Does CRM really pay off?

Not every CRM project delivers on a company’s expectations from the project. R Ramki points to some crucial areas that could make the difference between success and failure

Customer Relationship Management (CRM) is one area where a significant portion of information technology investment is headed. The reason for CRM’s importance is clear: a company’s relationship with its customers and their satisfaction and loyalty are critical factors when it comes to success in business. With countless CRM projects failing to meet expectations, a more sober attitude exists today than during the initial embrace of CRM technology. Yet, investments in CRM must be able to withstand cost-benefit analyses. Initial study results now show that well planned CRM investments can pay off in about one year.

Past CRM initiatives focused only on certain points of customer contact, but now the aim has broadened toward creating customer-centric business processes connecting all aspects of the entire enterprise to create customer value. The goal is to be able to perform tasks better in order to increase ‘return on relationship,’ and gain maximum value from customer relationships. With this goal in mind, companies that put CRM at the centre of a completely integrated approach to their business objectives can achieve measurable success.

Measuring success

Although companies set diverse CRM goals, certain measurement criteria remain constant throughout all CRM projects, including identifying clearly quantifiable parameters such as lower costs for distribution and customer service, new and higher inventory turnover potentials and greater profit margins. The list also includes hard to quantify criteria such as higher organisational flexibility to quickly adjust to market and competitive changes; better use of existing company resources; and even increased customer loyalty.

Companies also seek the support of independent experts to establish a clear framework to measure the return on investment (RoI) of CRM projects. Peppers and Rogers Group, a Connecticut-based CRM consultancy, is regarded as an authority in the field of customer-oriented business processes and recently carried out an RoI survey for German pharmaceutical company, ratiopharm. At the end of 2000, ratiopharm implemented a CRM solution to help the company identify its most influential customers and better service their needs. To date, ratiopharm has already achieved considerable results, including a 17 percent increase in customer interaction and a 46 percent increase in sales to the company’s most valuable customers. The study shows that ratiopharm will recoup its CRM investment in only 16 months. Stefan Langthaler, head of distribution systems at ratiopharm, credits the clear advantages of an integrated approach: “The use of CRM helped transition ratiopharm from a traditionally product-focused corporate culture to one centred around our customers. With the integration capabilities CRM offers, we can now seamlessly link customised customer processes with our product-oriented business model,” Langthaler said.

Integration is indispensable Initially, CRM projects focused outward, toward better interaction with customers, but now companies are recognising that improvements in customer contact mean little if internal processes are not in tune. Customer contact centres are a good initial investment, but if delivery dates are not met or products and services aren’t up to par, customers won’t return.

Integration is a necessary link to bring together customer-oriented business processes and internal business processes such as purchasing, production and billing. CRM success at Canada Post shows the value of integration. According to the RoI Report, published by Boston-based communications consultancy Hill/Holiday, Canada Post saved around $16 million by establishing an integrated ordering and payment process and 24/7 availability of accurate customer billing information. Canada Post also expects to achieve a $3.25 million margin increase from improved billing and contract process management and increased sales time from reduced administrative burden on the sales force.

CRM is the way, not the goal

Although some CRM projects have been criticised for not achieving the desired results, if companies are able to clearly define and internally communicate their customer oriented goals at the outset of implementation, and align their business processes accordingly, success is possible and measurable all along the way.

The author is director-Solution Architect Team, SAP India. He can be contacted at ramki.r@sap.com