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Avoid the CRM Trap

Written by Steve Deist on Thursday, 06 November 2014. Posted in Distribution, Manufacturing

How to reduce the risk of failure and increase chances of success with CRM

Do you know anyone who buys the newest piece of exercise equipment, and still can’t walk around the block without huffing and puffing? Or, have you met the woman who installs the best closet organizer and still cannot find her shoes? Or, have you ever known a guy who buys the best personal finance software and still can’t balance his checkbook?

Like the examples above, customer relationship management (CRM) software is only a tool and only one piece of the “sales fitness” equation. Successful people have good habits and the tools make goals easier to accomplish. The best tools in the world will not make up for bad behavior.

CRM software continues to suffer the highest failure rate of any enterprise software There are ways to reduce the risk of failure and increase chances of success.

The Original Promise

Back in the old days, business-to-business selling meant establishing and nurturing a personal relationship between your sales rep (usually in the field) and a buyer or other decision maker in the customer’s organization. However, increasing margin pressure, more sophisticated inventory management practices, proliferating logistics options and the emergence of new sales channels turned this cozy world upside down. To quote the title of a famous 2003 Harvard Business Review article, “The Customer Has Escaped” from the one-size-fits-all sales model. Sophisticated buyers have powerful new sourcing tools and are no longer willing to pay for services they do not need. Relationships alone are no longer enough.

The promise of CRM was to address these challenges. It promised to help companies become “customer centric” organizations that could quickly identify and respond to changing needs. The software would provide a seamless view of each customer, tracking all interactions whether in person, over the phone or via the website. By collecting and analyzing this information, CRM would help a company segment its customers, and fine-tune pricing and service levels. This, in turn, would improve profitability. At a tactical level, the software would use integrated reporting and workflow tools to identify daily sales activities to achieve corporate priorities. Companies could identify major leads target important marketing campaigns.

The Reality

All this crunching and steering of customer data utilizing leading edge software is certainly impressive. Unfortunately, the most powerful bits of information do not reside only in a computer data warehouse. They also lie between the ears of the sales rep (or maybe in notes taken by reps during or after customer calls). The type of customer data that is computerized is mostly transactional in nature, because this is what the legacy business systems require to process orders. It’s easy to extract a customer billing address, the number and types of purchases, the number of web page visits and so on. But, without an experienced sales rep to interpret the data, it is difficult to ascertain the customers buying triggers, a competitor’s share of purchases or evolving needs.

The software salesperson’s solution is to get the sales force to feed the system. Executives quickly agree with this solution, because they consider data centralization to be an important benefit of the CRM project; a way for the company to claim its proper ownership over the customer relationship. Many times however, this approach leads to reactions ranging from subtle sabotage to outright insurrection from the sales force. They object to the time it takes to enter the data into the system, after all this eats into precious customer facing activities, and doesn’t add a dollar of sales revenue. Rightly or wrongly, they also fear that divulging critical customer information will make them easier to replace and threaten their commissions.

Finally, the CRM software programs themselves often seem purposely designed to irritate the less-than-computer-savvy sales rep. In fact, they are often less than user friendly with their convoluted screen navigation, geeky nomenclature and functional overkill. Many times all a rep gets is a pretty color chart that summarizes all his manually entered data. At the end of the day, the information does not itself provide any new insight, increase sales or make the reps job any easier.

The net result of adding poorly implemented or explained CRM software is a vicious cycle. Reps do not use the new system because the data is incomplete; for most of them, it is easier to continue working with the old data sources, such as the enterprise resource planning (ERP) system, personal contact lists or paper records. As long as everyone continues working with the old files, the new CRM system isn’t updated, the data inadequacy continues and the vicious cycle is prolonged.

The Tragedy

Assuming you manage to overcome these obstacles, another trap awaits to disrupt the flow of data between different systems. In purely technical terms, it is now relatively easy for top tier CRM packages to interface with the more common ERP, email and contact management systems. However, the business processes for managing these data flows are very thorny and rarely well thought out by either the CRM vendor or the implementing company.

For example, what happens when a new lead is closed and the contact becomes an actual customer, and orders are processed? If the lead is downloaded from the CRM system into the ERP system, you will end up replicating the order entry function on the CRM system, which lacks product, price, credit and inventory information. Keying it directly into the ERP means double entry and no easy way to ensure that the CRM is updated to reflect the lead “win.” There is generally no way to tie the lead reference number on the CRM with the order number on the ERP. It is critical that implementers ask the CRM vendor how their software addresses this issue. “Don’t worry about it, we know it’s in there” is not an acceptable answer. Get assurances that data flows seamlessly.

These kinds of data landmines litter the CRM landscape. For every data element that flows between systems, there must be clear rules as to the steps to enter and update it, how to validate it, how it propagates to different systems and what happens when there is a version conflict. Failure to pay close attention to these issues can be worse than an ineffective implementation: it can jeopardize the integrity of the data needed to run the business.

The Hope

So, how do you ensure that your CRM implementation is one of the 30% that actually succeeds? For a start, recognize that sales performance improvement is not about technology. Most companies make the fundamental mistake of starting with a software selection decision (aka a vendor bake-off) and treating sales processes as a mere “configuration” issue. This is precisely backwards. It is important to understand your sales process first, and then find a software solution that will improve the process, thus making it easier for your sales people to identify needs, and close sales.

Modern CRM packages have more functionality than most companies will ever be able to discover, much less use on a daily basis. There may be functional differentiators that are relevant to a specific company, but identification of these differentiators happens after sales processes have been clearly defined. The challenge is developing effective sales practices, not selecting software based on fancy features.

The following guidelines will greatly improve your chances of success:

Strategy and structure. Before even investigating CRM, you should verify that you have a clear sales strategy and have an aligned sales force structure and process. Strategic sales issues are chronically misdiagnosed as software issues, personnel issues or process issues. So, tactical solutions such as fixing the pay plan, sending everyone out for more training or throwing money at technology are implemented. Simply put, they will not work if the sales force is fundamentally misaligned with the strategy or the company has not clearly defined its sales strategy. If every rep cannot articulate your corporate and specific sales strategy, you will need to fix this first.

Process first, automation second. Automating dumb systems and processes just enables you to do dumb things faster. If selling is still largely witchcraft in your company, rather than a set of defined processes, your chances of implementing a successful CRM system are bleak. Start with developing and implementing a Sales Effectiveness Process to establish best practices in time management, account targeting, pipeline management, territory reviews, customer reviews, sales rep reviews, and so on. Once the formal processes are in place and managed, you will find that a little automation goes a long way.

Bottom up, not top down. Everyone, except a wet baby, resists change. Your sales force will be especially leery of any changes in your sales management system and may suspect that it is nothing more than computer-enhanced micro-management. To mitigate this risk, create a project team comprised primarily of sales reps and managers, and only include the usual techies unless they are trained to listen and respond with solutions, not just jargon. Think about assigning the most vocal CRM critic in your company to the team and challenging them to come up with solutions to the identified problems, rather than just complain. It is not an understatement to say that you should consider sales force buy-in and ownership to be the single most critical factor in success of your CRM implementation.

Give more than you take. Start by implementing the functionality that is most important to the daily users of the CRM system. Sell it as a tool to make their lives easier rather than a new rulebook that demands compliance. In addition, make sure these early tools really do make your sales rep’s lives easier. Reps will find things like scorecards (everyone wants to know how they are doing); call budgeting tools (not call reports!); target account growth data; and online information libraries to be truly useful. As usage expands and deepens, the data to support market analysis and other corporate objectives will build up naturally.

Demand executive commitment. A visible, consistent and long-term commitment by senior executives is essential. The entire company must be convinced that there is no turning back and that the CRM is not just the latest gimmick.

We would all like to get back in shape for $69.99 plus shipping. It is just as tempting to hope that a $50,000 software license fee will vault our sales force into the 21st Century. Unfortunately, modern equipment alone will not win this game. The evolution of sales from a personal relationship craft to repeatable, scalable and strategically aligned processes requires modern management techniques, not more donuts.

About the Author

Steve Deist

Steve Deist

Steve Deist has been a IRCG Partner for six years. He has over 20 years of experience working for hundreds of distributor, retail, manufacturer and private equity clients in dozens of lines of trade. He is a highly rated speaker, a permanent University of Industrial Distribution faculty member and a distribution company board director.

Steve has extensive knowledge of the distribution and supply chain space, with substantial experience in retail, construction and industrial channels. This experience includes:

  • Strategy, sales effectiveness, operations, supply chain, marketing and technology projects for over 100 organizations over the past 10 years. These clients have ranged in size from $5M family run businesses to Fortune 500 corporations.
  • Numerous marketing channel projects for top tier manufacturers which sell through dealers, distributors, retailers, etc.
  • Frequent industry speaking engagements for clients including, trade associations and manufacturers on a broad range of subjects. These engagements have included workshops, technical sessions for management level audiences, strategic sessions for executive level audiences and keynote speeches.
  • Due diligence and related projects for top tier private equity firms.

Steve is IRCG’s strategy guru, focused on helping companies achieve lasting competitive advantage. His hands-on approach enables him to apply leading edge concepts to the practical realities of daily business.

Prior to joining IRCG, he was director of consulting services at a major supply chain software vendor. Steve’s thought provoking articles appear frequently in premier industry publications such as Modern Distribution Management. Steve has authored three books published by NAW (The Five Fundamentals for the Wholesale Distribution Sales Manager, Value Creation Strategies for Wholesaler-Distributors and the upcoming What’s the Right Plan? Effective Sales Incentive Design for Wholesaler-Distributors).

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