Why CRM Doesn't Work

I had dinner last month with a long-time client—someone whose customer-centric work I have followed and respected for many years. She's moving on to a new career and it was great to have an opportunity to get a synopsis of some of her lessons learned over the 10 years that I've been following her work. I was taken aback when she, a long-time reader of our weekly advisory service, said: "You never told us that CRM wouldn't work!"

I must say that stopped me in my tracks. She then went on to explain that in her job, as head of customer experience and later, as P&L manager for a multibillion-dollar division of a well-known company, she had had three different opportunities to implement CRM systems. "The first two times were less than satisfactory," she said. "We didn't really improve customer experience all that much, although we did manage to clean up our customer data." The third time, she said, "I got smart. I refused to go the CRM route. I left the customer information where it was—scattered in disparate systems all over the world. I just connected the dots." On the way home, I called Mitch Kramer, who covers CRM, Customer Self-Service, Customer Portals, and Customer Intelligence, for us, and reported my conversation. We were both bemused. "We've never said that a CRM system will make it easy for customers to do business with you," Mitch said. In fact, we've often stated the opposite—that CRM solutions are designed to solve the sales force/opportunity management problem, which is not something that customers care about. Sales force management is an internal process, designed to help you close sales; not an outside-in process, designed to help customers interact with you. Instead, we focus on customer self-service, customer portals, and on customer experience management. When we evaluate CRM applications, per se, we tend to evaluate them architecturally—what kind of customer data models do they support? How easy are they to integrate? We don't evaluate their sales opportunity management functionality at all. Obviously, in the 10+ years that we've been covering this space, we haven't been explicit enough. So let's say it now:

Having a Customer Relationship Management (CRM) system will not make it easier for customers to do business with you. In fact, it often gets in the way—adding yet another source of incomplete customer information.

But wait, I hear you saying—isn't that the point of a CRM system: to provide a 360-degree view of our customer information? No, actually not. We've rarely seen a CRM system implemented that actually provided any company with a complete view of its customers' information. And, we've never seen a CRM system that provided customers with a complete and accurate view of their information. If your goal is truly to make it easy for customers to do business with you, you need to enable customers—and the people who serve them—by providing them with accurate, up-to-date information about all of the customers' transactions and interactions with your firm, with their up-to-date profiles and preferences, and with an accurate view of their entitlements, their current products and services, with the offers and promotions they've received from you or your partners, and the action they have or haven't taken as a result of those promotions, with the information about the products and services that would be most appropriate for that client, given what they already have, what you know about them, and what it is they're trying to do. In other words, you also need to provide this information in the context of the particular scenarios the customer is engaged in at any point in time. What we've just described is way beyond the scope of just about any CRM system we've ever encountered.

Of course, there are many smart people in leading organizations that have implemented customer information approaches that pull together all the customer information that we've just described. Occasionally, those customer information solutions are centered around an actual CRM application that serves as the focal point for operational customer data and/or they contain a customer data warehouse for the purpose of segmenting, analyzing, and marketing to customers, and/or they include an operational customer data store that updates customer transactional information in near real time and provides that information to contact center reps, to ecommerce applications, and to customer portals. But, in general, and increasingly, we've found that the solution to the insoluble "360-degree" problem lies in providing a federated approach to customer information—the approach our long-time client and friend found herself taking the third time around.

If you want to solve the customer data silo problem, once and for all, you need to design a federated customer information architecture. It's an approach that presumes: 1) that you will always have many different sources of customer information, 2) that you will be adding new types of customer information all the time, 3) that many applications generate and use customer information. It's probably not a CRM system.

Please see Mitch Kramer’s report, “Federated Customer Information: A Practical Approach to Breaking through Customer Information Silos”.

Comments

[Patty Seybold]

Dominique--
What wonderful points! That CRM is often designed more for financial types--e.g. those that want to know what we bought in the past, and maybe be able to forecast sales (in the case of opportunity management) than for sales and service folks--who actually WANT to establish a relationship with customers.

I'd love to hear more about what you've found in your 3 years of mining email marketing responses, and what additional/new programs marketers could put in place to foster true LISTENING to customers...

One of my favorites is the success that several companies have had to-date in leveraging online customer communities--communities in which customers are invited to participate in co-designing comopanies' future offerings. Are those the kinds of approaches you're thinking of?

Patty

[Dominique Lahaix]

Hello,

Since we're provocative...

Isn't the problem that CRM has mainly be engineered from Finance, as a mean to forecast sales ?

This sounds to me like talking to my credit card and claiming having established a relation !

CRM basic assumption is that by looking at my past purchases, the provider will know me.

This may be true occasionnaly.. If I buy a digital camera , I'm probably going to buy photo paper one day but most of the time it's either not indicative or ... too late. (* )

Coming back to the good old days, I have never seen a salesman jump on his financial records and look at my past purchases ( I may be gone by the time he's back)
Instead he'll talk to me and he'll watch me trying to predict/assess my future projects and interests, pyschological profile aso..

- in CRM, the R matters most or even more important, a L (for active listening) is deadly missing.
- CRM is falling short because it's not watching the proper signals. (the customer not her/his credit card!)
- Discovery is a mandatory part of any sales process and traditionnal CRM just bypasses it.

I have been spending the past 3 years mining email marketing responses and I can tell you it's amazing to look at what customers read when attempting to know and predict their future purchases.

I think it's time for marketers to step in and re-engineered a process that has been too much driven by finance.

(*) by the way, most of the time, digital camera vendors would have no clue that I own one, since I would got it from a competitor. Not an easy situation to profile me.

[Patty Seybold]

Hi Dana,
This post was MEANT to be provocative. So I'm delighted to get your reaction. No need to kowtow. We CAN be wrong and sometimes are... But here's the main point I was trying to make with this piece... whatever the virtues of CRM are--and there are many--most companies design their CRM strategies and systems from the inside out. To help themselves manage their customer information and customer relationships. They don't start with the first principle, to wit: Give your customers access to a complete (360-degree) view of THEIR information, accounts, products, entitlements and service and interaction histories. Then worry about the other things you need from a CRM system (e.g. marketing automation, campaign management, customer service, customer case management, sales pipeline, opportunity management, customer segmentation, customer profitability, customer experience metrics, etc..

Is that principle #1 included in your "Eight areas that are critical to business?"

Patty

[Dana Richardson]

Hi Patty and brilliant readers - in the review on CRM and why it doesn't work there are many spots that trouble me. It's not the thoroughness of the research involved, I know you thoroughly research every item you put into the mill, it isn't that, more it seems to me that you may be skewed from the outset, albeit in perhaps a good way; by the very nature of the piece, why it doesn't work.
Normally Patty your writing is so wonderfully balanced that such a vantage point never comes up, or, if you are proving an argument, you do it so thoroughly that skewed or not, it is, "right on."
I'm not certain such is the case here- based on a very limited purview, and the ending paragraph.
You have probably read so much more than me on this subject that I hesitate to bring this up, but the question still is one I feel you can bring light too, and perhaps even I may have missed in reading your writing. I saw your notes from Mitch Kramer, which made me wonder if you'd read or conversed with Paul Greenberg in similar mode?
Please don't think me argumentative for sport here, that isn't the case, far from it, I respect your work, and research far too much to ever be flippant. Rather my inquiry goes more to the nature of CRM not so much as a sales tool, certainly it is that, but aren't we by definition limiting it's true nature, CRM's true nature, when we relegate it in such a manner of review? Let me put it this way, I see CRM as applying to eight areas critical to business in vogue- it seems from your writing that you see it in more of a limited horizon?