Andy Wood, MD, GI Insight You Asked There has been a certain amount of scepticism surrounding CRM in the past, but now it seems like everyone is doing it. Is this the case?

Customer Relationship Management (CRM) is now a universally accepted concept amongst marketers. The impression that one gets from reporting on the subject is that hardly any companies have failed to implement CRM initiatives.

There is certainly a level of scepticism surrounding the history of CRM. How many times do we hear reference to the now famous report, when analyst group Gartner predicted in 2001 that over 50% of CRM initiatives do not produce measurable payback? Loyalty Effect ‘statistic’ from Bain that a 5% uplift in customer retention can generate between 35% and 95% growth in profitability. Or indeed the assertion often associated with a similarly seminal work, which stated that it costs five times as much to recruit a new customer as it does to sell to an existing one.

Neither assertion is wrong. Both these latter two mantras of Customer Relationship Management, or CRM, are achievable by certain companies in certain circumstances. However, their use as a sweeping generalisation by marketers keen to convince the main board to invest millions in CRM software, is unjustified. On the other hand, while it may have looked as though a majority of CRM projects in 2001 teetered on the brink of failure, this is no longer the case six years later.

Customers have come to expect that they will be dealt with in a meaningful and personalised fashion. In the last two years, the financial services sector, in particular, has massively reduced the amount of direct mail it sends out, but has focused the budget thus freed up on making their communications more relevant and targeted in order to vastly improve response rates. Our recent research has, for the first time, proved the correlation between relevant communications and customer satisfaction, itself an absolute prerequisite for any customer retention and development strategy.

So, does the analysts’ enthusiasm for CRM really translate into corporate commitment in this area? One-off CRM technology costs can be written off; ongoing senior people costs cannot. So a company that puts CRM into the title of one of its senior managers is making a real statement of commitment to CRM. We decided to commission research amongst the UK’s top 500 companies to find out how many of them had that most expensive of people, a Head of CRM.

The penetration of Heads of CRM was felt to be a good proxy for the commitment that these large industry sectors were showing, not only to the notion of CRM, but to its successful practice, and its permanence within the organisation. Convincing metrics demonstrating return on investment from CRM strategies and systems are now demanded by colleagues, analysts, markets and shareholders. So if an official and directorial role had been created from CRM, this was felt to be compelling evidence to an organisation’s seriousness about methodical customer management and development.

The results serve as a barometer of ‘CRM commitment’ and found that one in five (19%) top UK corporations have now demonstrated their commitment to customer relationship management by appointing a dedicated Head of CRM - a substantial increase on the proportion (14.5%) two years ago and a growth rate in dedicated CRM Directors of almost one third in the last two years. We also found that the number of Heads of CRM in total, including those that also have another main job, such as Marketing Director or Customer Services Director has increased since 2005 from 44% to 48%, indicating a steady growth in the practice of CRM.

GI Insight