Why CRM fails and how to fix it

 

Writing for the MIT Sloan Management Review, Cranfield School of Management’s Dr Stan Maklan, Professor Simon Knox and Professor Joe Peppard reveal why investing in Customer Relationship Management (CRM) is not always a silver bullet for addressing marketing challenges and recommend what needs to be done to get results from such investments.

Their extensive research reveals that in endeavors to increase revenues, there has been a trend for companies to invest in sophisticated new relationship management resources, such as call centres, databases, software and websites, but to then continue running their business as they always have done. Crucially, these companies wrongly assume that their customers value the outcomes of these investments.

Companies spend almost $50 billion per annum on implementing CRM solutions, yet despite these enormous investments, studies consistently show that 55% to 75% of companies fail to meet the expected return on their CRM investments.

Whilst technology plays an important role in CRM, the research suggests that successful CRM investment results from developing customer relationship capabilities within the organisation and backfilling with capital investment as one learns which initiatives are working.

Dr Stan Maklan commented: “Too many organisations are compromising huge investments in marketing technology because they don't manage the development of management know-how as effectively as they do IT systems development. I am sure that the lessons we have learnt about CRM are applicable to the new online social media; software systems alone do not improve your business."

The Cranfield academics argue that it is because leading companies are usually so well endowed with resources that they rush too quickly into large-scale, IT-based CRM investments, seduced by ‘best practice’ and management fashion that they somehow forget about the capabilities needed to support these resource investments.

Professor Knox said: “Top teams need patience and the courage to avoid global solutions, consultants’ best practice models and their own preference for immediate results, by allowing marketing capabilities to develop and lead CRM investments.”

Professor Peppard commented: “Customer loyalty cannot be fast tracked merely through buying companies, mailing lists or CRM technology. Where CRM is successful, organisations learn from customers and craft effective responses, renewing and enhancing the value each side derives to a point where the relationship itself is a source of sustainable advantage and profit.”

It is clear from the research that engaging with customers and responding effectively does not develop automatically from investments in CRM technology solutions; it requires a sustained program of investing in and developing a wide range of resources (e.g. brands, distribution networks, supply chains and know-how) in consideration of customers’ needs. It is the combination of these capabilities and CRM technology that will enable a company to develop unique propositions that customers will value.

Ends

Notes to editors

For more information on this research or to interview one of the authors please contact: Marie McCormack on: T: +44 (0) 1234 754425 or E: or email:  marie.mccormack@cranfield.ac.uk

Cranfield School of Management is one of Europe’s leading university management schools renowned for its strong links with industry and business.  It is committed to providing practical management solutions through a range of activities including postgraduate degree programmes, management development, research and consultancy.    www.som.cranfield.ac.uk