TORONTO (05/16/2000) - When companies began to set up on-line versions of themselves, they created alternate delivery channels to their customers, steering them away from face-to-face contact. In doing so, many companies have lost mind-share with customers, and in some cases lost their patronage to more Web-savvy competitors.
These companies are now looking for ways to "reintroduce" themselves to their customers, using the Web to provide a value-added buying experience. One of the latest catch phrases to buzz the heads of IT executives is customer relationship management (CRM), and according to experts, CRM will help break down the walls of disintermediation that have emerged as a result of e-commerce.
But while IT executives may understand the benefits of CRM, and consumers certainly would like to have a better relationship with the companies they buy from, senior management doesn't seem to have gotten the message.
According to a recent Andersen Consulting survey of 204 business leaders, the vast majority of senior managers rank CRM as a low business priority.
Ironically, almost 80 percent of the business executives surveyed said they believe their companies face a serious competitive risk without CRM. Managing customer relationships, however, was ranked as a high priority by only 15 percent of business leaders, making it the lowest ranked of 14 organizational priorities outlined in the survey.
Underestimation of Impact
Business leaders' top priorities were attracting new customers (cited by 86 percent of respondents), enhancing productivity (84 percent), reducing costs (81 percent), improving customer service (77 percent) and securing access to new markets (60 percent). It would appear business managers fail to see these organizational priorities could be achieved through CRM strategies, says Jerry Garcia, a partner at Andersen Consulting.
"What many Canadian executives failed to do was to link all of that with customer relationship management," Garcia says.
In fact, many of the responses from business leaders indicate they don't recognize the impact CRM can have on a company's ability to retain customers and therefore compete in the marketplace, says the Andersen Consulting report.
For the purposes of the study, Andersen defined CRM as "the practice of identifying, attracting and retaining the best customers to generate profitable revenue growth by aligning a deep understanding of customers with the company's resources to deliver value."
The business leaders surveyed are involved in making corporate decisions about CRM, and have job titles that include president, CEO, owner, COO and senior vice-president of strategy, customer relations, sales and/or marketing. Also surveyed were 203 procurement professionals who are responsible for the purchasing function of their companies, and 250 end consumers. Business leader and procurement specialist respondents work in sectors such as financial services, communications and technology, resources and utilities, and product manufacturing and retail.
Analysis of the survey results points out a striking difference in the way CRM is perceived by the various survey groups. In contrast to senior management's low priority for CRM, 86 percent of procurement professionals and 78 percent of consumers give it a high priority. In addition, 88 percent of procurement specialists prefer to deal with suppliers that have integrated customer channels and an Internet presence, while 80 percent of consumers said they prefer dealing with companies that have these capabilities. Furthermore, 65 percent of procurement professionals said they would consider switching to suppliers who demonstrate a strong commitment to CRM.
Garcia says the large gap in customer vs. executive thinking is both surprising and not surprising. "It's surprising that it was such a large gap, and not surprising because inherently all of us as consumers probably realize there isn't as much attention given to this as there should be."
Meeting Consumer Expectations
Another void emerges when one looks at how business leaders rank their current Web-based CRM capabilities vs. what consumers expect from companies' Web sites.
It should first be noted that, generally speaking, business managers believe they are investing adequately in CRM, with 47 percent saying they are able to track and link all customer interactions across the various delivery channels they use.
With respect to Web capabilities specifically, 83 percent of consumers said they want to be able to check the status of their account or order via a company's Web site. However, only 19 percent of business leaders said their current sites provide this feature. Similarly, 76 percent of consumers said they want to purchase products or services directly from a Web site, whereas only 24 percent of business managers said their companies currently offer this true e-commerce capability.
Other areas where companies significantly fall short of customer expectations include: customizing the Web site to meet consumer preferences; differentiating each visitor; linking the Web site with all other channels; and automatically alerting customers of products or services in which they have previously expressed an interest.
Most companies are doing a better job at providing the following capabilities on their Web sites: the ability for customers to submit a complaint or make a product-specific enquiry; allowing customers to review products or services and to directly provide comments; linking customers to different pages on the Web site to facilitate cross-selling; and tracking or interpreting customer behaviour on the Web site.
Procurement professionals also indicated they feel the current capabilities of companies' Web sites need to be vastly improved. Only 33 percent of procurement specialists said the majority of companies they deal with are customer-centric, whereas a surprising 78 percent of business leaders said their organizations have a CRM strategy in place.
Among the business leaders who said they already possess CRM capabilities, 32 percent said CRM is essential to retain customer market share or loyalty.
Generating growth was cited as a reason for pursuing a CRM strategy by 24 percent of business managers, while only 18 percent said CRM will help them remain competitive.
This apparent dichotomy between how well business leaders feel they are managing customer relationships vs. how important they think it is to manage those relationships is further underscored by other stated rationales for implementing CRM. Only 17 percent of business managers said CRM can help improve customer satisfaction, while 9 percent said it helps to develop good relationships with customers. In addition, only 7 percent said they use CRM to educate themselves on the needs of their customers. Clearly, business leaders don't see a correlation between developing strong relationships with customers and their ability to remain competitive.
Of the 22 percent of business managers who indicated their companies haven't implemented a CRM strategy, 18 percent said there isn't currently a need for it. Another 11 percent stated their companies lack the time to pursue CRM, while 9 percent said other priorities are taking precedence. Finally, seven percent said their companies aren't implementing CRM because they are set in their ways of doing business.
Obstacles to CRM
When asked to choose from a list of possible "significant obstacles" to CRM, 26 percent of business leaders said insufficient human resources are the number one obstacle. The limitations of traditional business structures were cited by 22 percent of senior managers, and the existing long queue of IT projects within organizations was chosen as a top obstacle by 21 percent of respondents.
Organizational conflicts and a lack of management commitment tied for the next highest ranked obstacles at 16 percent. The final three obstacles listed are: difficulty of sales and marketing managers to gain resources for capital investments (11 percent); company policies that mandate identical treatment for all customers (10 percent); and a lack of existing success stories or examples (8 percent).
One reason business leaders may feel CRM is a low priority could be due to the gap between expected and realized sales increases as a result of implementing CRM. The survey shows that, on average, business leaders who implemented CRM expected a 22-per-cent increase in sales afterward. However, the actual sales increase attributable to CRM deployment averaged out to 14.7 percent.
Asked to identify the overall advantages that could be achieved by implementing CRM, business leaders seem to contradict their low CRM priority ranking.
The top advantage cited by business managers is achieving higher customer satisfaction (48 percent). The next two highest ranked advantages are reducing customer attrition and increasing profitability (37 percent and 36 percent, respectively).
Despite the fact business leaders can identify these benefits of embarking on a customer relationship management strategy, CRM still remains a low business priority. Andersen Consulting's survey results should serve as a warning to Canadian business managers that they may be ignoring, at their peril, the very strategy that can help them to achieve their objectives. Garcia points to successful on-line companies such as Amazon, Chapters Online and Canada Trust as setting a very high example of customer service.
"Look at eBay or E-Trade -- there's so many examples where if we don't pay attention as Canadian businesses, we're going to start lagging behind and have a real problem catching up," Garcia says.
Linda Stuart is a veteran technology writer and associate editor of CIO Canada.
She gratefully acknowledges the contribution made by ComputerWorld Canada staff writer Victoria Berry to this article.