Enterprise Software

Quick-hit tactics control CRM costs

All-at-once CRM implementations aren't practical given real-world budgets. Learn how IT leaders can control costs by selecting the components of CRM that best align with the company's business strategy and provide measurable results.

Many enterprises approach the implementation of CRM technologies with a “big bang” mindset—it’s all or nothing, and it’s often strewn across the enterprise without the investigation and sound strategy required for a successful effort.

A better approach is often a "quick hit" plan, which allows CRM components to provide the most bang for the bucks.

The first, and likely most critical, step in the “quick hit” approach is identifying a clear view of a company’s business strategy and using metrics to prioritize which CRM components to plug in first. Without such a strategy, you put the success of CRM at serious risk. According to Gartner Group research, 55 percent of CRM initiatives will fail to meet measurable benefit objectives and will fail to positively affect the ROI due to lack of ongoing measurements in the next four years.

Multiple stakeholders
Prioritizing CRM projects can be complicated, as they affect companies in myriad ways, and IT often has to deal with stakeholders with various perspectives. For example, in lean times, a CFO may view CRM implementation expenses as a good place to cut for big savings. (Even small-scale CRM modules may cost $100,000, and large companies working with vendors of multifaceted CRM suites can easily spend millions.)

Other departments may advocate the opposite—spending on CRM. Sales may want a better contact-management tool; marketing wants a CRM module to track special promotions; the COO may want tools for automating customer-service jobs and reducing staffing expenses; and the CEO may want CRM pieces for selling more product and growing market share.

What this means for the CIO is a great deal of pressure—pressure to make business units happy, and pressure to make sure IT spending is justified.

“CRM is, basically, a business strategy that becomes supported by technology,” explained Mark Hess, a partner with Tatum CIO Partners, LLP. Prior to joining Tatum, Hess was a vice president at Gartner Group, where he worked to develop CIO benchmarking to measure IT effectiveness. He’s also held senior management positions at several other companies, including IBM.

While it’s easy for tech leaders to get caught up in today’s hype over new CRM capabilities, it’s critical to stay focused on how the technology can help the enterprise, Hess said.

“The focus of CRM is on the customer, so it’s about how you sell, how you market, how you support the customer. What you’re trying to do is increase the return on the business in terms of revenue, profitability, and customer satisfaction.”

Although companies are abuzz with visions of better CRM, the technology in a business context is “simply one more application,” Hess pointed out.

Making the business case
A vital element to defining and prioritizing CRM needs involves making the case for business benefits and justifying the IT spending.“ The absence of a business case is probably one of the biggest problems that exists in a lot of CRM implementations,” Hess said.

Before implementation is even discussed, Hess recommends that CIOs answer the following questions:
  • What’s the business case? When the business case has been determined, the next step is to consider what the costs look like from an IT standpoint, and what the case looks like from an investment standpoint.
  • What are the benefits? Tech leaders should be able to explain exactly which business unit will benefit from CRM tools.
  • What’s the timing? CFOs and CEOs want to know both the cost and the timeline in regards to ROI.

By answering these questions, CIOs provide the short-term, tactical pieces of each CRM implementation, as well as long-term, cumulative benefits.

Underlying any CRM plan should be some performance metrics, Hess said. Will the CRM plan increase customer satisfaction and the profitability of the relationship to the customer? And, if so, in what way and in how much time? Will your CRM plans increase market share, and perhaps, ultimately the company’s earnings per share? If so, what’s the projected return? The answers must be quantifiable, emphasized Hess.

Aligning strategy with technology
To illustrate how business missions can affect CRM priorities, Hess provided a snapshot of how two different companies approached the effort. The first is a healthcare company built around serving the customer. The second is an airline battling fare competition.

For the healthcare company, CRM is an IT-based strategy that is completely aligned with what the business is trying to accomplish, explained Hess. As healthcare companies need to control costs while retaining customer-centered strategies, Hess said that they “may have to slow to the rate of investment and reprioritize…but clearly, the IT strategy and the business strategy are in alignment.”

In the case of the airline, however, the primary business strategy is keeping prices low. As CRM isn’t directly aligned with that business strategy, a tech leader may decide to terminate or radically slow down CRM efforts.

“You could do more dramatic [CRM] surgery,” Hess said, “because you’re not affecting something that is critical to the success of the enterprise.”

The economics in the "quick hit" approach
The “quick hit” approach not only helps focus CRM capabilities at strategic business points, it also provides a clear ROI in the short term.

The key, said Hess, is clearly communicating the business goals for each implementation—to cut the sales cycle from 60 days to 30 days, for example—rather than simply “to implement contact management software.”

Hess has seen dramatic success when IT leaders carefully choose quick-hit projects. One sales organization had been manually developing responses to proposals. After IT implemented a CRM proposal-generation system, the sales group could “pre-can” many responses to common questions—automating 75 to 85 percent of the process. This not only spiked sales response time, it reduced man-hours. From the IT side, the module was quick to implement, and it provided a measurable benefit that was clearly aligned with business strategy.

Hess added that another type of quick-hit CRM is eliminating redundant customer data. Duplicate names and addresses cost big bucks in terms of mailing costs. Buying a low-cost CRM module would not only clean up the data, reducing mailing cost, but it would also provide a deeper customer view—which would inevitably help the sales and marketing effort.

The key to CRM success
In approaching CRM, tech leaders need to know that the effort isn’t always quick, even with the “quick hit” approach. Defining strategies and assessing CRM priorities requires time and investigation. The key, said Hess, is staying the course in aligning the tech effort to support the business strategy. By giving priority to the projects that are best aligned with that strategy, CIOs can ensure that the company’s CRM budget really does get the most bang for its bucks.

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