Be thoughtful when adding CRM to e-biz strategy

Far and away among the hottest sectors in IT for the past year have been all things related to customer management. After years of virtually ignoring their customers, corporations everywhere have awakened to the fact that there is a tremendous amount of untapped value in their customer base.

Far and away among the hottest sectors in IT for the past year have been all things related to customer management. After years of virtually ignoring their customers, corporations everywhere have awakened to the fact that there is a tremendous amount of untapped value in their customer base.

Most Fortune 500 companies have initiated a CRM (customer relationship management) project, and most of these companies have experienced some initial level of success. After all, when you've ignored your customers for almost three decades, any effort to reach out to them - even electronically - is better than none at all.

The problem is that not everyone is convinced that simply reaching out to customers online is a good thing, the caveat being that unless the entire business is prepared to deal with the interactive nature of any CRM project, it may not have the beneficial effect that was originally intended.

Historically, one of the primary tenets for achieving profitability in any business has been in limiting the amount of money spent on customer service. This is because customer service is a cost, and although spending a lot of money on it may make for happy customers, it tends to make the chief financial officer very antsy because all the money spent on customer service comes right out of the bottom line.

In fact, it's no accident that most customer service operations put customers through an escalating series of hurdles to resolve any conflict. After all, if it takes effort to get a problem resolved, most customers won't bother trying to resolve the problem. This may not make for happy customers, but if only 10% of your customers have a problem, then spending additional monies to make those customers happy may not be financially prudent. Servicing that 10% could cut into profits by as much as 50%.

Of course the justification for investing in CRM is that it will help you encourage recurring revenue by maintaining a lasting relationship with your customers. Whether the product is a PC, a household appliance or a car, there could be an opportunity to sell additional products and services assuming the customer is happy. In theory, this is a principal application of any sound e-business architecture.

Unfortunately, most companies today don't have the business processes in place to really support CRM initiatives over the long term. Trying to return an item bought online to a physical store is a challenge to which most companies cannot yet rise. And in the world of business-to-business e-commerce, the complexity is greater. Ford Motors, for example, manufactures very little. Instead, it assembles parts from a broad range of suppliers. For companies such as Ford, tying their CRM projects into their order-management and supply-chain system is a major multiorganisational endeavour.

Ultimately, through better communication with the customer, this process should prevent disasters such as the tire debacle Ford is currently experiencing. But it will be years before companies get all their suppliers and distributors integrated with CRM projects because it's a major business re-engineering project.

The simple truth of the matter is that CRM today is soon going to be what enterprise resource planning projects were to IT in the mid-1990s. This is because installing the software is relatively easy compared to driving the cultural changes necessary to make these investments ultimately pay off.

In fact, when you think about it, CRM projects are only the tip of the e-business iceberg. It's a great place to get started, but deploying a CRM initiative without thinking through all the implications is an open invitation to internal strife that, at least in the short term, may do a lot more harm than good.

For IT managers, this means that you need to be seen as a proactive champion for CRM projects while simultaneously being wary of unleashing forces in your company that could have unintended consequences, not the least of which is setting up customer expectations that your company may not actually be prepared to deliver for a long time.

Michael Vizard is the editor in chief at InfoWorld. Send him email at michael_vizard@infoworld.com.

CRM takes off A survey of 300 companies by Meta Group revealed the following stats for e-business and customer resource management.
  • 75% expect to increase investments in enterprise CRM strategies.
  • 80 % report success with CRM programs and projects.
  • 76 % have not yet fully integrated CRM programs into their e-commerce initiatives.

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