Mar., 17 /A customer relationship management (CRM) system has the potential to offer major benefits, but financial directors often find it hard to gauge the true return on this investment. Here we draw on case- study evidence to explain how to implement a CRM system that best meets the needs of your business.

Historically, financial directors have viewed CRM as an expensive and ineffective information technology (IT) system pushed by overzealous vendors. Respondents to a survey last year by Bain & Company in the United Kingdom, for example, rated it as one of the least satisfactory management tools they had used.

However, given the current economic uncertainty, it could be worth taking another look at the emerging generation of CRM systems, because the acquisition and retention of customers have become a crucial theme. A good CRM system - if well conceived and carefully implemented - can be a valuable tool in translating these customers into shareholder value.

One problem for financial directors when assessing the business case for a CRM system is how to determine the return on the investment. According to a survey in June 2002 by Atos KPMG Consulting in the United Kingdom, although 80 per cent of respondents felt that their CRM implementation had been successful, only six per cent could quantify the return on their investment. Even if the expected return is hard to estimate, by making CRM part of a performance management framework such as the balanced scorecard, its relevance to your business strategy can be explained and clear objectives can be set.

A pilot project can help to justify the investment and provide the basis for a rational calculation of the return.

Two of the main factors that prevent a CRM system from performing - a failure of understanding and a failure of implementation - are common to many other projects, but they have features that make this particular management tool distinct.

A review of 57 case studies provided by a range of different CRM system vendors gives us a valuable insight into what companies want from their CRM systems and the benefits that can accrue. The main benefits for the case-study organisations seem to lie in improving internal processes and marketing data to increase revenues and reduce costs, rather than in directly meeting the immediate needs of customers.

Examining each of these needs and benefits provides a real understanding of what CRM can achieve. It can form the basis for a realistic business case with a verifiable calculation of return on investment.

* Create a single, detailed view of the customer, with improved management reporting and forecasting. This includes knowing why the customer is buying the organisation's product or service and any ongoing problems they may have with it. Anyone who contacts the customer can then contribute information about the encounter and highlight this for people elsewhere in the organisation who may need to act on it.

* Improve productivity through standardised processes, less paperwork and more integrated IT systems. One point of interest arising from the case studies is that, although many of the organisations were actively integrating their sales, marketing and service functions, they were planning to include the back office only in the later phases of the implementation.

* Increase revenues by providing a wider range of products, "up- selling" and "cross-selling". This entails using the customers' own insights to inform the design of new products and services, including upmarket versions of the existing offering.

* Increase customer satisfaction and loyalty by improving the level of service. Establishing a simpler process of resolving customers' problems can reduce the number of calls to the organisation, enabling call centre staff and other customer-facing employees to concentrate on more important tasks such as selling products.

* Use a wider range of communication methods. Organisations are realising that customers want the choice of both old and new channels. All of these must be integrated so that they work in harmony with the traditional retail distribution channels, with the customer deciding which one to use on each occasion.

* Improve information-sharing, both inside and outside the organisation. Problems reported by customers through a call centre, for example, can be automatically highlighted to overcome production problems or to report component errors to suppliers. Information can also flow the other way - for instance, customers can now use Web technology to track the progress of packages they have sent via a courier firm.

* Improve the profitability of existing products by analysing marketing campaigns more effectively. This means ensuring that the business' marketing efforts are more effective in terms of both revenues and costs by ensuring that they are aimed at the most appropriate customer segment.

Putting aside the general problems of project management, there are a few key elements of a CRM implementation that differentiate it from other projects (attention should be paid to the areas where the case studies show the greatest returns are to be found):

* Ensure that your firm has the correct processes and integrate the technology. This entails redesigning processes to put them in line with business strategy and bringing together customer information. Integrating disparate IT systems can be one of the costly tasks of the implementation.

* Increase customer loyalty through better service. This implies the need for a culture of service within the organisation. Given that this is the main customer-focused benefit to be derived from CRM, it is critical that you give it serious attention. Managing cultural change is a difficult process and should not be underestimated.

* Improve the productivity of sales and marketing. Campaigns should be well aimed and sales pipelines should be actively managed. Contact strategies need to be prepared in line with each customer's wishes.

* Create a single, detailed view of the customer. Analytical tools such as profiling and demographics should be used. It is important to involve human resource here, because the organisation may need to train people or recruit new staff to ensure that the necessary skills are available to use them.

* Increase revenues by expanding the product range. Tailor products to what customers want and what the sales team can promote. Sales and marketing processes need to be integrated with those of other departmental functions, such as production and research and development.

* Share information with suppliers and sales channel partners. Sales partners can be an important source of information and an integrated supply chain will allow your organisation to respond more quickly to changing customer needs.

* Ensure that customers can communicate with you whenever and however they want. Contact customers according to their wishes and, critically, gain and maintain their trust.

CRM is certainly moving out of the shadows to become a legitimate business tool. Most studies show that CRM initiatives can offer major benefits, even though it seems difficult to quantify them. The overall tone of the case is that organisations planning CRM still see it as using the customer to deliver business benefits, rather than a burning desire to satisfy the customer, but in practice, a successful CRM implementation focuses on both the company and the customer.