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Myths surrounding CRM

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CIOL Bureau
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MUMBAI, INDIA: Unlike ERP, the success rate of CRM implementation is very low. The scope of CRM is not limited to sales force automation only, as is widely perceived. CRM covers the entire gamut of activities, including market research, market segmentation, SWOT analysis for product positioning and marketing strategy, distribution network for fast and efficient delivery of products, services and after sales services, reorientation of organization culture to make it more customer centric, faster and consistent response to customer enquires and complaints.

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If a company is in the business of marketing of consumer products, say fashion garments, it has to constantly keep itself abreast of the fast changing lifestyle of customers so as to align the products and services in tune with the customers taste. The attrition rate of customers in this business segment is very high. More than the product, which has attained a certain level of maturity as of now, it is the quality of service that differentiates an organization from the rest.

How does a company respond to customer enquiries/complaints? Who attends to the enquiry? Are all enquiries channelized through a common database? How much time is elapsed in responding to an enquiry? Is the delay acceptable to the customer? Is the customer satisfied with the response? Are the companys business metrics in place, which can measure the companys performance in terms of levels of service provided? These are the challenges companies must address before rushing in to bring CRM software.

What CRM Can Do

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CRM software can at best maintain customer and product databases with pricing, keep a track of enquires received, and channelize the correspondences between the company and the customer. But, it cannot bring about radical changes at the grassroots level in the organization. 

Why it Fails

CRM implementation fails due to the lack of CRM vision and strategy, faulty evaluation of CRM software, and lack of ownership of project sponsor/project leader in driving the project. While trying to implement Saleslogix CRM in Garware Wallropes, Pune, I noticed that sales people of one division were simply not interested in feeding opportunity details in CRM. The CEO of the company was not involved in the discussions with the marketing team. His contention was that it is the consultant who should take the ownership of implementation. This did not work out, as a result CRM implementation failed.

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It is being debated whether CRM should be implemented before ERP or after ERP. CRM is a front-end application and, therefore, does not include sales order processing module. It is not possible for CRM to give an order execution status without a backend system in place. It is not necessary that the backend system has to be ERP; it could be any system with an Oracle or SQL server as the database. 

CRM can be integrated with the backend system. In an integrated environment, as and when an opportunity is converted into an order, it is pushed to the backend system for further processing. Conversely, after the invoice is generated in the backend system on delivery of goods, it is pulled back in CRM again. Payment details are entered into the CRM system and are ultimately pushed to the financial accounting module at the backend.

Most CRM systems are Web basedthey can be accessed from anywhere through a browser by connecting a laptop or a PDA to the Internet. Even if there is no connectivity, details can be entered then and there, and later on validated and synchronized with the server. CRM should be used in online mode and not in batch processing mode. If the sales representative meets a customer and if the customer needs some details, the same should be entered online. If there is Internet connectivity, the details can be given, otherwise the details required can be captured in the system in offline mode and later on provided on returning to office. If CRM is used in the batch processing mode, the sales representative would not enter the details at site and most likely would forget it after sometime, with the result details would not be captured in the system at all.

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Clarity of Thoughts

Quite often the sales team does not even know what details should be entered in CRM and when. It is, therefore, important to understand what activities each member of the sales team perform to provide customer service. These activities should be broken down further into tasks according to the level of people who perform these tasks. It should be clearly defined what task should be performed by whom and when. Unless the details of each and every task is entered by the people responsible for completion of the task, the sales person will not be in a position to know when the task is going to be completed and, in turn, will not be able to give correct information to the customer.

Another significant point to note here is that in ERP, if a transaction is not entered, it will have a cascading effect in the subsequent operations, resulting in disruption of the business cycle. For example, if purchase order is not entered by the purchase officer (PO), material received in store against this PO will not be accepted by the system that will affect stock in hand and a stock out situation may result in. In CRM, barring few transactions, transaction entry does not impact the business cycle although customer service gets affected. It is, therefore, very difficult to keep a track of transaction entries during the implementation stage. Generally, the implementation partners role is to install the software, map business process to the product functionality, provide training to key users, conduct conference room pilot run, handholding, and, finally, project sign off to indicate that implementation is over.

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Unfortunately, the real benefit of CRM comes 6-12 months after project sign off, when each and every member of the marketing team creates a sizeable chunk of database. Generally, unless strict control is exercised over day-to-day entry of transactions in CRM, users tend to revert to old methods of using excel sheet for day-to-day activities, with the result the entire investment and the efforts that go into implementing CRM go down the drain.

The Cost Factor

The total investment required in CRM implementation varies, depending on what brand of CRM you go for and how many licenses you take. Typically, investment in CRM in the SMB sector is Rs 30-40 lakhs, assuming one goes for fifteen user licenses. This cost will increase proportionately with more number of user licenses. The total cost of implementation of CRM includes costs of licensing, hardware, implementation, and training, but does not include customization cost, which will vary depending on quantum of change required. 

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All Web-based CRM software require a Web server, which will be connected to another server at the backend in which CRM software will be installed. Since the Web server can be accessed through public domain, it is always safe to install firewall between the Web server and the application server to protect the application server from unauthorized access.

You should go for a software-based firewall and not a router-based firewall as is normally the practice. The cost of firewall should also be included in the TCO.

Computing RoI in CRM is often quite difficult. RoI can be reasonably calculated if you can estimate the loss of sale on account of lost opportunities or customer attrition on account of unsatisfactory service level. Even a 5% increase in sales on account of better service provided to the customer can more than justify investment in CRM.

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Evaluating CRM

There is no recipe that can be given on how to evaluate CRM because it depends on what business your company is engaged in, the internal and external challenges faced by your company in serving the customer, etc. It is better to hire a consultant who can study your business, identify pain areas, and suggest a suitable product that can address your pain area. Do not go by recommendations of your business associate or friend. Your business requirements are different from others.

In a nutshell, CRM is not a technological solution that will bring dramatic change in company productivity. CRM is about a sweeping change of mindset across the company to make it more customer centric. Thats why before installing a CRM system, the company should understand what it wants to achieve. Does the company want to make selling process more efficient? Is it trying to target and acquire the right customer segment or the goal is to improve customer service?