CRM Done Right According to Harvard Business Review

Contributor:  Darrell K. Rigby and Dianne Ledingham
Posted:  03/21/2011  12:00:00 AM EDT
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Tags:   HBR | CRM | customer loyalty

Management Tools Survey of 708 global executives found that firms actually began to report increased satisfaction with their CRM investments. In 2001, CRM had ranked near the bottom of a list of 25 possible tools global executives would choose. Two years later, it had moved into the top half. In fact, 82% of surveyed executives said they planned to employ CRM in their companies in 2003—a large jump from the 35% who employed it in 2000.

Today, CRM spending appears to be picking up. Gartner forecasts that overall CRM sales will rise another 10% by the end of 2005. So what’s changed? Why has disappointment turned to satisfaction, pessimism to optimism, cut backs to new spending?

To answer these questions, we studied a wide range of companies that have recently been successful in implementing CRM systems, and we discovered some common threads in their experiences. Most important, they’ve all taken a pragmatic, disciplined approach to CRM, launching highly focused projects that are relatively narrow in their scope and modest in their goals.

Rather than use CRM to transform entire businesses, they’ve directed their investments toward solving clearly defined problems within their customer relationship cycle—the series of activities that runs from the initial segmenting and targeting of customers all the way through to wooing them back for more.

The successful users have also exhibited a healthy skepticism, discounting overblown claims that the ultimate payback from a CRM system is the creation of a “real-time enterprise.” Understanding that highly accurate and timely data are not required everywhere.

Disappointed by the high costs and elusive benefits, early adopters of customer relationship management systems came, in the post dot-com era, to view the technology as just another over-hyped IT investment whose initial promise would never be fulfilled.

But this year, something unexpected is happening. System sales are rising, and executives are reporting satisfaction with their CRM investments. What’s changed? A wide range of companies are successfully taking a pragmatic, disciplined approach to CRM.

Rather than use it to transform entire businesses, they’ve directed their investments toward solving clearly defined problems within their customer relationship cycle. The authors have distilled the experiences of these CRM leaders into four questions that all companies should ask themselves as they launch their own CRM initiatives:

Is the problem strategic? Is the system focused on the pain point? Do we need perfect data? What’s the right way to expand an initial implementation? The questions reflect a new realism about when and how to deploy CRM to its best advantage. Understanding that highly accurate and timely data are not required everywhere in their businesses, CRM leaders have tailored their real-time initiatives to those customer relationships that can be significantly enhanced by “perfect” information.

After they’ve succeeded with their first targeted CRM project, they can use it as a springboard for solving additional problems. CRM, in other words, is coming to resemble any other valuable management tool, and the keys to successful implementation are also becoming familiar: strong executive and business unit leadership, careful strategic planning, clear performance measures, and a coordinated program that combines organizational and process changes with the application of new technology.

in their businesses, they’ve tailored their real-time CRM initiatives to those parts of their customer relationships that truly do depend on “perfect” information. Once they’ve succeeded with the smaller, more-targeted CRM project, they’ve used their initial investments as springboards for solving additional problems. We’ve distilled the experiences of the CRM leaders into four questions that all companies should ask themselves as they launch their CRM initiatives:

• Is it strategic?

• Where does it hurt?

• Do we need perfect data?

• Where do we go from here?

The questions reflect a new realism about when and how to deploy CRM to its best advantage. When Darrell Rigby, Fred Reichheld, and Phil Schefter took stock of CRM’s effectiveness in these pages nearly three years ago (in “Avoid the Four Perils of CRM,” February 2002),

lots of companies were still placing big bets that the technology would pay off—somehow. Lacking clear customer strategies and the organizational structures to support them, many firms got burned and grew distrustful of CRM.

The difficult lessons such organizations learned have led them to sharpen their customer strategies, setting the stage for real gains from more focused CRM applications.

Reprinted by permission of Harvard Business Review Press.  An excerpt from Harvard Business Review on Increasing Customer Loyalty.  Copyright 2011 Harvard Business Review. All rights reserved.

Darrell K. Rigby and Dianne Ledingham Contributor:   Darrell K. Rigby and Dianne Ledingham


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