CRM's success depends on ROI goals, study finds

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By: Wise Marketer Staff |

Posted on May 29, 2003

More than 70% of the executives behind corporate customer relationship management (CRM) initiatives in the US have not set clear and specific goals for achieving returns on their investment, and while a significant number of companies are re-evaluating their CRM initiatives, the nation's soft economy was the cause of less than 22% of those re-evaluations, according to a study from BearingPoint.

The study, 'Mastering the Moving Target', sponsored by business consulting and systems integration firm, BearingPoint (previously known as KPMG Consulting), also found that once ROI goals are set, measurement planning and performance monitoring are key activities to help ensure that CRM initiatives meet anticipated results.

However, only 6% of companies surveyed had actually set specific ROI targets early on in their CRM initiative to help them clarify the results.

"Companies are re-evaluating their CRM initiatives due to their inability to meet business performance expectations, and not because of the downturn in the economy," explained Bruce Culbert, senior vice president for BearingPoint's CRM practice. "To meet their goals, companies need to establish appropriate metrics and a specific ROI."

Poor metrics
Despite the majority of respondents considering CRM "very important", few had achieved the expected value from their CRM initiatives. Those who did have metrics in place were measuring customer data, transaction data, and productivity data without always understanding the cross-functional impact, and often without having the ability to gauge and translate that data into a return on investment.

The study highlights a concerning finding: that many companies lacked the knowledge of what to measure, and how to measure it, in order to determine the success or failure of their CRM initiative.

According to the study, companies may have identified metrics for measuring the value of CRM but, unless specific ROI targets are set, success is difficult to achieve.

The study revealed a number of interesting findings, all of which are significant to those evaluating the success of their CRM initiative:

  • Some 40% of executives said that they only had partial organisational buy-in;
  • One distinct difference between B2C (business to consumer) and B2B (business to business) strategies is that the first focuses on the consumer while the latter focuses on the re-evaluation of an application or software system;
  • Alignment of CRM strategies with many companies' overall business strategy includes a multi-channel approach, such as telephone, web, direct mail, and in-store;
  • While CRM's importance to overall e-business has increased, barriers to overcome include: budget constraints, lengthy implementations, and organisational buy-in.

The study was based on interviews with 167 businesses representing 14 different industries (among which were automotive, banking, energy, telecommunications, travel and healthcare), with each organisation having more than US$1 billion in annual revenue.

"The study clarifies how businesses can turn CRM into a powerful tool that helps them survive - and even thrive - in the challenging days ahead," concluded Culbert. Copies of the study can be obtained from BearingPoint's web site.

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