NEW YORK-The crowded vendor marketplace obscures the fact that customer relationship management, though expensive, easily pays for itself in business expansion and market differentiation.
“Companies looking for flat head decisions, where you smack your forehead and say `that’s for us!’, are confused because it’s acronym hell out there,” said John Williams, a partner in CRM Insights, Denver.
“There are too many vendors and too much technology, but the technology is doing a fantastic job of evolving.”
CRM Insights, which does research and consulting in this area, recently surveyed 300 companies in various industry sectors, Williams said April 12 at the CRM Solutions New York 2000 Conference, sponsored by Advanstar Technology Communications Group, Eugene, Ore. Asked to name their top three customer relationship management providers, the 300 respondents identified 64 different companies. That figure extrapolates into an estimate of more than 500 CRM solutions providers doing business today.
“The cost of ownership is a real issue. Consolidation is coming on, and when it does, will your vendor still be there?” Williams said.
Today, it costs about $10,000 per work station to install a customer relationship management system, down from $12,000 to $13,000 several years ago, he said. Companies that undertake this process, which can unfold to full fruition over five-to-20 years, should also expect to pay between $3,000 and $7,000 more for support after the CRM system installation.
“Determining a return on investment for CRM is tough to model, but there are some real hard dollar numbers coming up and they are high,” Williams said.
As a general rule, the implications for increased revenue through successful implementation of customer relationship management systems are 10 times their cost, said John A. Goodman, president of e-Satisfy.com, Arlington, Va. Formerly known as Tarp Customer Care Solutions, the management consulting and research firm was established in 1971 at Harvard University.
“For every five customers who have had a problem with your company, one will look elsewhere. For each two customers you move from dissatisfied to satisfied, you retain one customer,” he said.
“You must know your customer-acquisition costs and the value of each customer, but it can cost up to 20 times more to gain a new customer than retain an existing one.”
Furthermore, customers who do not have problems in their dealings with a company are willing to pay more for its products or services, thereby increasing the seller’s profit margins.
As a general rule, only 20 percent of problems customers encounter are caused by employees of the company from which they have procured goods or services, Goodman said. Another 40 percent of customer dissatisfaction is the result of company policies that create unrealistic expectations because of hype about price, delivery or performance.
“There is a Dilbert cartoon that says, `I know this looks like criminal fraud, but it’s marketing,’ ” he said.
The other 40 percent of customer dissatisfaction typically is due to the buyer’s incorrect expectations or incompetence, Goodman added. Therefore, upfront efforts to educate the consumer in the correct parameters of the service and the proper use of products are worthwhile investments.
The advantage customer relationship management technology confers is its capability for improving the dynamics of the person-to-person and person-to-machine interactions involved in buy and sell transactions, Williams said.
“Examine how you sell and how the customer buys. Identify the process flaws and select (and prioritize) specific problems to solve,” he said.
“Beta test the system first to prove the business case. Then pilot it to see customer and employee acceptance.”
As a general rule, about two-thirds of all corporate attempts to install and benefit from customer relationship management systems end in failure, Williams said.
“The Maalox moment comes when you realize you’ve spent $4 million and 18 months and you’ve just had it with the whole thing,” he said.
Most often, companies that fail did not get the wholehearted support at the outset of a top executive dedicated to quarterbacking the process from initiation to fruition. In addition, they neglected to bring on board the collective mindset of the workers who would implement and use the system.
However, companies in the successful third can realize a return on investment of up to 75 percent, Williams said.
“CRM is not easy, fast or cheap, but it’s not an option,” he said.
