MARCH 31, 2004

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DIGITAL MANAGER
By Lisa Miller


CRM: Trickle-Down Tech
[Page 2 of 2]

TAKE AIM.  This is good news, because smaller outfits stand to reap major benefits from the targeted use of CRM. The key word here is "targeted."


Despite the influx of SMB-friendly products, businesses can still blow it if they don't think things through before buying. "The problem with CRM, is that it has been equated so much with tech," says Douglas Turk, executive vice-president of Inforte, a consultancy, and co-author of a new book, CRM Unplugged: Releasing CRM's Strategic Value.

CRM newbies should first define overall business strategies and goals, figure out how a functional approach to support those goals, and then craft customer strategies. Only after taking these steps should they start stocking up on CRM software, Turk says, adding: "Your CRM should support the key aspect of your business that is most important to your customers."

GOLD DETECTOR.  Besides helping outfits treat customers right, CRM can also help to identify which customers are the most lucrative -- and the most costly. With this information, SMBs can target their markets in much more sophisticated ways. In one extreme instance, an Inforte client discovered that 40% of its profits were coming from a mere 2% of customers. Meanwhile, about 90% of clientele actually had a negative impact on earnings.

Businesses might not want or be able to drop their less-lucrative customers, but they can seek out more profitable ways to serve them. "Your customer service rep, your sales rep, your marketing person only have 8 hours to 10 hours in a day," Turk points out. "If they're not prioritizing their activities on those customers that are creating the highest value, then your company will not create the highest value."

This type of profit-enhancing insight is why CRM generated so much hype in its younger days. Unfortunately, the folks buying the software back then didn't always do their homework. Of failed CRM projects, most flopped because businesses "skipped the strategy side," says Gartner's Topolinski.

TOO MUCH OF A GOOD THING.  Even after setting a strategy, outfits have another pitfall to avoid: simple overenthusiasm. CRM software can do so much, it's easy to get distracted by its many fancy features. Not only can it tie each customer's information together all in one place -- making it easy to track complaints, billing problems, order changes and the like -- outfits can also set it up to monitor trends, such as shifts in buying patterns in different regions. The temptation is to try to do it all.

Turk recalls fighting "like hell" with a client about the need to use certain features in its new CRM system. "In the end, they insisted they would have these alerts that would pop up whenever there was a status change on certain orders, or a status change on activities, and things like that," he says.

The alerts were duly set up, but Turk's misgivings soon came to pass. "A week to the day after the rollout, we shut down all the alerts," he recalls. With each person in the 400-strong outfit getting roughly 25 alerts nearly every hour, employees were overwhelmed. Turk cautions: "CRM technology and functionality can be very sexy, but you've got to be careful, because if it's not supporting your business, you're not going to be happy about it."

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Miller covers small business for BusinessWeek Online
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