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BUSINESS SOFTWARE

A Second Act for CRM

Customer relationship management software is back -- and worth another look. Really.
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The 15 sales reps at Intellinet were skeptical -- and it was easy to see why. Over the previous four years, executives at the Atlanta consulting firm had introduced four customer relationship management, or CRM, systems. Each time, the execs promised that the new technology would revolutionize the sales cycle by analyzing trends and providing road maps to bigger and better sales results. Yet each initiative failed, costing Intellinet tens of thousands of dollars and the sales reps hours and hours of headaches.

Now it was new vice president Scott Ehmen's turn. He had joined the company in early 2004 with a mandate to find and institute a CRM system that works. Bear with me, he told the sales reps. They did -- and they have no regrets for having done so. Almost immediately after the latest system was introduced, new and fascinating data began to appear, data that helped Intellinet make some smart decisions -- including scaling back a Florida office and opening a new outpost in New York City. Thanks to the new CRM system, sales are up some 50%, Ehmen says. "When you can measure and track sales," he says, "you can make smarter business decisions." Even if it takes five tries.

Customer relationship management was one of the boom's big disappointments. Now it's back -- and worth another look

To those who have experience with customer relationship management technology, Intellinet's story may sound like a fairy tale. CRM was sold as a foolproof way to spin everyday customer interactions into strategic gold by sifting through mountains of data, identifying hidden patterns, and delivering insights that would help executives sharpen their sales plans. Instead, CRM turned out to be one of the biggest disappointments of the dot-com bubble. Many efforts -- as many as half, by some estimates -- were failures, leaving companies with nothing to show for their investments.

But today, with more firms emerging from periods of cost-cutting and beginning to explore new growth prospects, many appear willing to give CRM a second (or third or fourth or fifth) chance. A recent study by the Gartner Group found 60% of midsize businesses intend to adopt or expand their CRM usage over the next two years. Only 2% of the companies surveyed had no plans to tap the technology at all. Why the surge of interest? The CRM industry has improved, offering more targeted solutions, a greater range of price points, and more accountability for its own performance. "Those without at least a loosely woven set of CRM capabilities will be at a competitive disadvantage," says Gartner analyst Wendy S. Closes.

There are dozens of CRM vendors out there, offering products at dozens of prices, and sifting through them can be daunting. If you're simply looking for software to help manage a database of contacts, you might opt for something like Act!, which sells for less than $500. Salesforce.com offers a system for businesses with as few as five users for just $995 a year. Some of the latest wares from SalesLogix, which promises to speed and improve sales, marketing, and customer service functions, list at just under $2,000 per user. And NetSuite offers a CRM application as part of a comprehensive Web-based management system for $399 a month for a single user and $99 a month for each additional user.

From there, the prices -- and the capabilities -- go up fast. A powerful system that can discern consumer patterns from years of data -- such as some of the offerings from Siebel, Oracle, and SAP -- can run six figures for an initial rollout. On the other hand, many CRM price tags are determined by the number of users, so a small company will pay less for the same product than a major firm with numerous multinational call centers.

Vitale, Caturano & Co., a 250-person accounting firm in Boston, recently launched a major sales initiative designed to win new business from the region's 200 biggest employers. To pull it off, executives knew that they would need new technology and opted for InterAction, made by Interface Software, based in Oak Brook, Ill. The software allows everyone in the office to share contacts; and it also tracks and analyzes customer histories and preferences. When it came time to pitch the 200 prospects, the list was cross-referenced with the InterAction software and, in a matter of minutes, a helpful web of relationships emerged. That enabled individual sales pitches to be farmed out to staffers who already knew the prospect.

The result: Twenty-three of the 200 companies became clients, bringing in an additional $5 million in sales. Sure, the firm could have figured it all out by scheduling a series of face-to-face meetings. But Vitale's salespeople were stunned by the technology's speed and sophistication. "Technology let us make sophisticated use of our relationships," says Jill Hulsen, the firm's marketing director.

Brandrud Furniture, a Seattle manufacturer of hospital furniture, had a similar experience. Sales had been flat for years. Then the company adopted Prophet, a sales-management software package made by Avidian Technologies, based in Bellevue, Wash., that operates within Microsoft Outlook. Brandrud's goal was to do a better job of following up on sales leads that came into the system when a potential customer requested a price quote. By giving Brandrud's 50 sales reps a structured system to record and track leads, the company was able to boost its conversion rate from 20% to 40% in a year.

Owner Bobby Holt also made another discovery. Because the sales team was now functioning in a more disciplined fashion, his reps were able to get the attention of bigger clients. Of the 88 hospital architecture firms that Holt considered A-list, Brand-rud was able to get business from 15% of them, up from zero in 2003. "When you have a professional approach, you look like you have your act together. Bigger firms are willing to do business with you," he says. "That's a sales benefit we didn't plan for."

CRM is not without its pitfalls. For one thing, a three-year wait for return on investment is still common.

Of course, even the new CRM applications are not without pitfalls, especially for smaller firms. For one thing, a three-year wait for return on investment is still common. And for midsize firms, that investment averages some $4,000 per user over three years, according to Gartner. What's more, many companies fail the human test, targeting the wrong problems or providing inadequate training. That results in the classic failure scenario: a nifty new tech system that nobody uses. "Positive impact only comes when you have executive commitment, willingness to change behaviors, and people with the skills to actually use the technologies the right way," says David Taber, president of Taber Consulting, a marketing consulting firm in Palo Alto, Calif.

Consider Intellinet's Scott Ehmen. His first step in the CRM process didn't involve technology at all. The first thing he did was involve his sales reps in a study that defined the sales process, breaking it down into steps and segments. Then, when he set about introducing changes, including the new CRM system -- Microsoft CRM -- he could relate it back to elements, goals, and weaknesses outlined in the company's game plan. "You can't start with the automation," he says. "You have to start with understanding the process and then moving forward to change behavior."

Last updated: Mar 1, 2005




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