CRM paradox

Almost half of all the customer relationship management (CRM) software licences sold to organisations in recent years have never been deployed. And, in light of poor return-on-investment (ROI) figures, they probably never will be.

That is the finding of a major new survey of CRM buyers by IT industry watcher Gartner. The consultancy found that 42% of the total number of software licences bought by respondents (CIOs, CFOs and other IT decision-makers) were not deployed.

“[Even] cut or frozen spending on CRM initiatives… hasn’t stopped enterprises from buying more CRM software than they can use,” says Gartner. “With licence revenue generally down, CRM software vendors always look for ways to boost sales.”

Buying more than the organisation needs may seem a good deal in the short term, but the result is a skewing of total cost of ownership calculations by as much as 20% to 30%, making it less likely that the CRM buyer ends up with a positive ROI.

During the past three years numerous studies have shown CRM projects’ struggling to show clear ROI. “If CRM software is assumed to roll out to fewer users, technology planners must recalculate the benefits – something that most enterprises fail to do. Typically, a decrease in benefit affects the business case and attainment of planned ROI becomes less certain,” says Gartner.

  • The reason for the over provisioning of CRM software is perhaps explained by another survey carried out by Gartner’s business research and advisory service, GartnerG2. The survey, which asked more than 100 companies across Europe about their strategy, competitive advantage and planning, found that most corporate planners in Europe rank managing relations with customers as the most important source of competitive advantage over the next five years.

    However, says Jennifer Kirkby, research director at GartnerG2, much of the activity done in the name of CRM so far has only served to “alienate customers”. This year, she says, “Companies must ‘get down to business’ to get the real value out of previous CRM investment and practices.”

    To do that, continues Kirkby, companies must focus on the ‘human factor’ of CRM, implementing coordinated changes to organisational structures, skills, incentives, knowledge management and cross-functional processes. As a result, she concludes, “Companies will need to allocate 50% of their total CRM budgets to change management instead of the 10% typically allocated today.”

  • The assertion that many companies in the UK are failing to manage their customer relationships effectively has been given added credence by technology marketing communications consultancy Rainier’s Miscommunication Index.

    Between December, 2002 and January 2003, Rainier contacted 50 major FTSE-listed companies to test their ability to respond to customer queries via multiple channels – post, telephone, email and web.

    All but one company failed to provide simple information on vital business statistics across all the channels. One-fifth of enquiries received no response, and 62% of questions were unable to be answered. Results per company varied dramatically, with the poorest performers achieving a total rating of just 16%, while the best company, Abbey National, scored 95%.

    According to Rainier, overall results have worsened since last year. While less than half of companies scored less than 50% in 2001, this has risen to two-thirds of companies. Email communication, in particular, has deteriorated: 42% of enquiries were unanswered several weeks after they had been emailed in this year’s study, compared to 36% in 2001.

    Retail was the worst sector overall, averaging a 40% response rate. It also proved to be least consistent and least able to handle questions by email, with only 16% of email questions answered.

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    Ben Rossi

    Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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