Four Myths About CRM That Could Destroy Your Business

Increased competition spawned by the Internet is forcing midsize companies to look for ways to reduce the cost of sales and increase customer loyalty. Customer relationship management (CRM) offers businesses the opportunity to do both by enabling them to automate many sales and marketing functions and tailor products and services to individual buyers.

A recent Gartner Group study has found that there are more than 500 companies claiming to make CRM software, while only about 200 of them can legitimately make that claim. The proliferation of CRM vendors and the hype they generate have created confusion about what exactly CRM is and how a business should approach it. There are four prevalent myths that a midsize company should avoid in its search for the right CRM package.

Myth: CRM is just about technology.

Reality: CRM is not just technology. CRM is a new way of looking at your business. A comprehensive definition of CRM is “the business strategy, process, culture and technology to enable organizations to optimize revenue and increase shareholder value by understanding and meeting customers’ needs.”

To be successful, a company should look at CRM as an opportunity to shift its focus from performing processes to serving customers. That requires a critical examination of all a company’s business processes from the standpoint of optimizing its relationship with the customer, not just maximizing efficiency and quality. It requires a re-orientation of company culture based on the recognition of the fact that every employee – from customer service representative to billing clerk to stock picker – directly contributes to building the relationship with the customer. Management and personnel in all departments have to buy into the CRM initiative and learn to think in a customer-oriented way.

Myth: CRM is just about improving sales.

Reality: CRM cuts across business processes. Depending what business it is in, a company might configure its CRM system to include any of the following functions:

Contact and opportunity management
Field service and dispatch
Sales configuration
Sales force automation
Marketing campaign management
Telephone call center management.

To determine what CRM functions it requires, therefore, a business should do a thorough analysis of its markets, distribution channels and customers’ needs. A screw fastener manufacturer has little need for sales configuration, but a company that sells assembled-to-order computers does. A company that sells and services conveyor belts needs to manage field service and dispatch, while a canned goods maker does not. An aftermarket auto parts producer selling to thousands of repair shops can use contact and opportunity management software; a captive job shop probably can probably do quite well without it.

One thing CRM does require is a Web interface to enable a company to:

Accurately identify potential sources for new business
Cost-effectively deliver customized information to customers and prospects based on data accumulated in their profiles
Quickly handle orders and inquiries
Share information with suppliers.

Myth: You can just buy a CRM package and bolt it onto your existing systems.

Reality: Installing and integrating a CRM system is a major investment in time and money and represents a significant risk for a midsize company. Bolting on a system can open a Pandora’s box of systems integration troubles:

Building interfaces (if there are no application program interfaces – APIs – for your legacy systems) or an information portal to provide integrated, browser-based access to information from your different systems
Web-enabling your legacy software: If your back office systems are more than five years old, chances are they weren’t designed for the Internet.
Eliminating redundancies and overlaps. CRM performs many functions already handled by back office systems, such as sales configuration and order entry. You’ll have to decide which system you want to perform those functions and how you want the CRM and back office systems to interact.
Creating a central data depository or making sure that your CRM software can access data maintained by other departments quickly, cost-effectively and accurately.

Without adequate planning and budgeting for integration, you could spend more on integration than you paid for the CRM software.

Myth: A midsize company’s best bet is to use the same CRM package its larger competitors do

Reality: Midsize companies need many of the same capabilities that large companies do, but they don’t have the money to spend on a complicated multi-component package from a CRM vendor that serves large corporations. Nor can they afford the time or the risk involved in installing large-company CRM software, which can take months with no guarantee of success. A prolonged installation can jeopardize a midsize company’s ability to operate over the short term: productivity drops as operations are disrupted, customer service deteriorates, operating costs increase, and morale suffers.

There are other alternatives, each with its own tradeoffs.

At the lower end of the CRM spectrum are products geared for small business: simple, inexpensive canned applications that plug-and-play, but provide only basic features in a given functional area. While inexpensive and easy to install and use, they don’t give a midsize company the functionality or flexibility it needs to react rapidly to customers and marketplace developments.

One alternative is to look to vendors experienced in developing versatile multi-function enterprise applications. Because there are many overlaps between the functions performed by enterprise resource planning (ERP) and CRM systems, it makes sense to investigate what ERP software vendors have to offer in the way of CRM.

If you are operating an ERP system or an application from an ERP system vendor, that vendor should be the first person you call to look for CRM applications.

Many ERP system vendors are partnering with CRM developers to integrate CRM into their ERP packages. This approach has advantages over bolting a CRM package onto your existing system, because somebody else has already done the integration. You will get a contemporary, comprehensive Web-enabled system, but no matter how much work was done to eliminate redundancies and synchronize data files the two systems are likely to look and act differently. The learning curve for this package may be longer than anticipated.

Other ERP system vendors are developing their own CRM components. The buyer will get well-integrated components, CRM functionality that is consonant with the needs of the ERP vendor’s market, and a consistent look and feel. This approach makes it possible to achieve the goal of making all a company’s processes customer-centered. For many midsize companies, buying an ERP system with the CRM capabilities it needs is the least expensive option in both the short and long term.

If you haven’t yet installed an integrated company-wide information management system, it might be the time to move to one that offers a CRM module with the functions you need. A system like this can be implemented one module at a time, starting with the modules most relevant to the company’s business processes, to spread the cost over time.

The CRM marketplace is full of inflated claims and misconceptions, but one thing is certain: a good CRM system can help level the playing field for midsize companies who take the time to think about their markets and their customers.


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FOUR MYTHS ABOUT CRM THAT COULD DESTROY YOUR BUSINESS

FOUR MYTHS ABOUT CRM THAT COULD
DESTROY YOUR BUSINESS