A necessary evil

Customer relationship management software is viewed as the nearest thing the world of IT has to a 'Holy Grail'. Ideally, CRM would mean that delighted customers will be retained, forever loyal and no cross-selling opportunity will ever be missed, while the flexibility of the software means it will continue delivering value.

However, the reality of many CRM projects has been very different. Instead of gaining customers, it has lost them. The workforce has refused to co-operate with the deployment of the software, the data produced has helped no one and the whole exercise has cost a fortune. The Holy Grail has become a money pit.

Simply defining CRM can be difficult, as no two summations are the same.

It could be seen as using technology to find and keep customers, or developing processes to discover who your customers are, what they want and why - what they are actually buying and if they pay their bills.

It is certainly possible to make CRM pay handsomely, but only when it forms part of a wider strategy that has been rigorously planned and carefully delivered. Given that it can cost five times as much to find a new customer as it does to retain a current one, it is easy to understand how stellar CRM projects have produced up to a 500% return on investment. It is no surprise that numbers like these keep interest in CRM high.

The problem for brokers wanting to tackle CRM begins at the outset. "It is a hugely complex area and it has been confusingly sold," explains Graham Oakes, who runs his own CRM consultancy. He continues: "There are over 400 vendors of CRM and there is a huge range of capabilities."

Many of these solutions barely touch on customer issues but are still pushed as CRM. There certainly is not a 'one size fits all' solution.

Historically, overselling and the raising of buyers' expectations has been a major factor in the poor reputation associated with CRM.

The worst examples of CRM waste occurred in the large corporate sector.

Staff at CRM technology pioneer Siebel are mindful of this bad reputation, but do not see this as a major problem in the SME sector. "We are finding it is much more about education," says Andrew Moore, Siebel's vice-president, Europe, Middle East and Africa SME division. "Typically, CRM solutions have not been available to smaller organisations. They have had to cobble solutions together using spreadsheets. Bigger implementations received bad press, but this is a new market with new low-risk and low-cost solutions." Siebel has developed all new solutions specifically aimed at the SME sector.

The software being developed now is very different from the corporate implementations of five years ago. The newer architecture means CRM is easier to deploy, functionality is higher and the packages are much more scalable. "The trouble is, when something has a bad name it can take a long time to shrug off," says Stewart Walker, business consultant at Softlab, which integrates CRM solutions. He feels that the solutions being offered now are mature, but the key issues are not about technology.

"Brokers are the sort of people who are used to their independence and value their contact list, so you need a culture change for CRM to be a success. Most CRM fails because, at a personal level, people do not understand or buy in to why they should use it."

Walker has seen on many occasions companies in which staff members have consciously decided to sabotage the implementation. "It only takes a few people to decide they do not like it and then it will not work."

Charles Willcock, managing director of Miraquel, partner of Bluesoft CIS software, which is aimed at brokers and small businesses, says it is unfair that the technology gets the blame for CRM failures. Human factors, such as resistance of staff, are often the real cause. "Deploying CRM software is a little like joining a gym," he says. "You have a go at it for a month or two, but then decide it is all too much effort and a waste of time anyway; that does not mean there was anything wrong with the gym."

Affordable adaptability

Microsoft has also entered the SME market with Microsoft CRM, a solution that product manager Jason Nash describes as having 'affordable adaptability'.

However, he also stresses that staff are a vital part of the equation.

"If people are not actively encouraged to adopt the product, they will view it as a hurdle to their daily work."

Nash strongly supports incentive initiatives to get staff on board with CRM implementation and, at the extreme opposite end, payment of commissions could be refused to to those who do not use the product. Another approach is to pay a share of the commission to the staff member whose contact produced the sale. Then everyone should gain from widespread adoption of the system.

The challenges facing a business deploying CRM are considerable. The staff must be included in the process and a cultural evolution will be necessary. Training and incentives must be put in place and software must be sourced. Each business will vary as to where it needs to place emphasis.

For some companies with staff that are less computer-literate, it will be IT training. For others, it will be convincing sales teams that CRM is in their interest, or breaking down the silo nature of partnerships where client information can be jealously guarded. No two CRM implementations are the same.

Leadership

All of this requires leadership, as Mark Carlile, vice president for UK and South Africa of software vendor Pivotal, explains. "The critical mass in making CRM stick is executive sponsorship. People will buy into it when they see 'super-users' being successful." Pivotal has a workshop induction programme for users, which, Carlile explains, is more than just learning about the application. "CRM is an ideology that is all about change management, so we bring in specialists in change management issues."

The introduction of external consultants might not appeal to every business but, in the world of CRM, it could be money well spent. A consultant will have seen many implementations and developed best practice around that experience, offering businesses the chance to learn from others' mistakes rather than having to learn from its own.

Critically, a consultant can help executives stand back from their company and really think what it is they want out of a CRM system. Customer data is obvious, but in what form? How will information about customers be 'sliced and diced' so that it becomes meaningful? By looking at the business processes of the company, an overall strategy can then be developed.

The Jelf Group, a composite brokerage based in Bristol, provides a good example of how to approach CRM. The company operates in three divisions, offering commercial insurance, corporate healthcare and financial services, and employs 160 staff. Each division had its own core administration platform so there was never a universal view of clients - a considerable problem, as Phil Barton, group commercial director, explains: "Our strategy is to develop a broad range of services into a defined niche of the corporate landscape, so it was imperative for us to mine our customer base effectively."

The first stage of the process was to extract all of the data from the three systems and enrich it in a data warehouse. This meant recruiting a database manager. A consultant helped them build the client strategy at the outset, as the business lacked the capability that the consultant provided. A project manager was employed to oversee the whole process.

There was considerable expense but, Barton says, it was worth the effort.

"It is a long road. We started the project in November 2003, but now it is really beginning to deliver."

The wider strategy has allowed the business to develop useable data.

Through the CRM system, the group discovered that the best 500 clients had bought from more than one division. After some data-mining, they found that, of these 500 clients, 80% had made a purchase from from all three.

"There is a significant upside," says Barton. "Seventy per cent of clients are untapped. We found that, when we communicate our proposition clearly, customers buy into the whole shooting match, we just hadn't been communicating our proposition consistently."

The Jelf Group also redesigned its website, rebranded its literature and worked hard on marketing. "This, combined with CRM capability, is what is giving us results. CRM is only worthwhile if it fits with a wider strategy," Barton adds.

Barton explains that selecting the CRM software came later in the process, an approach supported by Oakes. By failing to look at the wider CRM issues, businesses rush to buy a software package hoping it will deliver as promised.

"The biggest mistake people make is choosing the vendor too early, allowing themselves to be pulled into the vendors' view of what CRM is all about," says Oakes.

This can mean the vendor pushing you towards an area he knows his package handles well, such as an aspect of sales-force automation. In reality, a close examination of the business and what staff are actually doing to add value for customers would show that this is not the area that needs work. For example, a broker could be offering classic-car insurance but not retaining customers as they do not have confidence in the business.

When talking to staff, it becomes apparent none of them have any clue about classic cars. This is a knowledge-management issue and this is what must be addressed in the wider strategy.

Vendor focus

"Once you have examined these issues, you should start thinking about which vendor focuses in that area," says Oakes. He returns to the importance of using a consultant in such decisions. "You need to look at the value you will get from a system and 'cut your cloth' to suit that. In just five or 10 days, a lot of good work can be done with a consultant." CRM vendors are good at assuring support, and promising return on investment, but they are all in the business of selling software.

CRM is a necessary evil. It presents businesses with real challenges right across the enterprise, and undoubtedly costs money. It is a slow process when done properly, as the Jelf Group's experience shows. However, in an information era, where a firm handshake and face-to-face contact with customers is increasingly rare, using IT is the only path open to companies that are trying to discover who their customers are.

Successful CRM offers the nearest thing to the personal touch of the past. "You need to give customers a single touch point with your business," says Carlile, "Then you must treat them with intimacy. If they are treated royally, they will come back."

CRM VENDORS

There are around 400 vendors providing CRM products for SMEs. Examples of these vendors include the following:

Bluesoft CIS, sold by Miraquel

This business specialises in CRM for insurance brokers. It offers a highly tailored solution for those with a limited budget.

www.miraquel.co.uk

Frontrange Goldmine

Offers expertise in tying CRM into marketing campaigns to provide useable data.

Microsoft

Stressing the software's 'affordable adaptability', the solution has the advantage of familiarity. This reduces training and speeds up implementation.

www.microsoft.com/crm

Pivotal

Pivotal claims to have a bite-size approach to clients, carefully looking at the component parts of a business and configuring the solution appropriately.

www.pivotal.com

Siebel

This vendor has been called 'the pioneer of CRM technology'. Now offering specific solutions for SMEs, such as the On Demand solution, which, the company says, can be up and running for 50 users in just a week.

www.siebel.com.