How can companies extract value from CRM software?

In early 2000s companies raced to setup CRM systems but, even with all of the money and attention invested, many are still seeing low or even negative returns.(1) Despite this, the potential of CRM systems to streamline sales processes, align the interests of a firm and its customers, provide actionable insight into consumer information and purchasing decisions as well as improve the efficiency and effectiveness of marketers and sales teams are powerful incentives for businesses to find solutions.

The ROIs from CRM systems vary considerably both within and across organization,(6) however, most of the companies adopting CRM systems are large organizations. While there are a number of internal and external factors shown to affect the decision to adopt CRM systems and features,(5) the slower rate of adoption in the SME sector though to be the result of an increased aversion to risk.(3,4) One of the biggest risks involved in the adoption these systems is not the technology itself, but rather its implementation and is one of the leading explanations for high failure rates. Rather than abandon these systems completely, companies have instead been trying to understand why they’re not performing as well as they thought they would and are looking for new and inventive ways to enhance or refine their systems. There are several theories that can shed light on the weaknesses of CRM systems including the effectiveness of the company’s CRM strategy,(10) its implementation of these systems or the systems themselves. I believe that the reasons are more structural and question the operating fundamentals on which they are developed.

“One study was able to show a strong positive correlation between the perceived success of a CRM initiative and an ingrained view of the system in top management as being critical to the success of the firm.”

One paper claims that the reason for high failure rates lies in the unbalanced approach and noncommittal attitude that companies often take in the implementation of these systems. Companies acquire state of the art systems believing that results will simply occur naturally and fail to match investments in the technology with investments in developing the accompanying marketing capabilities in any way meaningful to the proper integration of the technology.(2) Hershey and CIGNA Healthcare are good examples of poor implementation leading to disastrous consequences(7,8) and as much as can be gained from examining CRM failures there is also much to be learned from its successes. Some believe that the success of these initiatives rests on cross functional integration,(9) others on timing(2) or executive engagement. One study was able to show a strong positive correlation between the perceived success of a CRM initiative and an ingrained view of the system in top management as being critical to the success of the firm.(6) This same study also showed a negative relationship when the system was only viewed as useful and leads me to conclude that for a CRM system implementation to succeed there must be a collective, organization-wide commitment. While few would argue against the need to take a holistic approach when implementing any system as central to business activities as this, there are those who believe that the main source of failure lies in the systems themselves.

CRM systems evolved to what they are today from early SFA systems(11) and so it is natural to assume that they will continue to evolve as more technology and implementation methods becomes available. Many companies are starting to connect CRM systems with complimentary systems or tools in order to develop a network sales analytics system(12) and others have started collecting information from other applications to be used in the CRM system itself. One exciting development in CRM systems is referred to as Closed-Loop Marketing which was designed to close the gap between sales agents and marketers by relaying information from sales agents directly to the marketers responsible for developing sales aids. These systems are still in their infancy, but are quickly becoming a standard in the pharma industry.

“CRM systems typically follow the sales process, which doesn’t say much about how and why customers make decisions or how to foster or improve a strong buyer-seller relationship.”

While new implementation methods and system enhancements appear to be generating positive results, I believe that there are more fundamental issues that need to be addressed. For instance, CRM systems typically follow the sales process, which doesn’t say much about how and why customers make decisions or how to foster or improve a strong buyer-seller relationship. Part of the problem is that we don’t know how to interpret why a customer buys and the mental processes at work in making purchasing decisions. These processes draw heavily on psychological, behavioural and sociological theories and mapping purchasing decisions will involve extensive use and integration of various models within these fields.

Also, it needs to be addressed that different users need different types of information depending on their role. Where marketers will need information about the responsiveness of customers to their initiatives, sales managers need to know how customers are moving through the sales funnel and, on the ground floor, sales agents need access to real-time information about customer preferences and purchasing decisions. The language used in these systems is often overlooked, but it is important from the perspective of a sales agent that it capture the essence of an interaction or sale and is consistent with relationship selling. For these reasons the sales agent should be able to view the information not in terms of a sales process, but rather in terms of a purchase process and that the pipelines reflect states of the process that customers use to make decisions. Too often CRM systems are used as sales dashboards than systems that can align the interests of the firm and its customers by providing actionable information about customer purchasing and we need to come up with the appropriate language for the purchase process, methods to measure the quality of a relationship and proper guidelines to direct sales calls.

“…many sales agents do not see the value in these systems because they don’t tell them anything they don’t already know.”

CRM systems are useful tools for sales managers, however many sales agents do not see the value in these systems because they don’t tell them anything they don’t already know. The information CRM systems provide to sales agents is an important part of engaging sales staff in the use of this technology and using these systems to their fullest potential. An important consideration for any sales agent is to understand how their customers define value which according to Aziz Guergachi, can be classified as either personal or social. Personal interests are selfish and can be addressed by appealing to what’s important to each individual. Customers, however, also often need to justify their purchase decisions to others. This can be addressed by providing them with information that they can use to justify their purchases to other stakeholders. To do this effectively the seller needs information about the interests of the stakeholders and the process and criteria through which purchasers will be held to account. Knowing the state customers are in before responding to a call can also be extremely valuable information for sales agents. Some customers know what they want while others are still forming attitudes. When buyers are in a state of indeterminacy their preferences are more affected by the information provided to them and knowing this can lead to more effective communication.

“…sales agents can enter the picture as external agents to interrupt the independent movement of purchasers…”

Peng Sheng and Aziz Guergachi believe customers to be free entities moving around in an economic system and that it is the reason why it is so difficult to predict, in any sort of deterministic fashion, the decisions that they will make. Due, however, to the interactive nature of the buyer-seller relationship, sales agents can enter the picture as external agents to interrupt the independent movement of purchasers by asking questions, giving suggestions and learning about the purchasers and the criteria they use to make purchasing decisions. By developing the right tool to leverage the information extracted from interactions with purchasers, sales agents will be better able to affect the sale, sales managers can increase their predictive accuracy and ultimately the company can better align their interests with those of their customers.

References:

1) Foss B., Stone M. & Ekinci Y. (2008). “What makes for CRM system success — or failure?”. Database Marketing & Customer Strategy Management. Vol. 15, 2, 68–78

2) Maklan S., Knox S. & Peppard J. (2011). “Why CRM Fails — and How to Fit It”. MIT Sloan Management Review. Summer 2011. Vol. 52, №4

3) Ismail, H.B., Talukder, D. and Panni, M.F.A.K. (2007), “Technology dimension of CRM: the orientation level and its impact on the business performance of SMEs in Malaysia”. International Journal of Electronic Customer Relationship Management, Vol. 1 №1, pp. 16–29.

4) Nguyen, T.H. (2009), “Information technology adoption in SMEs: an integrated framework”. International Journal of Entrepreneurial Behaviour & Research, Vol. 15 №2, pp. 162–186.

5) Nguyen Waring (2013). “The adoption of customer relationship management (CRM) technology in SMEs An empirical study”. Journal of Small Business and Enterprise Development. Vol. 20 №4, 2013 pp. 824–848.

6) Bohling T. et al. (2006). “CRM Implementation: Effectiveness Issues and Insights”. Journal of Service Research, Volume 9, №2, November 2006 184–194

7) Bligh P. & Douglas T. (2004). “CRM Unplugged: Releasing CRM’s Strategic Value”. Hoboken, NJ: John Wiley.

8) Ragowsky A. & Somers T. (2002). “Enterprise Resource Planning”. Journal of Management Information Systems, 19 (1), 11–16.

9) Payne A. & Frow P. (2005), “A Strategic Framework for Customer Relationship Management”. Journal of Marketing, 69 (4), 167–76.

10) Bull C. (2003). “Strategic issues in customer relationship management (CRM) implementation”. Business Process Management Journal. Vol. 9 №5, 2003 pp. 592–602.

11) Raman P. et al. (2006). “Leveraging CRM for Sales: The Role of Organizational capabilities in Successful CRM Implementation”. Journal of Personal Selling & Sales Management. Vol. XXXVI, №1 (winter 2006). pp. 39–53

12) Stakenas P, Desisto R. & Sengar P. (2012). “Apply Directional Sales Analytics to Drive Success: Business Intelligence for CRM and Sales Leaders”. Gartner. Published: 30 August 2012

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