CRM fails to deliver on promise of success

You have probably read the marketing hype about how much more expensive and difficult it is to win new customers than to retain existing ones. Conventional wisdom dictates that the key to commercial success is to have customers who are, and always will be, delighted to do business with you.

At the same time, you've probably also had a presentation from a customer relationship management (CRM) software supplier promising to deliver that success.

But the reality has not lived up to the expectation. A recent report from industry analyst Frost & Sullivan found CRM users are a disappointed lot. Andy Tanner Smith, the report's author, believed vendor hype, product immaturity and, above all, product cost, are contributing to user dissatisfaction. "The CRM market is really at an early-adopter stage," he said. "But marketing is done as though they are mass-market products."

Frost & Sullivan spoke to 50 chief executives. Tanner Smith said: "Users expressed relative satisfaction with the technology, but the pre-sales consultancy and post-sales service they receive could be improved. Expectations have been raised through the high prices attached to top CRM products."

There have been cases of CRM installations taking 18 months or more to complete, and it seems to be accepted that the price of CRM software from market leaders such as Siebel can run into several thousands of pounds per seat. A common statistic for Siebel is a ratio of 1:3 - the services and installation associated with the software cost three times as much as the software itself.

The have and the have nots
Part of the problem is that CRM in itself offers immediate competitive advantage, said Tanner Smith. Businesses are differentiated by just having the product, not by its functionality. "Vendors can charge what they want. Many of the products are cobbled together as a result of merged companies or technologies, and the ones that do work well are far too expensive," he said.

Angela Lovegrove, managing director at Pivotal Software reseller Tenuteq, suspects that customers may be partly to blame. Tenuteq has been marketing Pivotal for 18 months and has sold it to 10 customers.

Some businesses view CRM as a panacea, said Lovegrove. "We've sold CRM to firms committed to customer relationships. We meet companies that want CRM but aren't embracing the strategy. Customers should remember that what they are buying is a product, a tool to help them improve their customer intelligence. It's not the solution, just part of the solution," she said.

While Frost & Sullivan's comments may hold true among Global 1000 companies, the reality is different in the middle-market space usually served by resellers. Cost per seat is much lower - in the hundreds rather than thousands of pounds - so the investment is nowhere near as great and the installation less time-consuming.

The people at the top are close to their clients and to the firm's culture. "I have a client whose stated strategy is to get ahead of its tier-one rivals," said Lovegrove.

Many CRM vendors are already hyping electronic CRM and using the web as anaccess channel. But vendors are pushing customers faster than they would wish to. Tanner Smith said it's not happening yet, apart from one or two early adopters.

But CRM uptake is certain to increase. A survey last year by researcher Meta Group found firms increasing their CRM investments by 23 per cent a year. And a survey of 2500 UK firms by Business Intelligence and Renaissance Worldwide found that 60 per cent had introduced an initiative to improve the management of customer relationships, while a further 25 per cent plan to do so.

What's in a name?
There are probably 60 CRM software vendors in the UK, say observers. Many enterprise resource planning vendors are trying to reinvent themselves, but labelling a contact management package as CRM doesn't mean it will be able to manage the customer relationship from initial prospect to sale and support for years to come.

A shake-out is likely in the future, so who should resellers align themselves with? A Frost & Sullivan report said: "A vendor that matches complete offerings with strong marketing will have access to a large pool of SMEs that need the full range of CRM functionality but lack the resources to invest in the solutions on offer."