Turning CRM Failure into CRM Success

By Doug Turk,

executive vice president

Recently, Inforte launched its first book,"CRM Unplugged: Releasing CRM's Strategic Value." Based on extensive industry research, the book illustrates how past failures of CRM stem from multiple causes in both planning and implementation. Ultimately, it reveals that a whole new way of conceiving of and implementing CRM is needed. The following article describes how focusing on a customer-centric approach across departments provides the first seeds of success for managing and building customer relationships.

There is an old industry joke that blames customers for an organization's business problems. Two executives are talking and one asks the other how his business is going; he replies, "It's great except for the darn customers." This joke inevitably gets a laugh because of both the brutal irony and the brutal truth.

As backward as it seems, it isn't too far off the mark. Finding ways to improve your customer relationships are among the most difficult problems for executives to solve. In most Customer Relationship Management (CRM) failures, companies are unable to meet their business goals and metrics because they failed to adequately understand their customers and define how CRM should meet their customer's unique requirements. For most companies, CRM would be great if it weren't for the "darn customers."

To understand how to turn CRM failure into success, it is important to first de-mystify some of the issues with CRM and identify the reasons for the failures. If you study companies that are winning with CRM, you will find that they are consistently outperforming their competition and maintaining their loyal and profitable customer relationships. Typically, these companies fundamentally understand two factors; first, they understand their competitive differentiation, and second, they incessantly pursue increasing their customer insight. The critical step these companies take is to ensure that these factors are built into their CRM programs and operations.

This may sound like a pipe dream for many organizations. Few companies achieve this insight and provide seamless customer interactions across departments. In fact, it is usually quite the opposite. In most companies, customer orders or requests are routed through many departments, including sales, finance, billing, manufacturing and customer service. As client calls are transferred from person to person, and information bounces around departments, departmental rules often trump the desire to provide swift and seamless service.

There are many reasons for these problems, and most start with management issues. Most managers tend to be too internally focused and department-centric, rather than customer-centric. As a result, their employees are usually unaware of the priorities attached to various customer interactions. So customers tend to get treated in uniform, often-shoddy ways, making most companies difficult to do business with.

Based on our research, we found companies that are leaders in effective CRM practices break down departmental barriers and manage customer relationships holistically. Cross-departmental collaboration is encouraged and the importance of customer priorities and activities supersede most other departmental issues.

For example, in implementing their CRM initiative, PepsiAmericas developed a coordinated enterprise-wide approach. The company first acknowledged that each of its three identified customer segments had different service, delivery and relationship needs. Rather than create a uniform approach to customer interaction that would serve no one group optimally, PepsiAmericas assessed the types of dealings and processes that provided the greatest value to each segment, and developed specific approaches for each one. This type of strategic customer segmentation dictates what kinds of treatments each group receives, which in turn drives policy, process and behavior across the entire organization.

In reality, each department within a firm significantly affects value delivered to customers, and it is the responsibility of each department to deliver unique and satisfying service to customers. Each department already has a functional strategy that defines its operating plans and budgets. But in most organizations there is no equivalent customer strategy, that is, no central definition of customer policy and interdepartmental process related to customer interactions. To optimize value delivered to customers and the costs associated with it, companies must take a more customer-centric approach to defining operational plans across departments.

Functional planning, policies and operational priorities at leading companies like Dell, PepsiAmericas and Harrah's are driven from goals associated with addressing customer segments. In these companies, customer goals drive departmental planning, which leads to better coordination and monitoring of customer activity across the firm.

We recommend that, in addition to functional strategy, companies should also create a customer strategy that coordinates the specific treatments and metrics associated with creating and delivering optimal value for specific customers and customer segments. Similar to DNA code, customer strategy provides every department with the instructions on how to meet each customer's needs. Rather than relying on each department to get customer policies and processes right on its own, the customer strategy defines an integrated set of customer processes and policies across all parts of the enterprise. Your customer strategy must ensure that segments are treated uniquely, the customer experience is coordinated across your enterprise, and customer insight processes are integrated into daily operations.

Customer strategy helps avoid the silo effect that exists among departments in many organizations. As previously stated, customer strategy encourages department managers and employees to think first about the customer and second about departmental policies. For example, finance departments usually define credit rules and payment terms that provide optimal risk management and daily sales outstanding (DSO) metrics for the firm. Although basic ground rules must exist, top customers likely should also have their own, tailored credit rules and payment terms designed to make it easy for them to do business with the company.

Customer strategy must drive customer-related policy; existing departmental rules are secondary in importance. The same goes for internally focused inventory policy and fulfillment rules that fail to put the customer first. In many organizations, departments become fiefdoms and lose sight of their mission to support the delivery of value to customers. High performance firms breach the walls between departments.

In the end, customers are the reason for any company's success and shouldn't be blamed for its failure. The leading companies recognize this fundamental premise and approach their CRM programs by first clearly defining their Customer Strategy and then ensuring that the customers are subsequently served to generate the greatest return. With this approach, someday the answer to the question posed at the beginning of this article will become, "Our business is great, especially due to the relationship we have with our customers." No longer the punchline of a joke, an organization's customers will instead play a central role in the success of the overarching business strategy.

Doug Turk, a recognized authority in customer, sales, and marketing strategy, has led numerous successful multimillion dollar customer strategy and solutions engagements for Global 1000 companies. Turk and Inforte CEO Phil Bligh are the authors of CRM Unplugged: Releasing CRM's Strategy Value (Wiley & Sons, 2004).

Copyright © 2004 IDG Communications, Inc.

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