Despite the tens of millions of dollars organizations are spending on their customer relationship management (CRM) initiatives, far too many of these initiatives are scrapped without ever showing any positive results. How can you assure that your CRM initiative is successful? Avoid these top ten mistakes.

Figure 1: Potential CRM Failure

1. Lack of Planning. The number- one reason CRM initiatives fail is lack of adequate planning. Planning in this case includes not only a comprehensive project plan, but also a detailed business case that properly sets expectations for the likely return on investment. The CRM plan should be broken down into phases of not more than six months, with measurable goals and success metrics for each phase.

2. Narrow Focus on Technology. For many organizations, CRM is technology, but achieving a true focus on customers and demonstrating a positive return on investment requires that the organization look beyond technology. CRM technologies are tools; however, without new or significantly revised business processes and business focus, it's extremely difficult to develop true relationships with customers.

3. Lack of Senior Management Commitment. Creating, maintaining and sustaining customer relationships is not easy; it requires a significant shift in business focus. That type of shift is next to impossible without broad senior management commitment. Yes, new technology can be implemented, but chances are that the staff who interact with customers every day will not change the way they do business with customers unless that "new way" is prescribed throughout the organization - and that means from the top down. Senior management participation in defining success metrics is also essential.

4. Not Listening to Customers. It's truly surprising just how many organizations try to implement CRM without first talking to customers. You can't create and maintain relationships with customers without providing lasting value. Additionally, you can't truly know what customers believe is valuable unless you ask them. Qualitative and quantitative research with customers is essential to success.

5. Trying to Maintain the Organization Status Quo. Achieving a customer focus almost always requires some revisions in the organization structure. Throughout the early stages of the initiative, all staff that touch customers need to participate on the CRM task force. This group will be instrumental in defining the organization changes required to achieve the organization's CRM goals.

6. Not Making It an Enterprise Effort. This issue is often tied to #2 – leading with technology. For example, if CRM is focused solely on sales automation, chances are the initiative will fail to demonstrate increased customer profitability. The organization may be able to demonstrate efficiencies in sales processes with associated ROI; however, long term, it may be difficult to demonstrate just how relationships with customers have been improved. This is especially true if related processes and technologies in marketing and customer service remain unchanged. Relationships with customers are based on all the interactions they have with the organization. Positive strides in one area can be totally undermined by lack of consistent voice and uncoordinated offerings throughout the organization.

7. Not Focusing on Best Customers. Many organizations have blown their business case (if they had one), by not appropriately allocating their CRM resources. In fact, the major problem is either trying to focus on all customers equally or, in some cases, focusing too narrowly on only the best customers. Most organizations cannot afford to universally improve sales, marketing and service for all customers. In fact, the business case should easily demonstrate those customers where improvements are likely to have the most impact in terms of increased profitability. Generally, this translates to:

  • Recognizing best customers with express service, assigned sales and customer service representatives and special benefits. Decreasing heavy marketing efforts, except for those that demonstrate increased activity only when incented or during specific seasons. The focus is retention.
  • Increasing marketing and service efforts with "next best" and marginally profitable customers that show greatest promise (based on statistical models and lifetime value analysis) for increased profitability. Also target those unprofitable customers that look most like best customers. The focus is additional cross-sell or up-sell.
  • Decreasing marketing and service levels for unprofitable customers that have limited probability of higher lifetime values. Chances are these are one- time buyers or those that only buy with deep discounts or heavy promotions.

8. Not Beginning with a Pilot. It's surprising to us just how many organizations don't start their CRM initiatives with a pilot project to prove the concept. A pilot will quickly demonstrate where you don't have adequate senior commitment and where the business case may be flawed. The pilot can also help to further define organizational change requirements. Most importantly, a pilot can help you to further qualify what success can mean, especially if you continue your primary research efforts throughout the term of the pilot.

9. No Customer-Focused Metrics. Many organizations fail to revise the metrics they track to include customer-focused variables. The most important variables relate to how customer segments are changing over time. The most effective way to do this is through a customer scorecard. Your scorecard should track changes in customer profitability and lifetime value, up-sell and cross-sell, and acquisition rate and retention month to month as well as year to year. In addition, these metrics and the related trends should be used during the strategic planning process to set organization and departmental goals and objectives.

10. No Updates on Progress. This one is simple – a plan without regular progress updates is not truly a plan. Good or bad, progress must be measured. Communicate progress against each of the pre-identified success metrics and against the project plan on a regular basis. Discuss how you're adjusting to deal with setbacks. Most importantly, celebrate the successes!

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