The Road to CRM Riches

As the global economy lurchesunsteadily through the early partof the 21st century, companies aroundthe world are searching for ways torestore the growth and profitabilitythey enjoyed in the buoyant 1990s. For many of these organizations,customer relationship management(CRM) is seen as a particularlyattractive proposition.

Indeed, better management of thecustomer base offers great potentialfor companies to improve their topand bottom lines – especially givenhow difficult it’s become for businessesof all types to attract and retain loyalcustomers. However, as many companieshave discovered, adopting the rightCRM capabilities – and generatingsignificant business benefit from thoseinvestments – is not as easy as theyfirst thought. In fact, many industryobservers and analysts are quoting failurerates as high as 60 percent for recentlycompleted CRM projects, and are equallybearish on initiatives currently under way.

As the cost of a typical CRMimplementation continues to grow – and the pressure to address theshortcomings in customer managementoperations intensifies – organizationswill have to become more vigilant in:identifying which CRM capabilitieswill provide the greatest financialbenefit; building a bullet-proof businesscase for the project; gaining executiveand stakeholder support; creatingan intelligent and comprehensiveexecution plan; and using the newsystem to develop customer insightsthat will fuel more effective strategiesand programs for marketing, sales,and customer service.

The Road to CRM Riches

The Road to CRM Riches 1

In the past decade, it has becomeincreasingly difficult for companies toconnect with existing and prospectivecustomers, for a variety of reasons. Theseinclude: the commoditization of brandsand products, with the number of itemson offer to consumers expandingsignificantly in the past 20 years;tougher and more numerous competitors;explosion in the amount of market ‘noise’following the huge jump in the numberof messages that bombard consumers on a daily basis; proliferation of customerinteraction channels, especially withthe advent of the Internet and wirelessdevices; and ever-rising customerdemands and expectations, driven bytheir increased ability to evaluate offersand prices as never before through theInternet plus their experiences with valueand service leaders such as Virgin, FedEx,Wal-Mart, and Siemens.

With such stiff challenges facing them, it’s no wonder that companies are increasingly under pressure to comeup with better ways to manage theircustomer relationships. The stakes trulyare high. A misstep in a key marketing,sales, or customer service activity todaycan be disastrous, even to healthycompany – and possibly fatal to a weak one.

The Customer Challenge

The Road to CRM Riches 3

In the face of this “customer revolution”,many companies have sought to addresstheir shortcomings in key customer-facingactivities via CRM initiatives (Figure 1). In fact, according to a report from TheConference Board, some 52 percent ofthe 96 global companies the organizationsurveyed have implemented a CRMsolution, while Forrester Researchestimates that 45 percent of companiesare considering or piloting CRM.

Some companies’ efforts could becharacterized as the “first wave” ofCRM: bolstering the effectiveness ofcall centers and sales forces. The goalof such projects is to increase customersatisfaction by improving the efficiencyof the existing channels used forcustomer interaction. These initiativestypically result in more convenienttransactions for customers, e.g., shorterhold times for customers calling forassistance, or a sales associate’s abilityto access instantly customers’ buyinghistories and product pricing information.

Hoping to do more than enhancetheir call center and sales force activities,other companies are focusing on howthey can improve their customerinteractions – with the goal being tonot only increase customer satisfaction,but also to create compelling reasonsfor customers to continue to patronizethe organization. During this “secondwave” of CRM, companies seek toprovide customers with multiple waysof interacting with the company andgather valuable data on customertransactions, preferences, and behaviorfrom activity at those contact points. The Internet, in particular, has provedto be a powerful tool for creating newlines of communication with existingand prospective customers.

Having focused their CRM efforts onrealizing benefits from their sales andservice functions, the most forward-thinking companies are now turningthe spotlight on marketing - the lastbastion of CRM benefit realization.They are using deep customer insights and analysis, drawn from individual(yet integrated) customer interactions,to understand and predict customer

behavior and fulfill customer needs ascompletely as possible. This “third wave”of CRM, which will bring about theultimate transformation of the customerexperience, is geared towards improvingcustomers’ brand loyalty and creatinglifetime customer value. By integratingcustomer communications and brandacross all channels, a seamless, integratedcustomer experience is created –regardless of how an individual chooses to interact with the company.

Unfortunately, CRM efforts of all types are either foundering or are likely tofall short of their goals. Gartner Grouppredicts that during the next five years,55 percent of all CRM projects will failto meet their objectives. Furthermore,the Data Warehousing Institute recentlynoted that 41 percent of CRM projects are “experiencing difficulty” or are“potential flops”. And, a study bycrmindustry.com revealed that 56 percent of US-based companies have not achieved a measurable return on their CRM investment.

CRM to the Rescue?

Figure 1The Three Waves of CRM

CRM Wave 1Call Center/Sales Force Effectiveness

CRM Goals Improve channel efficiencyIncrease customer satisfaction

Investment Provide more efficient meansStrategy of customer interaction

Resulting Customers enjoy more Customer convenient transactions, but

Experience channels are not integrated

Outcomes Customer acquisitionProduct sales

CRM Wave 3Reinvention of MarketingTransforming CRM

Predict customer behaviorBuild brand and lifetimecustomer value

Integrate communicationsand brand across channels

Customers are givena seamlessly integratedexperience acrossall channels

Customer valueBrand value

CRM Wave 2Multi-Channel Interaction

Improve customer interactionsIncrease customer retention

Provide customers with multiplepoints of contact; gather insights

Customers have more options tointeract with the company, butthe experiences are fragmentedacross contact points

Customer retentionCross-selling

CRM Pitfalls

Why are analyst groups such as Gartnerbearish on the ability of today’s CRMprojects to be successful? What’s behindthe arguably chequered track recordof many recent initiatives? What’sto blame for the fact that, while CRMprojects have improved some aspectsof companies’ customer-facing operations,few have generated the type of significantcompany-wide benefits that CRMproponents tout as possible?

There are several critical factors behindCRM’s underperformance (Figure 2).One of the most prevalent is the failureof many companies to obtain andmaintain executive support for theCRM project. Consider the typicalscenario. A group within a companydecides that it could benefit from newCRM capabilities. It begins to studythe issue, momentum builds, and soonthere’s strong grassroots support forthe effort. Unfortunately, when thetime comes for senior managementto sign off on the sizable investmentrequired, no executive is willing to doso. Too many times, a group planning

a CRM effort fails to ensure – early in the process – that executives understandthe initiative and the business case for it;are clearly convinced of the need forCRM; and are willing and able toproactively support the initiative,especially at critical junctures of the project (e.g., securing funding).

Companies have also struggled withaligning key internal functions orbusiness units affected by the CRMinitiative. Functional misalignment isa very complex issue that often takesthe form of a battle between IT andthe company’s customer-facing functionsor a disagreement among sales,marketing, and customer service onthe right priority for competingCRM recommendations.

In the former situation, a company’sIT department may want to implementa particular CRM solution, but hasn’tsecured agreement from the functionsthat will have to use it. This almostalways results in a waste of resourcesbecause, although the company may end

up with a good technology tool, it mostlikely will never fully realize the potentialbenefits of the tool because the changesin business processes, strategies andorganization structure necessary toleverage the technology were not made.An HR services firm discovered this thehard way. After spearheading theimplementation of a call center system,the company’s CIO found that callcenter employees were refusing to useit because they were never fully coachedon how the system could help themimprove the way they did their jobs.On the other hand, if marketing, sales,and service decide to push ahead witha CRM initiative without IT’s supportand resources, the effort often stallsor gets derailed when it comes timeto implement the supporting CRMtechnologies.

Alignment discord among business units is also a common cause of CRM projectfailure. For instance, if sales wants toadopt sales force automation software,customer service wants new productivitytools for its call center, and marketing is

The Road to CRM Riches 5

pushing for new campaign managementcapabilities – and all three efforts moveforward without consensus – a collectionof “one-offs” that don’t work welltogether will be built. The result is moremoney spent than necessary; clumsy – or worse, non-existent – technologicalintegration; redundant or conflictingcustomer data gathered; and afragmented customer experience from one interaction channel or touchpoint to another.

A third area that has proved a problemis accurately linking the CRM project tohigher-level business strategies – inother words, identifying short- and long-term business objectives and how CRMwill support them. Many companies havefallen prey to the “sexy technology” trap –becoming so enthralled with a particularCRM technology that the organizationloses sight of whether the tool willactually support how the company goesto market. A simple example is thecompany whose marketing departmentwants to implement a campaignmanagement tool to improve theefficiency and effectiveness of directmarketing. Yet, the company generallytakes a mass-marketing approach tocustomer acquisition and uses call centers as the primary vehicle forcustomer and prospect communications.In this instance, an investment in direct-marketing CRM tools wouldn’t supportthe company’s principal customeractivities, and such an investment rightly would be deemed a failure.

A focus on “capability building” insteadof ROI creation also plagues many CRMinitiatives. In fact, it’s not uncommon thata sponsor of a CRM project “knows”intuitively that a capability is neededand will create value, but doesn’t spendenough time thinking through how thatvalue will be generated. For instance,one global hospitality company wasconsidering implementing a systemfeaturing a hand-held device that wouldhelp check guests in as they pulled upto the front door – similar to the one

car-rental companies use to processcustomers returning cars. On the surface,the idea was attractive, but whenexecutives were finally pressed toquantify the tangible value of the newsystem to the hotel – i.e., if it wouldincrease the number of room-nightsbooked or justify higher room rates – itbecame clear that the project couldn’t be economically justified.

A fifth problem area concerns havingan integrated plan for projectimplementation. Many companies arejuggling several CRM projects at once,all competing for the same limited poolof resources rather than being executedas part of an integrated CRMimplementation program that ensurescapabilities are built in an order andtimeframe that makes sense to theorganization at large. Without suchan integrated plan, IT often becomesoverloaded and unable to keep up withthe demands of the various projects.

Furthermore, such a disjointed approachcan result in the implementation of aspecific capability before there’s a solidunderstanding of the key dependenciesthat must be in place for the companyto generate value from the capability –e.g., building a campaign managementsystem before a customer database is fully functional.

Finally, many CRM projects are consideredfailures because they don’t achieve earlysuccesses that help shorten the paybacktime and create momentum for theprojects. Instead, they are executed insuch a way that the companies can’tbegin to realize a payback on the newsystems for two or three years. Thisnot only makes it difficult to justify theinvestment in the projects, but also givesthe efforts the appearance of “blackholes” that are consuming valuablecorporate resources. In some cases inthe past, these projects have been abortedwell before they were finished – resultingin a substantial waste of time, money, and opportunities.

Figure 2Principal CRM Project Problem Areas

• Failure to obtain and maintain executivesupport for the project

• Failure to align key internal functions or businessunits on goals and mission of the project

• Inability to accurately link the CRM projectto higher-level business strategies

• Focusing on “capability building” insteadof ROI creation

• Lack of an integrated plan for project implementation

• Failure to achieve successes early in the project

How can organizations learn fromthe mistakes of others and avoid thesecommon pitfalls? To ensure that theyaddress these critical CRM elements – and, thus, improve the chance that theirprojects will generate true businessbenefits for them and avoid becoming“one of the statistics” – companies mustidentify, prioritize, and build the rightCRM capabilities for creating customerand company value.

This approach – which we call the CRMStrategy and Roadmap – is appropriatefor these typical CRM situations:

• For a company that’s struggling toreconcile competing requests for CRMinvestments – often from differentbusiness units or departments – andmust determine which requests shouldbe funded and how each initiativewill affect not only a business unitor department, but also the companyas a whole.

• For a company that lacks executivealignment behind a CRM strategyand plan.

• For a company that’s interested inproactively designing a “greenfield”CRM capability and has to pinpointwhich capabilities are appropriate fortheir specific business requirements.

The CRM Strategy and Roadmapis a distinct alternative to traditionalapproaches to CRM capabilitydevelopment. It focuses on businessoutcomes, not capabilities alone. Itis analytically rigorous, relying onan ROI focus instead of subjectiveconsiderations. Its emphasis onrevenue and cost drivers links theCRM investment directly to acompany’s income statement. And,it provides a value-based, prioritizedplan for CRM implementation toensure that the most importantareas are addressed first.

Avoiding the Pitfalls:CRM Strategy andRoadmap Development

There are four key steps to a CRMStrategy and Roadmap project: strategiccontext identification, capabilitiesassessment, business case development,and implementation plan creation.

Strategic ContextThe first step is to understand howCRM fits into the context of thecompany’s overall business strategy. This entails first confirming the company’svision for the CRM project as well as theproject’s business imperative – takinginto consideration the existing businessenvironment and the company’scorporate strategic priorities.

• Is the company’s market growing,stagnant, or declining?

• Is cutting costs the organization’smost pressing immediate concern oris boosting revenues the priority?

• What’s the relative emphasis betweencustomer acquisition, development,retention, and cost-to-serve?

• Which channels are most critical forinteracting with and serving customers?

• What’s the balance between productfocus and customer focus?

• Who does the company see as its mostvaluable customers and why?

Answering questions such as thesehelps determine which CRM capabilitiesthe company pursues.

At this stage, it is vital to understandhow the CRM project will fit with thepriorities of key stakeholders. To ensurethat the project has strong backing fromthe right people – and that the viewsof these individuals are in sync – thecompany must understand what keysponsors believe are the project’sobjectives. Similarly, the views ofmanagers responsible for marketing,sales, and service – as well as their directreports – must be considered to ensurethat everyone is “pulling for the sameteam” as the project progresses. Onetechnique used to help achieve suchalignment and consensus is the “warroom,” in which key stakeholders aregraphically plotted on a board alongseveral dimensions – e.g., their

understanding of the project, “buy-in”of the initiative, willingness to takeproactive action to support the effort, etc.This helps the project team know, at aglance, which stakeholders are in theircamp and which need special attentionor additional information. Alternatively,a large, cross-functional “input team”can be created comprising numerousrepresentatives from all functions affectedby the project to ensure that views ofexecutives, managers, and line employeesalike help shape the project and thesystem that’s ultimately created.

Capabilities AssessmentNext, the project team conducts acomprehensive assessment of thecompany’s current CRM capabilities – such as marketing program executionand management, customer interactionmanagement, and brand/messagealignment.

The Road to CRM Riches 7

This exercise helps the companyunderstand how current performance onthese capabilities stacks up againstbenchmarks from other CRM practitioners– i.e., whether the company is lagging,performing at parity with its competitors,or leading its industry – and identifies“stretch goals” for future improvement.The team also reviews the CRMcapabilities to determine which ones aremost germane to the company’s particularsituation, and assigns a “weight” to eachcapability based on how much or little itcontributes to the company’s ability tocreate customer value. The result of theassessment, weighting and scoringprocess is a comprehensive reportshowing areas of strength andopportunity across relevant CRMcapabilities – and highlighting specificgaps between current and potentialperformance.

Business Case DevelopmentThe third step involves building a soundbusiness case to support the CRMinvestment. This effort begins withestimating how the company couldimprove its financial position byenhancing its performance on key“drivers” of revenue and costs. Suchdrivers include customer retention, new customer acquisition, and salesper customer on the revenue side, andaverage length of call center “call-handling time”, total number of callshandled, and direct-mail expenses onthe cost side. By understanding howthe company performs on all revenueand cost drivers, benchmarking thisperformance against industry standardsor new performance goals, andquantifying the gap between current and potential performance, the companycan determine where it should focus itsCRM efforts to achieve maximumfinancial benefits.

A simple example is a company thathandles 98 percent of its 10 millioncustomer calls with live agents – at acost of $5 per call. If the companycould reduce this percentage to just94 percent by shifting more calls tocustomer self-service options, it wouldsave $2 million. Clearly, this makes astrong case for the company to investin increasing its customer self-servicecapabilities to achieve quantifiablefinancial benefits.

With a solid understanding of where itcan generate the greatest improvementsin financial performance – i.e., increasingrevenue and reducing costs – thecompany must next identify which CRMcapabilities are necessary to bring aboutsuch improvement. For example, ifimproving the effectiveness of directmarketing is seen as a way to significantlyincrease revenue, two CRM capabilities –Predictive Modeling and MarketingProgram Execution – would be critical to achieving that revenue goal. Byconducting this exercise for every revenueand cost driver, the company can easily

The Road to CRM Riches 9

identify which CRM capabilities arecritical to improving its financialperformance – and then map thesecapabilities against their ease ofimplementation to create a picture thatclearly shows which capabilities should be pursued in the CRM project and inwhat order.

As illustrated in Figure 3, prioritizingcapabilities in this way helps managementidentify which ones may represent a quickwin, which require a longer-terminvestment, and which – because of lowvalue and implementation difficulty –should not be pursued. With thecapabilities thus prioritized, the companycan then group the capabilities intological initiatives – e.g., implementingmarketing automation software andimproving marketing processes could be grouped into a Direct MarketingEffectiveness initiative, or adopting a customer self-care capability andimproving call-handling could be bundledas a Call Center Optimization initiative.

As the illustration shows, the team canalso identify interdependent capabilitiesi.e. those capabilities that rely on theprevious implementation of others.

To complete the business case for theproject, the company must tally howmuch additional profit each CRMinitiative can realistically generatefor the company (using the revenue-enhancement and cost-reductionestimates developed earlier in thisphase), and map these estimates againstthe high-level costs associated withcompleting the respective initiative(including hardware, software, training,third-party resources, and maintenance).The results of this exercise will help thecompany demonstrate that the projectcan be economically justified and securethe funds necessary to execute it. Moreimportant, it significantly reduces thecompany’s chances of embarking ona project that will result in little orno payback.

HighEase ofImplementation

Low

Low

High

Value

Long Term Quick Win

Cancel

Short Term

Long Term

InterdependentCapabilities

Consider

Figure 3Prioritizing CRM Targets

Implementation Plan CreationThe final step involves creating theroadmap that clearly defines “how toget there”: the technical, process, andorganizational elements that must beaddressed to complete the CRM initiative.

These include the following:

• Interdependencies between new andexisting systems and processes

• Resources needed and available

• Organizational alignment

• Executive alignment

• Necessary new or redesigned processes

• Key technology infrastructureand applications

• Execution plan

• User training

The CRM Strategy and Roadmap approach can help the companydetermine financing and sourcing optionsfor the project as well. If, for example, thecompany has a high demand for capital, it may opt to explore alternatives tooutright capital expenditures – such asco-sourcing or outsourcing arrangementswith strategic partners. These can reducethe amount of money the company hasto spend to complete the CRM initiativein exchange for some percentage of thefinancial gains the project generates forthe company. On the other hand, acompany for which CRM is a corecompetency may prefer to buildcapabilities itself.

The Road to CRM Riches 11

Case Study: Hotel OperatorOne company that is using this approach to guide the design and implementation of its

CRM initiative is a large North American hotel operator. In its role as a franchiser of several

well-known hotel brands, the company provides a number of shared services to its properties,

including a central reservations center, e-commerce support, brand marketing, and a frequent-

guest loyalty program. Although the company’s historic performance in delivering these

services was good, there was a growing perception internally that several CRM-related

enhancements were needed to improve the effectiveness of its customer interactions.

Company executives – confronted with numerous uncoordinated, independent CRM investment

requests from various areas of the company – realized that a cross-functional, integrated

approach to CRM would provide the company with the best capabilities for enhancing their

shared services organization, optimizing their customer relationships, and improving franchisee

business performance. Accenture was asked to help the company develop a CRM strategy

and implementation plan.

The first order of business was to developthe company’s enterprise-wide CRMstrategy and identify and prioritize itsCRM initiatives. As part of this effort,the project team first conducted a“touch point analysis” of the company’soperations to identify the key points ofcustomer interaction and help thecompany focus its attention on thoseareas with the greatest impact oncustomers. Customer touch points weregrouped into four areas: Establishingthe Relationship; Pre-Trip Experience;On-Property Experience; and Maintainingthe Relationship. The specific CRMcapabilities that related to each of thesetouch points also were identified.

Next, the project team conducted anassessment of existing CRM capabilities.Through this assessment, it becameclear that the company was an industryleader in developing insights into itscustomers’ needs and behaviors andrunning an efficient call center, butcould benefit from enhancements indirect marketing execution, call centereffectiveness, and sales.

After assessing its existing CRMcapabilities and identifying areas forimprovement, the project team conducteda comprehensive analysis of whatfinancial impact improvements in its“lagging” capabilities could have onthe organization.

This effort led to a dramaticconclusion: the company couldgenerate an estimated $65 millionin additional net profit over fiveyears by focusing on 15 to 20 keycapabilities in its direct marketing,sales, and call-center operations.

The team grouped these capabilities intofour distinct initiatives:

• Direct Marketing Effectiveness, whichsought to improve the company’scampaign management efforts and itsability to provide offers more closelytailored to individual customers

• Call Center Optimization, whichinvolved building robust capabilitiesfor more “intelligent” handling ofcustomers’ incoming calls and better

access by call-center representativesto customer records

• Sales Effectiveness, which included salesforce automation capabilities and anintegrated channel sales approach

• IT Infrastructure Enhancements,which focused on creating more robustcustomer data models and enhancedguest profiles

When the CRM project is completed,the company will have in placecapabilities to generate incrementalimprovements in business results acrossdirect marketing, its call center, andsales. As one example, the newcampaign management software andrelated marketing processes will allowthe company to more effectivelyleverage its industry-leading customeranalysis capabilities by creating moretimely, targeted, and relevant direct-marketing campaigns.

Undoubtedly, CRM has generated valuefor many companies in the past severalyears. However, the value that’s beendelivered pales in comparison to whatis possible. As economic uncertaintycontinues and customers become moredemanding, organizations simply mustfind ways to improve the chances thattheir new CRM initiatives succeed.

A major step in this direction involvesadopting an ROI-based approach to CRM.This ensures that the capabilities built in a CRM project are not only the rightcapabilities – i.e., they are consistent withthe company’s mission – but are also theones that support the key activities thatenable the company to realize its businessgoals and, thus, have the greatestpotential to provide the highest returnto the company in the form of reducedcosts and enhanced revenue.

But building the right CRM capabilitiesis only the first part of the CRM journey.Once these capabilities are in place, it isincumbent upon the organization to takethe necessary steps to ensure that thenew CRM capabilities are leveraged mosteffectively. These steps include: creating ahigh-level customer strategy that buildsupon the new CRM capabilities toimprove the way the company interactswith customers and prospects; developinga better understanding of existingcustomers’ needs and profitability, andgrouping customers into logical segments;creating strategies for each segment tomaximize the value of those groups ofcustomers; and identifying and buildingthe processes, organization structures andmeasures necessary to implement thesestrategies and optimally serve eachcustomer segment.

By following this approach, companiescan realize a significant return on theirCRM investments – and, subsequently,attract the attention, loyalty, and businessof their most valuable customers for yearsto come.

Conclusion

Accenture is a global management consulting, technology services and outsourcingcompany. Committed to delivering innovation, Accenture collaborates with itsclients to help them become high-performance businesses and governments. Withdeep industry and business process expertise, broad global resources and a proventrack record, Accenture can mobilize the right people, skills, and technologies tohelp clients improve their performance. With more than 83,000 people in 47countries, the company generated net revenues of US$11.8 billion for the fiscal yearended Aug. 31, 2003. Its home page is www.accenture.com.

Contact Information:

Brian Crockett

brian.k.crockett@accenture.com

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