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March 19, 2001 |
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CRM's Realities Don't Match Hype
Study shows most companies' projects have yet to come to fruition
By Rick Whiting (rwhiting@cmp.com)
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usiness and IT executives are thinking big with their future plans for using customer-relationship management systems. But for the moment, the number of operational CRM systems is vastly outnumbered by those in various stages of planning and design. Those projects, many of which are being undertaken with limited budgets, are running into a range of technical and organizational challenges.
Those are some of the findings of a recent survey of 1,516 business executives and IT managers, ranging from CEOs and CIOs to IT workgroup and project managers, about the state of CRM projects and practices. The survey was conducted by the Data Warehousing Institute, an IT education, training, and market-research firm.
For all the hype surrounding CRM, the survey found that only 7% of the respondents have a mature CRM system in place, and another 8% have recently completed system rollouts. Most of these early adopter companies are large, with revenue of $10 billion or more, and many are in the highly competitive telecommunications, software, and financial-service industries.
Harrah's Entertainment Inc. is one company that's made CRM a core of its business through its Total Rewards customer loyalty system. Harrah's has spent $75 million to $100 million on its CRM system since the mid-1990s, but that investment has generated an estimated 60% after-tax rate of return each year by keeping current customers loyal and attracting new ones. "CRM allows you to build a stronger relationship with your customers. And one of the things we find is that our customers become apostles for new customers for Harrah's because of their experiences," says John Boushy, CIO and senior VP of operations, products, and services.
But by far, the largest block of survey respondents are still in the planning stages with their CRM projects, while others are in various design, build, and initial rollout phases. Another 9% have no CRM plans.
Many CRM systems now in place are limited in scope. The survey found that 45% have collected fewer than 100,000 customer records, most of which represent conventional customer account and sales data. In one year, however, a majority expect to be collecting 100,000 to 50 million records, including data on marketing campaign responses, Web-site registration, and customer service. Expanding the range of collected data will be a necessary step for companies to achieve a critical goal--optimizing customer interactions across multiple channels, including the Web, direct sales, direct mail, E-mail, and advertising.
At first glance, businesses appear to be sinking a lot of money into CRM. The survey found the average CRM project budget to be more than $4.1 million, while some budgets are more than $10 million. But a small number of big CRM projects skewed the findings; nearly half of the survey respondents report that their CRM budget was less than $500,000; two-thirds say it's less than $1 million.
Regardless of budget size, assembling a CRM system is complex. Companies face a range of organizational challenges, including managing expectations, hiring skilled personnel, and getting buy-in on rules and definitions. What's more, they face a host of technical hurdles, such as managing project scope and maintaining data quality and consistency.
"When you start looking at the totality of what needs to be done, it's not surprising that it's taking longer and that some companies are experiencing difficulties," says Hugh Watson, an MIS professor at the University of Georgia who co-authored the survey report. Although 42% say their CRM systems are "meeting expectations," 41% are experiencing difficulties or consider the effort a potential flop. Only 16% say their projects are exceeding expectations or is "a runaway success."
Nonetheless, IT professionals are thinking big when it comes to future CRM plans, the survey says. Most have embraced the idea that their CRM systems will be global or companywide, rather than restricted to business units or departments. On average, respondents say their CRM strategies consist of at least six cross-functional applications, including database marketing, telephone call centers, Web marketing, direct-mail campaigns, field sales, and Web self-service for customers.
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