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Don't believe all of what you hear about CRM

A consultant in charge of Peppers & Rogers' ROI practice said that CRM is working a lot better than many reports would have you believe.

ATLANTA -- At the Smart CRM conference, a noted return on investment (ROI) expert turned a widely held notion about CRM failure on its ear.

Tom Spitale, principal at Norwalk, Conn.-based Peppers & Rogers Group, wiped clear the CRM industry's biggest blemish by arguing that most projects actually generate ROI.

"It was easy to hype the failures because many of them were high profile," he said. In actuality, Spitale contended, many projects were deemed duds because organizations failed to establish metrics to measure their success.

It was easy to hype the [CRM] failures because many of them were high profile.
Tom Spitale, principal, Peppers & Rogers Group

Many analysis firms, notably Gartner Inc., have long held that organizations simply haven't gotten bang for their CRM buck. In fact, some have said that as many as 80% of all CRM initiatives fail. Of late, however, some researchers are reporting rosier numbers. International Data Corp., Framingham, Mass., just issued a study that says most firms do realize returns.

Spitale highlighted other studies that also tout CRM successes, including recent research from the Web site, which found that 70% of all projects deliver ROI. He also cited a Peppers & Rogers study of 15 companies' CRM efforts; they had an average ROI of 32%.

Still, he admitted that "CRM to implement is painful" and identified four steps organizations must take to keep from becoming a statistic: establish a solid strategy, commit to end-user training, get executive buy-in, and set measurable goals.

"These four things are really hard to do," Spitale said. "But it's worth the pain."

CRM, he said, has turned a corner. No longer a concept embraced by visionaries alone, CRM is now being adopted by "pragmatists" who must be convinced it's a worthwhile pursuit, he said.

Spitale conceded that doing so isn't simple. The key limitation is often a lack of benchmarking data. So he urged companies to make sure that every stakeholder in a CRM project signs off on the same metrics, including the chief financial officer. Project managers must fully disclose all CRM-related costs to keep their numbers from ever being challenged, he said.

When estimating the cost savings that result from automating a customer-facing process, Spitale said, companies should gauge the productivity gains and not just the reduced man-hours. He cited one company whose call center agents used their freed-up time to phone debtors to ask them to pay their bills.

Conference attendee Derek Shaw, the manager of customer service at Lennox International Inc., a Richardson, Texas, manufacturer of heating and air conditioning equipment, said he's often unsure whether improvements are due to CRM-related efficiencies or external factors. Before implementing software from SAP AG, Lennox did an ROI study and set a goal of improving customer attrition rates.

"After the fact, how are we going to draw the information out?" Shaw wondered. "Is [a lower attrition rate] due to improvements in our product or CRM?"

Spitale recommended that companies estimate conservatively and get upper-management to agree to those assumptions.

If someone disputes the figures, and "the CFO says [the numbers] are right, odds are the meeting is over," he said.

Still, Kaenan Hertz, another show attendee and director of CRM and data mining at Sallie Mae, in Reston, Va., called measuring ROI "a fuzzy target." He said that his organization struggles to pinpoint the cost of servicing a customer via different channels, such as the call center, interactive voice response or the Web.

"Each system spits out conflicting information," Hertz said. "Our challenge is trying to marry them to get a consistent view of ROI."

TechTarget is the organizer of Smart CRM and owner of the family of Web sites that includes


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