Enterprise Apps


The Seven Deadly Sins of CRM

The best performing companies when it comes to customer-facing strategies actively attack the seven deadly sins of CRM with a vengeance. These observations come from their quantified success, and for certain publicly held companies, a rise in their Price/Earnings Ratio, stock price and valuation. From a limited sample, that correlation exists.

I’ll be doing some correlation analysis of those companies that have strong customer-facing strategies, and their trending on P/E Ratio, profitability and Return on Sales, to see if serving customers more efficiently, and actively rejecting these seven deadly sins, really does pay. Intuitively, that certainly seems like the case, yet tying it to stock multiples and long-term valuations is a useful barometer of how customer strategies impact the long-term financial performance of any company.

1. Culture of Complacency

In the highest-performing companies, both in B2B and B2C, there are deliberate steps taken to keep their cultures free of complacency. Rejecting complacency starts at the sales force, whose goals become the company’s goals, and whose needs must be treated quickly and seriously — and I can hear the groans from development, product marketing, product management, and everywhere else.

The bottom line of the top performing companies is that each person sees themselves as selling, every day. At Disney, Southwest Airlines, Marriott and other high P/E Ratio companies that have delivered exceptionally strong financial performance, their cultures are permeated with the phrase “everyone sells.”

From the financial analysis of top customer-facing companies, the impact of “everybody sells” on P/E Ratios is already fascinating, and it’s going to be interesting to see the significance of this result.

2. No True Customer-Facing Goals

One services organization that instituted a CRM system, when asked what the goals of the system were, nebulously said it was “to track customers.”

What about increasing long-term loyalty, and by how much? Or minimizing churn? Or understanding why customers literally visited this services company once and never came back?

Clueless about these questions, this company installed its CRM system and, sure enough, it tracked customers and little else. Churn happens and no one knows why.

3. Not Getting User Feedback Prior to Launching a CRM System

Another company in the healthcare field decided to get automated with a new CRM system and launched a new medical service the same day, without bothering to train the technicians, administrative staff, and physicians on the new system.

The result: chaos. The company was back to a manual approach in six hours and just one aspect of the new system, the Outlook scheduling interface, is being used today.

4. Assuming Your Present Security Level Is OK

This is the biggest of the seven deadly sins. Don’t think for a second that the world is getting more secure. If anything, it’s getting less secure. You have to assume that the level of security in your CRM system today is going to be antiquated in less than a year, and that means getting very aggressive in this area.

Don’t believe what your CRM vendors are telling you; Get your hands dirty here and make sure security is world class on your CRM system and that its vendors truly are delivering what they promise. If this is the only point you remember from this article, take action on it.

5. Making Customers Solve Your Integration Problems

It makes me cringe when I think of how many times one HMO sends me a form for personal information just because they don’t have the forethought to get their internal customer databases connected with each other.

This HMO asks for personal information from subscribers every year. When asked why they have relied again and again on forms and manually collecting the data, they replied: “We have a new CRM system and the old data can’t be used.” So what this HMO is saying is that it completely ignored integration as part of its CRM roadmap — which is worst practice in 2000, never mind 2006 — and it doesn’t really give a hoot about asking its customers to make up for its own lack of planning.

This is inexcusable and a real pain to any customer. No wonder the performance on P/E Ratios for companies in industries renowned for their lack of integration continues to plummet.

6. Thinking Speed and Efficiency Is the Best Panacea for Customers’ Pains

The sixth of the seven deadly sins is the mistaken belief that adding speed to a broken process will somehow make it easier to solve, or solve it completely. Just getting to mediocrity faster is typically the result.

The best performing companies find their own best practices for each major process first, then layer in technologies. The industry has been talking about this for years, yet when there is an economic upturn, there is a definite tendency for management to “automate their worlds” without figuring out a solid strategy first.

7. “One and Done” Mentality to Change That Never Sticks

The highest-performing companies take the time to define how their strategies can be supplanted and strengthened with CRM applications. Time and again I’ve seen sales VPs and managers say that if they had to use an AS400 or mainframe-based CRM system, they would leave the company. They want to have a hosted solution that just requires a browser, not an AS400 Rumba session.

Making change permanent has signs of correlating to a long-term, stronger P/E Ratio. Just look at Salesforce.com’s P/E Ratio and consider it a barometer of how making change permanent with applications drives a vendor’s long-term financial strength.

I am not and have never been an investor, employee or contractor for Salesforce.com, but I have seen sales VPs, directors, and managers bet their jobs in political showdowns on using CRM systems they knew their sales forces could master. That is what lasting change is all about.

Louis Columbus, a CRM Buyer columnist, is a former senior analyst with AMR Research. He has worked with enterprise clients on defining solutions to their channel management, order management and service lifecycle management strategies. Mr. Columbus also teaches graduate-level international business and marketing courses at Webster-Loyola Marymount University and University of California, Irvine. He is the author of fifteen books on technology and two books on analyst relations. His book, Getting Results from your Analyst Relations Strategies, can be downloaded for free.

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