Flip through the presentation deck of a CIO undertaking a customer relationship management project, and you'll likely find a slide that says: "CRM is a journey, not a destination." Indeed, the 434 CIOs participating in our survey and follow-up interviews indicated that surmounting the nearest CRM hill only reveals a vista of new opportunities.

"We're gathering a lot of data, and now we're trying to figure out how to use it," says John Good, vice president of technology finance at Merrill Lynch & Co. Inc., who was on the team that launched a call-center integration project last year. "How do we mine this data and interpret it to meet our clients' needs? Now we can track a client's total history with us—okay, what do we do with that?"

The 13-month project was the result of the firm's desire to understand its individual customers better. "If we know from their history that a client has no children, for example, then we don't want to be offering educational investments," notes Good.

This scenario is familiar to Kimberly Collins, a senior research analyst with Gartner Financial Services in Durham, N.C. "In many instances, CRM used to be thought of as tactical," she says. "Now you're starting to see people looking across the enterprise. Once they realize that CRM must cross multiple channels and multiple products, they realize that they will need to leverage the insights derived in the marketing and IT departments. Analytics is starting to play a bigger role. Initially this will come with a higher price tag, but it will also bring greater long-term revenue gains."

Often, the second step in the journey won't become clear until a company has taken the first. "Only after you get started can you really visualize the magnitude of the benefits your firm can realize," says Don Peppers, founding partner of The Peppers and Rogers Group, a CRM consulting firm in Norwalk, Conn. "In many cases, if you have no CRM capabilities, it's difficult to quantify the business case for it at all. So companies begin on the basis of reducing cost or realizing efficiencies, but when they get big revenue benefits, they ramp up spending."

Moreover, companies will find they must adapt their CRM efforts as the expectations of customers and their familiarity with technology change. "Although corporate bean counters would like to see a defined conclusion to a CRM initiative, that's not always possible," says Carol Parenzan Smalley, a customer communications consultant and former editor of searchCRM.com. "As customers evolve, so do the technologies that support them. CRM is not a once-and-done endeavor. It is an evolution of processes and strategies."

Fifty-two percent of our respondents rated their satisfaction with their CRM projects at 4 or 5 on a 5-point scale (where 5 is the most satisfied). The mean was 3.4. Yet dissatisfaction, analysts say, often has nothing to do with technology.

"CRM has to optimize marketing, sales and service—they have to be aligned," says Collins at Gartner. "In most organizations they're separated."

John Goes, vice president of operations at Ellison Machinery in Kent, Wash., a distributor of machine tools, studied CRM failures for a long time before deploying a system in 1998 to link all of his firm's sales, service, engineering and administrative staffs. "For our little company, I couldn't have a failure," he says. "One of the problems with a CRM package is that companies purchase it looking for a process. You're buying a process in a can and telling your people that the beatings will continue until we're using this. Everyone has to change how they work. What we did was build our application to fit our existing process."

The key to winning employees over to a new system, he says, is user value. "A new system has to make their jobs easier." Often it's the sales force that balks. "They're afraid the new system means they will be fired," Goes says. "I brought the service staff up first, which allowed me to get a lot of clean customer data into the system. Most of what the salesperson needed was already there when they were brought into it. Now they realize that it's not a policing tool but a communications tool that allows them to keep up on things on their territories."

Goes is quite pleased with his system. "It probably has had more to do with us staying in business and maintaining our market share than anything else," he says. But he, too, is planning for the next phase: moving to a larger, more comprehensive system that will offer new functionality, including more marketing capabilities such as a Web interface for customers. The system is being rolled out by Ellison's parent corporation, Meritage Corp.

While Goes was deploying his system "before the term CRM was even coined," others are just beginning. The Orlando Utilities Commission, a municipally owned utility, is looking into data warehousing and Web account access to improve customer service. Says Thomas Washburn, vice president and CIO: "We pride ourselves on having good customer service, and it's something we can improve now that the technology is here. One thing we try not to do is be on the bleeding edge. The size of our company is such that we can't go out and try the latest and greatest. We have to let it get shaken out by the industry."

Sixty-one percent of respondents either have a CRM system in place, are installing one or plan to do so this year. That leaves a lot of room for growth.

"We're probably at the beginning of a three- to five-year bubble for CRM," says Gartner's Collins. "A lot of people are ready to move forward. It's a long-term process. For people beginning today, it will take a couple of years to get there. There's still quite a window of opportunity. And it's always going to be shifting in some way. How, for example, is wireless going to play? Will it play? Over time, customers will expect different things, and this will change the environment."

Don Peppers thinks CRM has a long way to go before it lives up to its real promise. "I want to do business with a bank that fills out my loan application for me with data they've already gotten," he says. "I want to do business with a phone company that allows me to go to a Web site and control my call-forwarding options for the day, the week, the time of day. I want a car company that lets me make my service appointments online and a credit card company that sends me my bill in a password-protected Web URL. When those days arrive, I'll say CRM is living up to its real potential."—Terry A. Kirkpatrick

This article was originally published on 07-01-2001
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