BMW’s investment in CRM evolved as its understanding of how consumers reacted to direct relationship initiatives expanded.
Image courtesy of Flickr user le_huf.
During this millennium, many marketers seem to have bet the family silver on customer relationship management investments with little to show for it, and those marketers are now attempting to justify further investment in order to achieve their original goals. To suggest that they have arrived at this uncomfortable place because they are regarded as unaccountable and financially innumerate,1 or that CRM technologies are immature and consumers simply won’t engage with such new technology, is too simplistic. The problem is more fundamental: Most senior management teams have an unbalanced approach to managing marketing investments, and this is particularly evident in the case of CRM. They focus on the key resources in which they invest capital, such as technology, location and advertising, but ignore the commensurate investment of time, energy and talent to develop the capabilities required to leverage those investments. Of course, this approach to marketing investment is risky: It generates excessive investment before the organization is capable of leveraging it profitably.
All of this is a far cry from CRM’s original promise. Do you remember how new forms of consumer relationships were going to revolutionize marketing, rewriting its rules and calling into question decades of scholarship and practice?2 Buying behavior would change as consumers used the information-rich environment to secure better terms of trade, personalize service and join online communities to cocreate solutions with suppliers.3 Marketers, armed with perfect information about consumers, would optimize every marketing cent they spent generating a step-change in marketing effectiveness.
The Leading Question
How should marketing investments be managed for the greatest return?
Findings
- Develop new capabilities to improve customer relationships.
- Backfill with capital investment to sustain and embed capability development.
Companies bought heavily into this “new paradigm” thinking: Between 2000 and 2005, organizations spent $220 billion implementing CRM solutions,4 creating a market worth almost $50 billion per annum and growing in excess of 16% prior to the
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Clear demonstration of why injecting technology — without accompanying business process change — often fails.
In his New York Times interview, Forrester Research CEO George Colony has a concise statement on injecting technology (nytimes.com) … the phenomenon recurs and I therefore call it the Law of Technology Injection (www.BT.practice.com).
Yes, merely injecting technology does not guarantee success. We might go even further and suggest not only processes, but capabilities must develop.
Well worth a read….if only to find both violent agreement and disagreement in the same article!!(at least I did!)
This raises some great questions about CRM, its definition and understanding, neither of which is clear, and also the abilities of Boards to make rational decisions based on what they “hear” and also on what they are fed from their marketing groups.Successful CRM is NOT about technology, although this is what Mr Seibel made his fortune from, and it isn’t even about “..developing the new capabilities necessary to improve customer relationships” as the authors state. Successful CRM is about understanding the customer journey and experience you want to provide, THEN developing the capabilities as they suggest and lastly the overlaying of technology to facilitate those capabilities – where it can add value! Frankly there are quite a few areas of this paper I read and thought “yes!”, and an equal number where I thought “no! I don’t agree…” – if you have any views at all on CRM and marketing capability then this is a must read article which will get your thoughts racing I think – for me, CRM starts and ends with the customer (People are People First)…always did, always will!
Glad the article provokes such thoughts. I suspect we are largely in agreement about what it takes to make CRM successful, albeit there are definitional issues raised. How one defines CRM has been the focus of numerous articles from academics, consultants and managers. Ian Ryder chooses to define CRM as customer experience; this is increasingly a popular approach and an area in which I am research active. Experience, like CRM, can be defined widely and certainly inconsistently between writers. The really broad definitions (I loath to use the word “holistic”) of experience don’t leave much out and hence become difficult (impossible?) to make operational. Similarly, CRM can be defined very narrowly around customer selection and promotion or more broadly to incorporate customer journey and overall experience. Regardless of definition, I suggest that the core of our article remains valid: build the organisational capabilities that create relationships (experience if you prefer) and then invest in the operational processes and technology that will deliver them consistently and at scale. Organisations that invest first in technology and hope that the capabilities will follow, are more likely to be disappointed with their investment outcome. We suggest in the article that firms first innovate with their customer treatment to build capabilities and then extend from there – that is how we operationalize Ian Ryder’s comment that CRM starts and ends with the customer.