A Lexicon for Customer Relationship Management Success

  • Written By: Glen Petersen
  • Published: September 29 2008

User Dissatisfaction with Customer Relationship Management

The customer relationship management (CRM) industry is approaching a ten year anniversary. Despite its longevity, there continues to be a pervasive sense of dissatisfaction within the end user community relative to CRM's perceived delivered value. There are three fundamental factors contributing to this:

  1. The industry fails to articulate a clear picture of the value it provides outside of the feature/function attributes of the technology.

  2. Senior management (user organizations) view CRM in terms of infrastructure deployment instead of in operational and strategic terms.

  3. Because the user community fails to approach CRM as an operational strategy, its perceived value is limited to technology efficiency. User organizations must move beyond technology and process productivity to properly assess the system's potential. Only then, can the vendor and user communities establish meaningful discussion about value.

The industry does itself a gross disfavor by using tired and essentially empty terms when discussing the application of CRM. The rate of technology development has largely outpaced the development of management techniques to effectively use the technology. Vendors base their pricing on the level of sophistication their product has, but end users balk because they are unable to leverage a solution's capabilities. As a result, users do not assess the added value highly.

It is time for the CRM industry to more accurately articulate the implied value proposition of their solutions and for senior management to take a leadership position and articulate a true CRM operational strategy. Without these two forces coming together, CRM will be forever relegated to a position of infrastructure and will become one more footnote in the history of failed management concepts.

The Issue

The motivation to write this article was spawned by two recent articles. The first article was based on a survey of CRM experts who explained why they believe CRM initiatives fail. Although some of their comments were refreshingly accurate, there were a number of references to tired old phrases that do little to improve understanding of the real issues and opportunities associated with CRM. The second article was based on a survey of chief executive officers (CIO) about their satisfaction with CRM applications. The survey reported a rather low level of approval and cited various technology and productivity deficiencies. These two articles are representative of the disconnect between galloping technology and the inertia of many organizations to change their operating paradigm. The continued use of empty phrases and the emphasis on implementation as opposed to strategy is not going to help narrow this gap.

The Genesis of CRM: The Perfect Storm

CRM, as a technology, started as a software marketing strategy. The concept was to create a common database between customer service and sales force automation (SFA). The SFA industry picked up on this idea and soon there was massive consolidation among SFA, customer service, and field service software providers. Each vendor (left standing) claimed to have an integrated set of capabilities and the phrase customer relationship management became a bi-word in the world of technology.

On a separate path, Peppers and Rogers (currently a strategic division of Carlson Marketing) popularized "one to one marketing" which established a marketing component in CRM. At the same time, the dot-com era was born and the idea of tracking consumer behaviors at the click level materialized, giving rise to real time marketing. The rush for customer data was soon followed by the realization that there was an ocean of data with few tools to ferret out actionable information.

Since the beginning of this "perfect storm", there has been a quantum leap in CRM tools, but there has been a distinct lag in the management rationale to keep pace. This new set of tools provides the means to integrate the actions of sales, marketing, customer service, helpdesk, field service, and web site design; and it is a way to interface with partners. However, part of the problem is that this spans an enormous amount of resources and responsibility. Since most organizations are structured by function and basically compete for limited resources, each function has a different view of performance, and of CRM for that matter. Therefore, CRM installs have historically involved functional deployments and there has been some success in this approach. The advantage of limited deployment is that it is more manageable in terms of scope and accountability. However, the real leverage for CRM is at the enterprise level.

Key Terms and Phrases

The following terms and phrases are not necessarily inclusive or exhaustive; rather, they illustrate the need to be more precise in our language. From an industry standpoint, there is a need to use terms in a general way, but when it comes to the end user community, the lack of definition generates missed expectations and leads to failure. This discussion is presented to help organizations to better understand these needs and, in some cases, as an admonition to the industry to refrain from using terminology that does not add value to the user community, and as a result, is destructive to the long-term health of the industry.

Customer Relationship Management (CRM)
From the moment of inception, CRM has been defined in a hundred different ways. Since the industry is technology based, definitions tend to revolve around the capabilities of the technology. Gartner was among the first research organizations to effectively argue that CRM is a business strategy and that technology is an enabler. This is where the industry is stuck today: how to describe this management strategy? Some practitioners describe the focus as one of competitive advantage (a state), whereas more common terminology is customer centric (an organizational value).

Being Customer Centric/Customer Driven
"Customer centric" and "customer driven" represent terminology that is a politically correct way of suggesting that perhaps the organization should pay attention to the customer as opposed to itself. It infers that the organization should

  • Not take customers for granted
  • Ensure that they are satisfied
  • Monitor their behavior
  • Consider internal actions in the context of how they will be perceived by the customer
  • Recognize that customers have options

All of these inferences are reasonable as value statements, but success will never be generated by senior management adopting a strategy to become more customer centric. What does this mean operationally? The rank and file are all too aware of the contention between functions, and policies designed to mitigate risk, but really drive customers "up the wall". For example, return product procedures can be ponderous to customers and cause them to alter their purchasing patterns in a manner that reduces total net revenue. Creating a unified and cohesive customer experience requires organizational change and the mantra of "customer centricity" is not going to unify or create a sense of urgency that will impact the inertia of the status quo.

Senior Management Buy-In
Senior management buy-in is a phrase that is simply wrong-headed. If senior management signs off on the CRM expenditure, does that signify buy-in? To link CRM success with buy-In suggests that success is a function of implementation and that if the organization does a good job of vendor selection and deploys the applications correctly, then success is ensured or at least highly probable. Yet this is far from the truth? Unfortunately in all too many situations, senior management approaches CRM as a technology deployment and views implementation as a CIO issue. When this happens, the project will quickly produce little impact or lead to outright failure. If nothing changes in the organization, where will the benefits come from?

Senior management is there to lead, not to acquiesce. The dirty little secret of CRM is that applications assume an alignment of effort that is contrary to how most functionally structured organizations operate. How can one achieve success (defined as some demonstrable economic benefit) when senior management is not leading?

An adjunct to the misconception surrounding success is the emphasis on the project champion. This again has an implementation spin. The industry wants to convince the user community that success is derived by following certain implementation practices. However, the value to the end user organization is derived from change, which does not solely depend on implementation. Consequently, from this perspective, what is required is an effective sponsor who will provide the right political clout to make the right things happen for the right reasons.

Going back to the beginning of SFA, there have been periodic surveys designed to define the percent of organizations that claim success from their implementations. Often, the definition of success is left to the perspective of the person being interviewed; this makes the survey process subject to interpretation. Another issue is whether the user organization defined success prior to implementation and setup metrics and goals to measure the outccome. If the organization did not define success ahead of time, does it have the right to claim failure?

It is possible to approach the applications of CRM as infrastructure. Customer facing functions need management tools to improve productivity, so the IT organization is chartered with the task of implementing cost effective tools. In this scenario, the cost of tools becomes preeminent and the objective is essentially to make existing processes more efficient. Success, in this case is to improve productivity with minimal investment. But these tools are not designed to simply replace existing tools; they are designed for an enterprise deployment.

Another misconception is that CRM benefits are intangible (e.g., competitive advantage, image, etc.), and therefore defy the classical requirements of return on investment (ROI) analysis. This should come as no surprise when the industry is talking about being customer centric. Such attitudes conveniently cloud accountability, and do not give the organization a competitive advantage or notoriety. Instead, the allow another failed initiative.

Customer Loyalty
Customer loyalty is a term that has great intuitive appeal and is likely to become another buzz word, like Six Sigma or other initiatives. Every organization wants to have loyal customers; however, the problem is that loyalty reflects customer attitude, and can only be measured indirectly. Further, there is not always clear linkage between attitude and behavior. For example, the linkage between customer satisfaction (attitude) and retention (buying behavior) is not often highly correlated. The reasons for this lack of correlation are many and include the fact that the company is not asking the right questions. Moreover, unless the satisfaction scores are extremely high, the customer is vulnerable to brand switching. For these reasons, linking CRM success to increased loyalty or satisfaction once again uses metrics that do not correlate with profitability or effective decision-making. They sound like "apple pie and motherhood"—innocent, idyllic, and flawless, but they are actually empty objectives when they are not accompanied by other metrics that measure behavioral changes linked to organizational profitability.

Organizations are struggling with how to capture current customer behaviors and predict future behaviors, and they are trying to learn how to influence this behavior in a profitable manner. In this context, there are certain customer behavior metrics that can provide solid evidence of the success of the organization's products and programs and can support ROI calculations. These metrics include

  • Number of customer referrals
  • Share of wallet
  • Contract renewals
  • Brand switching
  • New product trials
  • Percent of full line purchased
  • Product returns
  • Complaints

Consider where most organizations are today. Budgets are created on the basis of history and trends. Little insight is available as to what is working and what is not. Without a linkage of programs with customer behaviors, the organization is left with aggregated revenue figures. With average sales and marketing costs being approximately 35 percent of total corporate cost, companies need to determine what the value is of being able to optimize these investments. Optimization offers the opportunity to leverage both top line and bottom line results. Unfortunately, few initiatives have this capability.

Best Practices
Task lists become best practices when they produce desirable results. The CRM industry has generated many best practice lists and these collectively represent a solid framework for implementation. The issue here is not the value of these lists as much as their relevance to success in the context of ROI. It is a question of what drives ROI results. When a regression analysis is applied to operational approaches that achieve financial results, these best practices do not correlate well with successful results. This suggests that implementing best practices alone do not produce success in the context of ROI. Achieving operational success requires best practices that address organizational and sponsorship issues such as leadership and change management.

These results should not come as a surprise to anyone; technology alone seldom solves any process issue outside of scale. In fact, technology often exacerbates operational issues when there are hand-offs between functions. Operational improvement implies change.

Ultimately, ambiguous CRM terms do not provide the vocabulary for concrete action and measurable expectations. The technological gains of the CRM industry must be accompanied with accurate terminology that will encourage users to better conceptualize and plan with their investment. In other words, the CRM lexicon needs to be cleaned up.

Cleaning Up the CRM Lexicon

Defining CRM Industry definitions should be created from the desire to ensure that user organizations get on the right track for success as opposed to embracing the latest wave of hype. Having said this, this article will avoid the "definition derby" and will focus on two fundamental principles to guide its analysis:

  • CRM encompasses technology that provides a set of integrated applications that address the operational needs of customer facing entities (functions, web sites, and partners) and enables the integration of effort, the creation of a single customer database, and a set of analytical tools for reporting and analyzing customer behavior.

  • The strategic purpose of CRM is to enable the organization to use customer interactions and customer history in a manner that leverages long term, profitable growth.

Thus the objective must be profitable growth (a result)—why else should an organization invest critical resources on such a massive scale? It is the responsibility of the user organization to "connect the dots" as to how the technology will be used to leverage this objective.

Research has validated that customers make value assessments based on the total experience with a product or service. One way to approach this customer experience objective is through the use of value statements and policies. This approach may impact employee actions but there is really very little control as to the type of actions this precipitates and which actions are effective or profitable. Likewise, CRM tools can be deployed with a focus on reducing cycle time and perhaps increasing resource availability; but if customer behaviors are not captured, the organization still does not know what is working and why. The organization needs tools to manage the customer experience and also to monitor corresponding customer behaviors. The issue remains one of understanding the cause and effect of behavior and then providing an overlay of profit effectiveness.

CRM provides tools that can be used to positively impact the customer perception of value. The technology can also support resources with varying skills and experience to "raise the bar" on the typical customer experience, plus offer the customer options such as e-commerce and self-help. Similarly, it can be used to identify customers that are at risk and initiate programs that stop them from defecting. A CRM database can also be used to optimize customer interactions to leverage profit growth.

Given this set of capabilities, over time CRM should provide the user organization insight as to which prospects offer the most profit potential and how to raise negative or marginal profit customers to acceptable levels. As a result, customer behavior and profitability becomes a new perspective for managing the business. This approach involves no intangibles and offers an objective window as to the benefits received through the CRM investment.

The potential to improve profitability is within an organization's grasp, but gaining this potential is fraught with organizational issues such as, who owns the customer and customer data? Who can analyze the data? What happens when customer interactions require behavior that is inconsistent with existing performance metrics? In order to generate results, strategy and commitment is required from senior management. In other words, CRM cannot be a bottom or middle up initiative.


If one wishes to achieve success in financial terms, there must be a clear focus and link with gaining tangible operational results that are so significant that senior management will be willing to place their personal and professional reputation on the line. The following chart summarizes the comments and principles that will contribute to improving the understanding and vision associated with CRM.

Concept Current State Change To Rationale
  • Technology focused
  • Vague reference to improving competitiveness
  • Operationally focused with linkage to long-term profitability
  • End user organization definition
There needs to be a stronger emphasis on creating an operattional strategy that leverages the technology to support long-term profitable growth. Lacking this focus, it is difficult for senior management to grasp the need for their leadership in defining this strategy and its communication to the organization.
Customer centric
  • Vague, value based terminology that encourages a customer orientation.
  • Focus on managing customer behavior, attitudes, and profitability.
The focus needs to be on using customer profitability as a mechanism to achieve long-term organizational profitability. Senior management is not going to invest resources, including their personal time, if it is not clear that growth and profitability are the objectives.
Role of senior management
  • Buy-in
  • Leadership
Senior management must define CRM as an operational strategy and then personally direct the implementation as an organizational change initiative.
  • Budget and delivery perspective
  • Use of intangibles to justify
  • Return on investment
  • Total cost of ownership
The whole point of CRM is to move to an operational position where cause and effect are known (or better known) and customer behavior can be predicted. The opportunity is enormous.
  • Infers attitude based orientation and measurement
  • Operational strategy of managing customer behavior.
Managing customer behaviors has a strong impact on organizational strategy and can be measured directly.
Implementation Focus
  • Project champions
  • Implementation best practice
  • Project sponsorship
  • Change management plus implementation of best practices
Implementation needs to follow strategy. Senior management must be an active part of the implementation planning and execution.

About the author

Glen S. Petersen is an internationally recognized speaker, writer, practitioner, and thought leader in the CRM and e-business industries. As a visionary and early adopter of sales force automation (SFA), in 1986, Petersen led one of the first successful national implementations of SFA in the United States. He has held senior level management positions with system integration and end user organizations. As a consultant, he developed a number of proprietary facilitation techniques to help organizations to better understand technology, and how to rally around a single threaded, phased implementation approach. Prior to founding GSP & Associates, Petersen was senior vice president at ONE, Inc. and Ameridata. He has authored six books including Making CRM an Operational Reality and ROI: Building the CRM Business Case.

Glen Petersen can be reached at gpetersen@competitiveperformance.com

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