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What are the best metrics in CRM?

  RO Traducere in romana
12 Iulie 2014

How can you avoid the traps of a CRM implementation is a question to which many people tried to give an answer over the years. Obviously, no answer proved to be universally valid, no one identical replicable. A recipe for success doesn’t exist, but there are some "ingredients" that can ensure an efficient use and these ones can be quickly identified and implemented.

There is a vast literature, supplied by the analysis offices and experts in the field, about the failure of CRM implementations. It is true, the most studies and critical analysis refer to the beginnings of CRM, when such solutions were presented and sold as an omnipotent application, a panacea for all problems facing a company, no matter what field of business and the area of activity. An approach which soon proved to be detrimental even for those who had promoted it, which means the vendors of such solutions. So, the period of excessive optimism was followed by a much longer phase of pessimism, powered by the studies mentioned above. And, although all these can be considered already history, because now the CRM market is, for several good years, on an upward trend, critics have not ceased to be heard.

But this time, responsibility for failure - partially or totally - of a CRM implementation can’t be attributed entirely to the vendor. Customer relationship management solutions got "mature" by adjusting themselves constantly to the market requirements and the promotional message is clearly focused on the real possibilities of such applications. In other words, the principle of "Caveat Emptor" is perfectly applicable to this type of solutions today. If in the "childhood" of CRM, the fault could be passed to the vendor, implementer or consultant – so to anyone else than the recipient – now, in 2009, a customer determined that it is time to implement a customer relationship management solutions cannot be relieved of responsibilities. The argument is mentioned already in the beginning of this article - there is enough documentation on this subject: analysis, statistics, research, case studies etc..

If There is no Rol...

So, there are enough resources for a customer who try a CRM implementation to no longer do it "blindly". But, it is also true that a customer who choose a documented prepairing for this process will need some time before moving from theoretical approaches (such as "Customer Relationship Management is a business philosophy") to practical aspects. Equally, obvious is that "nobody has time”, therefore the top-level management can quickly pass the responsibility to the department that generated / flagged the need for such solutions (or the IT department, unfortunately). What cannot be passed is to answer some basic questions, such as like: "Why we need a CRM? What is it good in our company for? What concrete benefits does it bring? ". Naturally, the promoter of the project has prepared a series of responses (due to his previously documentation ...), but it is unlikely his answers to be totally satisfactory. Statements such as „increased customer loyalty, their level of satisfaction, decreased rate of loss of customers” or "mantras" like " a 5% raising customers retention can generate an increase of profits between 25 and 100%" can be eloquent, but it is difficult to quantify and demonstrate pragmatically the companies revenue growth. The promoters will have difficulties to make such assessments at least for companies that have achieved already CRM implementation, much less for a firm that only analyzes the feasibility of the project ...

And, to prevent unnecessary burdens, here's a tip recommended by many experts in the field of CRM that deserve to give credit to: Do no hazard in the achievement of a preliminary calculation of Return on Investment! In most cases, the calculation of such Return on Investment (ROI) for implementing a CRM is the sales argument of the producers of such solutions, but the post-implementation attempts to achieve such a calculation often fail. Experts argue that the failure is normal due to the inadequate methodology for CRM ROI (primarily, the arguments are based on the impossibility of the quantification of "soft" benefits like "Customer Satisfaction" or " loyalty degree"). They recommend to be used more plausible metrics like the TCO (Total Cost of Ownership) and Payback (recovery time of the investment). But not only!

Metrics for all
The optimal response to the above questions is the spot addressing of the issues that are intended to be resolved. Which means the identification and the nomination of the punctual problems and the analysis of the practical way the CRM may (or not!) solve them. But do not accept general indicators, like "5% loyalty rate increase ", but practically, by the definition of clear metrics to enable monitoring how the objectives are achieved.

Such a punctual approach, as the experts contend, is the optimal solution in the analysis of the success or failure rate of CRM implementations. It is a right point of view if we consider that in many cases, such a solution is not implemented across all the company. It is started in a first phase by an insular approach, in several departments where work is to be effective. Obviously, insular approach is not a strategy "by the book”, but as long as it covers the objectives, it is perfectly just. In terms of CRM metrics, there is an abundant documentation. For example, a Forrester Research study recommends as the "starting point" (!), a list of 38 indicators covering three main modules of a CRM solution: Sales, Support and Marketing. Metrics which can be assigned qualifiers, according to some predefined values in relation to the main indicators of performance.
Let us take a concrete example from a Marketing Department - a new promotional campaign. Metrics related to this department should allow monitoring the number of the leads generated within the champaign, regarding each type of product and the types of distribution channels, resulting the average costs to obtain a qualified lead. If they are following further the evolution of the lead quqlified as sales opportunity in the sales department, the scheme may be complicated progressivelly by the needs.


It may sound attractive, but implementation of these metrics and monitoring of all parameters is not an easy process. Therefore, in this case, it is recommended a gradual approach. There are voices who claim that the introduction of metrics in the early stages of a CRM implementation are likely to generate a rejection reaction from end-users, who could feel as being suddenly monitorised. This is a true argument, but the delay of the implementation of these metrics to a later stage of CRM implementation may unnecessarily prolong the implementation effort. The compromise solution is the progressive implementation of these metrics, during this process, the end-users will become more familiar with the new solution and new business requirements. In this way, it will be avoided the risk of rejection and the end-users can adapt better to the needs requirements and company opportunities. (The adoption of some parts from "the book of metrics, 38 or fewer, without an assimilation and adaptation for the "local specificity" is not recommended. A useful recommendation: before introducing a new parameter, which the employees will take as another intrusion: "walk a mile in their shoes!) Later, after the end-users work will be examined (not only in terms of metrics), the suite of indicators can expand or restrict, as needed, realizing a "CRM Index". This may remove the artificial indicators (eg.: the number of qualified leads is irrelevant unless we do not know their costs of generating and their value is close to zero if they do not meet the criteria issued by the Sales Dept.) and prevent the risk that the users issue false reports.

"The details" make the difference

As you can see, creating a "CRM Index" is not an easy approach, you must take into account many parameters and there still is the risk not to respond effectively to the requirements of top management. May be this could be convinced that an ROI calculation is inadequate, but they would not give up the clear priorities and the reducing the marketing costs, increase sales revenue, operational efficiency etc.. These are also a succession of metrics, the most important, but not the only ones to be taken into account. To these, you must add the parameters needed to measure the quality and validity of data, the process metrics, that track the activities and link them to a certain level of performance. Only all these put together can provide a full picture of the development business.
It may seem a theoretical statement but it can be rapidly translated in practice. Let’s take the concrete example of the number of telephones or visits a salesman has to do monthly. This is an usual metric process but uncomfortable, which many agents ... are trying to avoid by drawing out a more pleasant show for top management: covering or exceeding the monthly assigned sales target. But, without a reference to the metric mentioned, the sales manager cannot make a realistic forecast for the coming months, cannot quantify the profitability of the marketing campaigns, the risk of "desertion" of the loyal customers to competitors could increase etc..

The successful appearances
Another risk factor is if CRM is seen primarily as a tool by which the customer can be convinced to buy the most possible, sometimes products and / or services that do not plan to purchase. (Cross-sell, up-sell, any method is good in the current economic climate!) If the customer became aware that he purchased what he shouldn’t, the effect is negative. And although the result is reported as a success, the risk of losing a customer ( "valuable" in terms of global purchases) is increased.
Another high risk "successful outcome" – the reduction in the duration of calls in the support call center. If it is not analyzed also the customer satisfaction across the remedies offered, the success is questionable. As much as the customer feedback is irrelevant if it is not taken into account the value they bring to the company and the purchase frequency. How relevant is the feedback of a customer that made a small purchase three years ago compared to one who is a constant buyer?
The conclusion is obvious: to check the results achieved through a CRM solution requires metrics defined by business needs. But here comes a problem: although the CRM systems are user-friendly, intuitive, etc..the end-users will not look them, at least initially, than as some additional labor. Whose purpose is to get the managers to feel comfortable. And their arguments do not sound credible only if the results are visible and particularly felt at all levels.

Tags: CRM, metrics

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