploiting the technology to make things happen." In the industry, it's more commonly known as business intelligence. The idea is that once you know more about your customers, you can use that information to serve them better and drive new revenue.
Two years into the project, Murrell says it is a solid success. "We're not completely satisfied yet, and we have more to do, but when you say 'CRM' and 'e-business' at Dow, there's a very positive response."
In terms of what went wrong the first time, Murrell says a couple of factors stand out. First, the project's leaders didn't get the management buy-in required to make sweeping changes happen. Second, when the system was first put up, it was an empty shell without any customer data. Murrell says the sales staff was asked to put their key customer information into the system, but as is the case with most sales groups, they were too busy selling.
The second time around, Murrell targeted the company's call center operation first. As customers called in, agents used the Siebel Call Center application to enter information about customers, their questions or concerns and the products they were buying. After a while, he says, the sales staff began to access that information, and in turn began entering their own data.
"At each stage, as more customer information was added, it became more valuable to the sales staff," Murrell says. "Now they can't do without it."
Reaching that stage is a reflection of the Holy Grail that CRM offers organizations, says Lisa Arthur, Oracle's vice president for e-business suite marketing. Companies understand that it costs five to 10 times more to gain a new customer than to keep the ones you have, and in the current environment, "there's a fight to keep customers like never before," she says. On top of that are the operational efficiencies to be gained, particularly through Web self-service.
Arthur says at Oracle it costs about $300 to $350 to handle a customer service call by phone. While it sounds grossly exaggerated, she insists the figure is accurate when you factor in such costs as training, back-end technology and the agent's time. "And, by the way, those customers are not all that happy with the service," she adds. Oracle has been able to reduce the cost to about $1.98 per transaction using Web self-service, and levels of customer satisfaction have increased.
"That's why companies are spending lots of money on CRM despite the challenges involved," Arthur says. "They're trying to reach that Holy Grail."