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Customer Valued

Customer Valued

A former work colleague once gave me some perceptive advice: never deal with a company with a mission statement containing words such as "we value our customers". He believed that if the organisation needed a constant reminder it was unlikely to value its customers as a reflex action.

For much of the 1990s many organisations have been so focused on cost containment they have overlooked their customers. It has taken consumer backlash against things as diverse as bank branch closures, globalisation and privatisation to remind these businesses that it's the customer who is footing the bill. Perhaps that explains the burgeoning interest in customer relationship management (CRM) systems.

This year IDC in Western Europe examined the CRM services market and forecast that across the world it would experience a compound annual growth of just over 30 per cent between now and 2003. It ties much of this growth to the expansion of call centres and the increasing propensity among CIOs to outsource these services. In many ways this reflects a traditional approach to CRM: breakdown the stovepipe processes in organisations which shuffle customers from department to department. The thinking is that if there is a single contact point and customer data source, the organisation will understand the true value of the customer and be more efficient in dealing with their needs.

But the IDC report posits that CRM is not a single system; instead it is a series of interrelated activities, including call centres and service systems. It stresses that CRM also embraces other business systems such as sales force automation, data warehousing, data mining and ERP. All these functions need to be interwoven for the organisation to present a consistent view of any client.

The results of this years local "Forecast for Management" study indicate that not many organisations are managing this change. For the first time the survey asked about CRM, and just under 25 per cent of respondents indicated they had implemented such systems. At the same time respondents reported stagnation or decline in many of their ancillary systems -- such as data warehousing, data mining and sales force automation -- that would feed data into the CRM.

Responses to the "Forecast for Management" survey show a significant decline in the number of organisations reporting that their data warehouses will be used for sales and marketing activities. The data analysis needed to support an effective CRM project is not happening. Yet when IDC's Technology Integration Panel (TIP) surveyed CIOs on why they believed CRM was important the dominant responses were to enhance existing relationships and to improve end user productivity. How will organisations achieve these goals without strong analysis of customer-generated data?

In the hard-nosed business world of today someone, somewhere will ask what the ROI is from CRM. A recent article in NCR's "Relationship Management Report" might help with the answer. It quotes a GartnerGroup study which emphasises the folly of approaching CRM from a hard dollar savings angle. While investing in CRM might lead to initial staff savings in customer contact staff, eventually a good CRM implementation should generate more customer contact and a need for more staff. The report suggests the best approach is one of revenue enhancement through yardsticks such as reduced customer attrition or total customer value. It also advises CIOs that some of the strongest returns from CRM were soft benefits such as market image or improved staff morale.

Peter Hind is the manager of User Programs, which includes InTEP, at IDC Australia

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