Evaluation of customer profitability leads to identifying the most profitable classes of c u s t o m e r s and h o w to create n e w profitable classes.

7. Evaluation of customer profitability leads to identifying the most profitable classes of c u s t o m e r s and h o w to create n e w profitable classes.

8. M i g r a t i o n f r o m a product f o c u s to a customer focus.

H e r e are s o m e details that underlie t h e benefits. M a s s mailings are wasteful. S o m e 98 percent of p r o m o t i o n a l c o u p o n s are discarded. It costs up to 10 t i m e s m o r e to g e n e r a t e r e v e n u e f r o m a n e w c u s t o m e r than f r o m an existing one. A 5 percent increase in t h e r e t e n t i o n rate can increase c o m p a n y profits by 60 to 100 percent. Servicing a c u s t o m e r through a call center is six t i m e s m o r e e x p e n s i v e than via t h e Internet. L o y a l c u s t o m e r s w h o refer another o n e g e n e r a t e b u s i n e s s at little or no cost. R e f e r r e d c u s t o m e r s gener-

ally stay longer, use m o r e products, and b e c o m e profitable c u s t o m e r s faster.

CRM PROBLEMS AND ISSUES M o s t p r o b l e m s and issues with C R M are d u e to organizational factors. T h e y crop up

during a n a t t e m p t e d i m p l e m e n t a t i o n . O n e - t h i r d o f all C R M projects g e n e r a t e great results, o n e - t h i r d c r e a t e m i n o r i m p r o v e m e n t s , a n d t h e final third p r o d u c e n o t h i n g ( C R M g u r u . c o m , 2002b). A c c o r d i n g to a study by Gartner Inc., 42 percent of the C R M end-user licenses b o u g h t i n 2 0 0 2 w e r e not b e i n g u s e d ( s e e Songini, 2003d). L e v i n s o n

(2002) indicates that a failure to rethink b u s i n e s s processes, n o t t e c h n o l o g y trouble, kills m o s t C R M i m p l e m e n t a t i o n s . M o s t s a l e s p e o p l e v i e w t h e t e c h n o l o g y that w a s

" i m p o s e d " on t h e m in 2001 as a failure. M a n y firms did n o t i n v o l v e t h e users in the s e l e c t i o n o r d e v e l o p m e n t o f t h e C R M . C R M e x p e r t s b e l i e v e that 8 0 p e r c e n t o f t h e

b e n e f i t s o f C R M c o m e f r o m n e w business processes, w h i l e only 2 0 percent are d u e t o technology. S e e C l o s e (2002) f o r details.

A c c o r d i n g to an InfoWorld-CTO N e t w o r k Survey ( s e e April and Harreld, 2002),

C R M p r o b l e m s are d u e t o difficult integration ( 3 9 % ) , high c o s t / l o w R O I (27), resis- t a n c e f r o m staff o r c u s t o m e r s (24), other (5), and s o l u t i o n s d o n o t m e e t n e e d s (5).

I n t e g r a t i o n p r e s e n t s a w h o l e n e w set of p r o b l e m s . T h e p r o b l e m is a c u t e in that m a n y o r g a n i z a t i o n s h a v e l e g a c y s y s t e m s that w o r k p e r f e c t l y b u t just d o n o t readily integrate with n e w tools. For e x a m p l e , the M i n n e s o t a D e p a r t m e n t of V e h i c l e Services ( D V S ) had a t w o - w e e k d e l a y in r e n e w i n g a driver's license. T h e r e was a m o n t h delay in obtaining a car title. M o v i n g to t h e W e b w a s difficult b e c a u s e m o s t of t h e data w e r e only available on p a p e r via fax. T h e major difficulty organizations face is integrating the C R M i n t o the data s o u r c e s ( s e e A p r i l and Harreld, 2 0 0 2 ) . Further difficulties occur in integrating C R M with other enterprise systems.

A C R M s o l u t i o n a i m e d at sales f o r c e productivity i m p r o v e m e n t s m u s t c o n s i d e r the overall aspects of sales m a n a g e m e n t , especially the organizational culture and user

i n v o l v e m e n t ( s e e T h o r e s o n , 2003).

C R M projects are big and costly. L i k e m o s t large-scale I T projects, t h e y o f t e n d o

4 6 4 P A R T 111 ' COLLABORATION, COMMUNICATION, ENTERPRISE DECISION SUPPORT SYSTEMS, AND KNOWLEDGE MANAGEMENT

C R M e f f o r t s are p l a g u e d b y all t h e p r o b l e m s i n v o l v e d i n l a r g e - s c a l e I T d e v e l o p m e n t s (see Boslet, 2001):

• Necessary preparations include allocating enough time and money, establishing realistic goals, a n d g e t t i n g f i r m c o m m i t m e n t s f r o m t o p m a n a g e r s • Adapting business processes • Retraining employees • F i n d i n g t h e right s y s t e m i n t e g r a t o r s

C i g n a H e a l t h C a r e ' s failure, illustrated i n D S S i n A c t i o n 8.31, i d e n t i f i e s m a n y f a c t o r s t o consider when developinga large-scale CRM system. T h e r e is a dark side to C R M d u e to p e o p l e a n d s o c i e t y issues. A k e y i s s u e is that C R M c a n m a k e a n o r g a n i z a t i o n s e e m i m p e r s o n a l ( s e e S c o f i e l d , 2 0 0 2 ) . C u s t o m e r s like

t h e personal touch, a n d m a n y o r g a n i z a t i o n s , f r o m M a r r i o t t I n t e r n a t i o n a l ( D S S i n A c t i o n 8 . 3 2 ) t o t h e C h i c a g o W h i t e S o x ( D S S i n A c t i o n 8.27), r e c o g n i z e a n d c a p i t a l i z e o n this. I t i s i m p o r t a n t t o u s e t h e C R M t o c a p t u r e c u s t o m e r k n o w l e d g e t o i m p r o v e t h e p e r s o n a l t o u c h . I f t h e p e r s o n a l t o u c h i s lost, a n o r g a n i z a t i o n c a n c e a s e t o b e a p o s i t i v e

f o r c e i n t h e c o m m u n i t y , w h i c h l e a d s t o l o s t r e v e n u e . H o l l o w e l l a n d V e r m a ( 2 0 0 2 ) indi- c a t e that t h e g o a l s o f p e r s o n a l i z a t i o n are s i m p l e : l e a r n a n d u n d e r s t a n d w h a t t h e cus-

tomer really wants, then ensure that the customer gets the same look-and-feel, and m e s s a g e a c r o s s a n y c h a n n e l . T h e b u s i n e s s e s that h a v e t h e m o s t s u c c e s s f u l C R M strate-

g i e s l e a r n t o c r e a t e s o l u t i o n s f o r t h e i r c u s t o m e r s i n s t e a d o f f i n d i n g c u s t o m e r s f o r their products. W a l t n e r d e s c r i b e s h o w A r t T e c h n o l o g y G r o u p Inc. p r o v i d e s C R M s o f t w a r e that drives t h e a u t o m a t e d p e r s o n a l i z a t i o n o f W e b site c o n t e n t f o r i n d i v i d u a l s h o p p e r s .

I E x p l o r e Inc., a C h i c a g o - b a s e d t r a v e l c o m p a n y , u s e s A T G ' s D y n a m o S u i t e t o t a r g e t o n l i n e i n f o r m a t i o n f o r individuals. T h i s i s a n e x t r e m e l y i m p o r t a n t issue, b e c a u s e W e b sites are g r o w i n g t o u n w i e l d y size a n d c u s t o m e r s o f t e n c a n n o t f i n d w h a t t h e y w a n t . I t

a l s o e n a b l e s c r o s s selling, a n i m p o r t a n t C R M f e a t u r e , b y p r o v i d i n g i t e m s t h a t its p r o - jections showa customer may want.

D S S I N A C T I O N 8 .3 1