CRM Comes to Mid-market

About 12 years ago, big businesses rediscovered something that any shopkeeper manages every day: customers. With that revelation came a wave of business guru books and technology, and the “customer relationship management” industry was born.

But somewhere between the theory and the practice, CRM got lost. In short, big enterprises killed the goose to get the golden egg by using CRM to squeeze cost and push product. The result is a failure rate still quoted at over 60 percent and billions of dollars wasted.

Today, CRM is a dirty word in the halls of most major corporations, and spending on those initiatives is off some 40 percent. Software vendors and systems integrators are therefore taking aim at middle-market businesses, broadly defined as companies with between $25 million and $1 billion in annual sales.

If you own or run a business in Arkansas, you have likely been approached by a software reseller wanting to help you get the same “awesome sales and marketing prowess that the big guys have.” There is amazing power in the use of CRM processes, capabilities and technology, but success with CRM requires that management not buy the same story that has sent billions of dollars down a corporate rat-hole.

A mid-tier company has three distinct advantages over the lumbering giants when it comes to success with customer-centered initiatives:

  • A flatter management structure keeps senior executives more visible to the front line of the business. Programs such as customer centricity must by definition be sponsored by a visible, credible senior line executive — not shuffled off to a program office somewhere in IT or marketing.
  • Communications are critical in any change initiative. Mid-tier companies can more easily impact attitudes and behaviors than global giants.
  • Because the scale of projects is more manageable, the relative value received for money invested can be astronomically higher in a mid-tier company.

The other good news for mid-tier companies is that they have the ability to capitalize on the lessons learned in larger enterprises. Here are some of the ways that middle-tier companies can succeed:

  • Remember that, above all, customer initiatives are change projects. Think of your initiative as much more than technology projects, and you will already be way ahead of the companies that have failed with CRM. What customer experience do you need to create? What will it require for your firm to create that experience? Think not just about processes but about your organizational structure and your internal rewards systems. Be prepared for the argument that invariably crops up over who owns the customer. Ask yourself instead, “Who in our company can be ultimately accountable for a customer’s experience with us?” If that executive is not clearly identified, you have some organizational work to do.
  • Plan to boil the ocean — but start with a nice pot of tea. Vision and planning are critical, often overlooked steps to success. Define an end state of customer centricity appropriate to your organization, and break it down into workable projects. Before you begin to change anything in your organizational deployment, spend money on process change, branding and technology. Be clear about what success will require, and ensure that you are willing to support the program. Short-term wins are fine; short-sighted ones are expensive.
  • Begin immediately to measure and manage customer outcomes as stringently as you manage your balance sheet. Your senior managers should understand customer metrics such as attrition and lifetime profitability as well as they understand expense management.

In his landmark book “The Marketing Imagination,” Theodore Levitt, for years the marketing guru at the Harvard Business School, wrote, “The purpose of a business is to create and keep a customer.” He said nothing about shareholder value, profitability or cost reduction. All of those measures are outcomes of value creation for customers. A global giant would take years to make that charter true, but a mid-market company with a committed leader can reap the benefits of CRM, because that executive can redefine the purpose of the business and lead the change that makes it happen.

Originally published in Arkansas Business, Barry Goldberg On Leadership, August 25, 2003.