Building and maintaining customer relationships is neither new nor necessarily tied to the use of information technology. Nonetheless, the use of customer relationship management (CRM) sys- tems is becoming increasingly important to improve customer lifetime value, a metric which is believed to closely correlate with a company’s competitive advantage (Winer 2001). By providing information on customer data, profiles and history, CRM systems support an important area of a company’s core processes, especially in marketing, sales, and service (e.g., Fingar et al. 2000, Ling and Yen 2001, Nairn 2002). In fact, their adoption enables centralized and consolidated information, similar to the effect which enterprise resource planning (ERP) systems have had on production- oriented processes. In spite of the wide use of sales-force automation systems in sales (Rackham 1999), a Forrester study observes significant deficits in today’s marketing, sales, and service pro- cesses (Chatham et al. 2000). Just 22 percent of the companies surveyed possess a uniform customer view, and only 37 percent know which customers are looked after by the individual business units.
A customer profiling concept for customer selection is used by just 19 percent of the companies surveyed, and only 20 percent know whether a customer has visited their Internet portal.
To eliminate weaknesses in customer contact, many companies are either planning or in the process of implementing CRM systems. According to a Gartner (2001) survey, 65 percent of US companies intended to initiate CRM projects in 2002 (see also Radcliffe 2001). In Europe, roughly 3 percent of the companies had fully implemented a CRM project in 2001, 17 percent had initiated more than one local project, and 35 percent were developing concepts for the introduction of CRM (Thompson 2001). Another 45 percent have not pursued any CRM activities to date. As Wayland/ Cole (1997) point out, CRM projects have new implementation qualities, which may also be con- nected with the high number of failed CRM projects (Ryals et al. 2000). For example, 55 percent of a CRM project sample analyzed by the Gartner Group did not deliver results, and a survey among 451 decision makers conducted by Bain reports that one out of five interviewees even experienced negative effects of CRM activities on existing customer relationships (Rigby et al. 2002).
This research aims to understand the scope of existing CRM activities and to identify factors which characterize successful CRM projects. Since measuring the degree of success is a difficult undertaking, a multicompany consortium of sales, marketing, and service executives was orga- nized to determine the criteria and to guide the entire evaluation process. This benchmarking consisted of questionnaires, interviews, and site visits. The second section describes the research method and the six successful practice companies. The third section provides the results of the CRM benchmarking project based on five benchmarks. The last section describes six generic success factors and presents an outlook into future CRM developments.
LITERATURE AND RESEARCH METHODOLOGY
Literature on CRM and Success Factors
Obviously, the first requirement for the successful implementation of CRM is clarity regarding the underlying CRM terminology. There is a broad variety of heterogeneous CRM interpretations (Romano and Fjermestad 2002; Ling and Yen 2001) which range from strategic concepts such as relationship marketing (Kotler 2003) to technical approaches which conceive CRM as a set of information technology components (Xu et al. 2002). In the following, a process-oriented inter- pretation is adopted which follows established business (re)engineering thinking. Processes are regarded as links between strategy and information systems (Österle 1995). Three process areas have become generally accepted in the literature (Fayerman 2002):
- Operational CRM supports front office processes, for example, the staff in a call center (see Vervest and Dunn 2000; Myers 1998; Crego and Schiffrin 1995; and Greenberg 2001).
- Analytical CRM builds on operational CRM and establishes information on customer segments, behavior, and value using statistical methods (see Nykamp 2001; Peppers and Rogers 2001).
- Collaborative CRM concentrates on customer integration using a coordinated mix of inter- action channels (multichannel management), for example, online shops, and call centers (see Keen et al. 2000).
CRM is therefore understood as a customer-oriented management approach where information systems support operational, analytical, and collaborative CRM processes and thus contribute to customer profitability and retention.
Research on success factors is an area that has already received some attention in the IS litera- ture. An important early contribution (Boynton and Zmud 1984) defines critical success factors (CSF) as “those few things that must go well to ensure success for a manager of an organization” (p. 17). Based on the CSF methodology, Williams and Ramaprasad (1996) develop a general taxonomy of CSF and distinguish between causal, necessary and sufficient, necessary, and asso- ciated success factors. Whereas the former present a clearly empirically testable relationship be- tween the CSF and a specific outcome (ROI, cash flow, etc.), the latter are most widespread and encompass only weak correlations. Even the well-known PIMS studies (see www.pimsonline.com) have not led to the preferred causal relationships. Therefore, the following will refer to success factors in their “weakest,” but also more “down-to-earth” form. In this sense some studies on interorganizational success factors have emerged. For example, Saxena and Wagenaar (1994) define CSFs on a country, industry, and organization level in five areas: strategy, technological infrastructure, education, coordination, and culture.
At the outset of the present study no specific studies on CRM success factors were available. Therefore a benchmarking methodology was chosen to (1) obtain first empirical insights in the nature of existing implementations, and (2) identify factors which were regarded as critical to the implementation. In the final section, these success factors will be linked to other studies on CRM success factors which have been published since 2001.
Benchmarking methodologies aim at the systematic comparison of key performance factors and enable learning from other organizations. The design of benchmarking studies may differ in many dimensions, such as internal/external and qualitative/quantitative design (Camp 1989). The external and qualitative consortium benchmarking approach adopted here has proved suitable for obtaining information on current practices and results (Morris and LoVerde 1993). Due to the chosen research methodology—a mix of questionnaire and case study approach—this research presents a broad and in-depth picture of CRM. Four phases were completed within the timeframe May through September 2001 (see Figure 5.1):
- Preparation and first consortium meeting. A research team consisting of four researchers outlined the benchmarking project and organized the consortium, which encompassed ex- ecutives from twelve organizations.1 The consortium members were required to have re- sponsibility for customer relationship measures within their organizations. Based on a literature survey (see the second section) introduction project, CRM organization and pro- cesses, system architecture, efficiency, and culture have been proposed as general benchmarking areas. Table 1 shows the benchmarking criteria after the refinements and prioritizations made during the first consortium meeting. Successful practices were expected to meet these criteria.
- Screening phase. The research team identified 200 potential successful practice organiza- tions, of which 120 received questionnaires structured according to the benchmarking crite- ria (see Table 1). Out of the 55 returned questionnaires, 13 structured telephone interviews and ten in-depth case studies were conducted.