Papers

What makes for CRM system

success — or failure?
Received (in revised form): 7th April, 2008

Bryan Foss
is an experienced CRM and board advisor. He worked with IBM for many years and now provides independent advice for many
large organisations on systems implementation and related change issues.

Merlin Stone
is a leading author and advisor on CRM programme management and implementation. He is Professor of Marketing at Bristol
Business School and a Director of Nowell Stone Ltd. and The Database Group.

Yuksel Ekinci
is a Reader in Marketing at Business School in Oxford Brookes University. He specialised in customer satisfaction measurement,
quantitative data analysis and user satisfaction with CRM systems.

Keywords customer relation management (CRM), CRM system, CRM applications

Abstract Although customer relationship management (CRM) has been one of the
fastest growing businesses of the new millennium, critics point to the high failure rate of
the CRM projects as evidenced by commercial market studies. The purpose of the study
is to investigate success and failures of CRM system implementations. We found that the
scope, size, complexity and duration of the CRM projects seem to vary quite significantly
across firms. Poor planning, lack of clear objectives and not recognising the need for
business change are the key reasons for CRM failures.
Journal of Database Marketing & Customer Strategy Management (2008) 15, 68–78. doi:10.1057/dbm.2008.5;
published online 9 June 2008

INTRODUCTION in the CRM industry through 2010.

Since the late 1990s Customer Relationship Forrester suggested that worldwide revenues
Management (CRM) has been one of the for CRM solution providers reached $8.4
fastest growing businesses and energetically billion (£4.08 billion) in 2006 and would
debated topics among practitioners and continue to grow to $10.9 billion by 2010.
academicians. Companies have invested or Forrester anticipated that overall CRM
are planning to invest huge amounts to spending will remain steady, with services
implement CRM strategies, tools and taking an increasing share of vendors’
infrastructure in order to win the battle in revenue.3
the increasingly competitive economy.1 As a Despite the enormous growth in the
result, the growth in demand for CRM acquisition of CRM systems in the last ten
solutions has been increasing. Gartner years and widely accepted conceptual
Merlin Stone
1 Broadmead Close
estimated that the market for CRM underpinnings of a CRM strategy, critics
Hampton, TW12 3RT, software exceeded $7.4 billion (£3.6 point to the high failure rate of CRM
UK
e-mail: merlin@merlin-stone.
billion) in 2007, up 14 per cent from implementations as evidenced by
com 2006.2 Forrester estimated moderate growth commercial market research studies.4 In an

68 Database Marketing & Customer Strategy Management Vol. 15, 2, 68–78 © 2008 Palgrave Macmillan Ltd 1741-2439 $30.00
www.palgrave-journals.com/dbm
 What makes for CRM system success — or failure?

international survey of 1,337 companies consultants (if any — and internal or

who have implemented CRM systems to external) helping plan and manage the
support their sales force, CSO Insights has projects, the company’s business partners (eg
estimated that only 25 per cent reported marketing communications agencies, call
significant improvements in performance.5 centre capacity suppliers, fulfilment houses)
According to a Gartner survey, about 70 per and not least, its customers — as the
cent of CRM projects resulted in either company tries to create a new way of
losses or not bottom-line improvement in working with them, and sometimes even a
organisation performance.6 relationship. These CRM systems often had
Manufacturing, logistics, store/branch several stages of development, with one or
operations and the public sector have all two years of pure development, followed by
produced great examples — of both success several years of implementation and iterative
and failure. For years, change programmes improvement. Our interests, therefore, lie in
involving a big change to systems, or even exploring factors that contribute to
totally new systems, involved additional risk. successful CRM implementation as
It is no surprise — the more the change experienced by users in the private sector.
the greater the risk. CRM systems success
and failure have attracted a lot of publicity WHAT IS A CRM SYSTEM?
in recent years, but in the last quarter Payne and Frow point out that there is a
century, there have been many other lack of consensus on the definition of
management areas where the issue of CRM.7 A narrow-based definition of CRM
systems success and failure has attracted the often contributes to the failure of CRM
same interest. The reasons for success and projects when an organisation views CRM
failure turn out to be pretty closely related. from a limited technology perspective or
Successful systems-supported change undertakes CRM in a fragmented way. A
projects observe change management CRM system is a technology-based business
disciplines, unsuccessful ones do not. management tool for developing and
Successful projects are planned carefully, leveraging customer knowledge to nurture,
with all aspects covered, all the right people maintain, and strengthen profitable
involved, and the company and any external relationships with customers. Thus, a CRM
suppliers (consultancies, systems companies, system is an essential part of a global CRM
business partners) work well as a team. The strategy which emphasise creation of
opposite applies to failed projects. In the shareholder value through the development
middle lie the many partly successful of appropriate relationship with key
projects that achieve some but not all of customers and customer segments.8 The
their objectives, probably at a higher cost underlying premise of CRM is that firms
than initially planned. create customer knowledge in order to (1)
One of the central themes of most effectively segment customers, (2) develop
studies of success or failure in systems and maintain long-term relationships with
development and implementation is profitable customers, (3) determine how to
whether the project slipped badly, so that it handle unprofitable customers, and (4)
was completed well after the original customise market offerings and promotional
deadlines. In our experience, however, efforts.9 Through the creation and better
CRM systems seemed to be different, in utilisation of customer knowledge, the
that they usually support a large change in customer relationship and customer loyalty
how a company works with its customers, a should improve.
change that involves learning by the As suggested by Raman et al. CRM
company’s staff, its system suppliers, the system applications can be categorised into

© 2008 Palgrave Macmillan Ltd 1741-2439 $30.00 Vol. 15, 2, 68–78 Database Marketing & Customer Strategy Management 69
 Foss, Stone and Ekinci

operational or analytical.10 Operational CRM (relative to competition), (2) provide more

aims to reduce operating costs while value at the same relative cost (relative to
enabling these functional areas to provide a competition), or (3) provide more value at a
higher level of value to customers. It lower cost (relative to competition).11
contains all applications directly in contact
with the customer (eg front offices). SUCCESS AND FAILURE OF CRM
Operational CRM involves sales force SYSTEM IMPLEMENTATIONS
automation (SFA), marketing, and customer Payne and Frow argue that successful
support with a view to making these implementation of CRM programme
functions more efficient and effective. For depends upon four critical factors: (1)
instance, a CRM system may guide a CRM readiness assessment, (2) CRM
salesperson through identification of change management, (3) CRM project
customer-related information when making management, and (4) employee
a sales call. This information can engagement.12 A CRM readiness assessment
immediately be connected to back offices is an overview audit which helps managers
or transferred to other functional to assess the overall position in terms of
departments (eg manufacturing, finance, and readiness to progress with CRM
logistics) and communication channels in implementations and to identify how well
order to identify and provide the customer developed their organisation is relative to
with a market offering that provides value. other companies. CRM change
Analytical CRM concerns the management involves strategic organisational
technologies that aggregate customer change and cultural change. Senior level
information and provide analysis of the understanding, sponsorship, leadership and
customer data to improve managerial cross-functional integration are clearly
decision making and actions. It is based on critical in a complex CRM implementation.
technologies such as data warehousing and CRM project management requires forming
data mining. Ideally, the customer database cross-functional teams of specialists who
should be accessible from all relevant manage the enterprise’s CRM
departments such as sales, customer service, implementation programme. Successful
and marketing. Analytical CRM forms the CRM projects deliver against the CRM
basis for planning and evaluation of objectives derived from the corporate
marketing campaigns and assists cross and objectives and support the overall business
up-selling functions. To implement CRM strategy. Finally, employee engagement
successfully, firms must combine physical comprises support and commitment of the
resources (eg computers and technological employees to CRM projects. Increasingly,
infrastructure), informational resources (eg firms recognise the significant value their
customer databases, salespeople’s call records, employees contribute to the business, which
customer service interactions) and extents well beyond the basic fulfilment of
organisational resources (eg customer- core duties. Companies cannot develop and
oriented culture, information-sharing operate appropriately customer-focussed
routines) to enhance relational resources (ie CRM systems and processes without
relationships with customers) so as to motivated and trained employees.
improve a firm’s competitive position. CRM Various arguments have been put forward
implementation success may be defined as for the failure of CRM systems. Day
occurring when a CRM system helps a suggests that main reason for CRM project
company profitably deliver market offerings failure is the lack of strategic planning prior
to customers that (1) provide value to to the implementation of CRM.13 Maselli
customers — possibly at a lower cost found that the reasons for failure of many

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 What makes for CRM system success — or failure?

CRM initiatives ranged from technological 40 responses, showing the accuracy of our
implementation problems to a lack of targeting and the responsiveness of our
organisational integration and customer contacts. We asked them a few open-ended
orientation.14 Jain et al.15 state that most questions. The following section presents
such failures are attributed to poor design, our findings.
planning and measurement of CRM
projects. They comment that capturing the FINDINGS
wrong customer information, unclear goals, Different industries and users have different
inappropriate selection and use of priorities and varying amounts of funding
technology, inability to integrate people and to invest in CRM. Companies with very
processes and use of misleading metrics tight profit margins or limited funds tend to
or improper measurement approaches are the partner where they can (eg shared loyalty
major barriers in implementing and schemes, outsourced database management
managing CRM projects. According to and call centres) and to use small ‘pay as
Kale,16 the seven deadly sins for you go’ development stages, while keeping a
unsatisfactory CRM outcome are: (1) consistent vision and objective in mind.
viewing the CRM initiative as a technology Many of the largest scale projects were in
initiative; (2) lack of customer-centric vision; the financial services industry in the early
(3) insufficient appreciation of customer years of this century. Banks, insurers and
lifetime value; (4) inadequate support from others usually used packages such as Siebel
top management; (5) underestimating the and Chordiant at the heart of their project,
importance of change management; (6) but some developed their own systems.
failing to re-engineer business processes; and These companies were moving — or had
(7) underestimating the difficulties involved already moved — from managing customers
in data mining and data integration. He states mainly in the branch or direct mail, to
that most executives are not even aware of managing them in the contact centre and
these issues, even though they could spell over the web. Here, it is arguable that the
disaster for their careers and for the company. main reason for the investment was to cut
Others argue CRM failures are heavily the cost of managing customers, and to
influenced by the firm’s lack of ability to enable the company to move into new
integrate CRM technologies into its product markets very quickly (eg from
functional processes.17,18 banking to insurance or vice versa). At the
same time, telecommunications companies
RESEARCH METHOD AND SAMPLE were investing in large CRM projects.
We approached about 90 of our contacts Some did it as a ‘Big Bang’ replacement for
we considered had direct and personal an existing system which was focused
experience of CRM developments and entirely on subscriber management,
deployments in the last ten years. They including billing. Their new systems enabled
included supplier-side contacts, with them to manage churn and up/cross-sell
knowledge of many client projects, but also much better. In telecommunications,
client-side contacts personally involved in particularly in mobile telephony and now
one or more CRM projects during that broadband, reducing churn is a critical target,
period. Some of the latter had moved jobs while increasing customer value by up-sell
and so experienced more than one CRM and cross-sell is the ‘cream on the cake’.
implementation — particularly as they are Many of these companies have sustained
likely to have been hired across from one their CRM systems focus over time,
company to another because of their although these investments may or may not
valuable experience. We received nearly be considered part of a long-term CRM

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 Foss, Stone and Ekinci

strategy. For example, one major included in long-term and complex

international bank defines its CRM systems programmes.
as the marketing databases and campaign
management and considers distribution Customer data and analytics
channels to be a separated (but linked)
systems investment area. — real-time client data files, marketing
Industries with tighter margins databases, data warehouse and data marts;
(eg forecourt sales) appear to have invested — customer segmentation, propensity
more cautiously but have usually sustained modelling, profitability analysis and other
this over a long period to achieve analytics.
substantial effect. With limited funds we saw Marketing and campaign management
far greater focus on challenging proofs and
pilots, also a strong management process for — marketing campaign management,
reinvesting early savings to create a ‘pay as including via email;
you go’ approach. This approach is — marketing resource management
increasingly used within the public sector, (MRM);
where ‘lean’ initiatives can generate savings — event and survey management.
that can be immediately reinvested for
additional productivity gains. Distribution channels
The most recent CRM programmes, for
— contact centres for service, or sales;
example some in local government, have
— SFA and key account management;
clearly benefited from previous CRM
— branch or store merchandising and
systems experience of suppliers, including
support;
considerably reduced implementation times
— self-service via web, mobile or voice
and lower risk levels for comparable size
recognition;
programmes.
— field service support;
All these companies and organisations
— partner management.
had very different levels of success. Their
success was determined mainly by the Many other topics might now be
relationship between the complexity considered part of evolving CRM
of the system and the speed and phasing of programmes. These innovations update the
its development and roll out. A CRM CRM concept through improved research,
system is not just customer interface analysis and contact management in support
software. of profitable growth and an improved
customer experience
CRM PROJECT TYPES
Our research was broad and allowed Research and analytics
respondents to define and describe ‘CRM
systems’, as we found that these varied — Real-time decision making and ‘next best
widely by market, industry and company. offer’ recommendations;
We received a very broad list of CRM — customer experience management and
project types, demonstrating that there is customer journey mapping;
perhaps no common definition of CRM — mobile polling for real-time decision and
systems content. This list summarises the near decision insights.
systems technologies deployed by companies Distribution management
in earlier years. Projects may include just
one of these technology items listed, or a — online chat and voice over internet (VOIP),
small number, or very many of them when click to call back and email call back;

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 What makes for CRM system success — or failure?

— case management and workflow So, when someone talks about ‘their CRM
management; project’, they could mean any or all of the
— collections and debt management; above. Each function usually demands a big
— outsourcing and work load balancing. additional development, customisation
and/or integration effort, depending upon
Integrated regulatory compliance the choice of software.

— treating customers fairly (TCF); THE EFFECT OF SIZE AND

— anti-money laundering (AML); COMPLEXITY
— know your customer (KYC); The number of CRM system users is not
— complaints escalation and management by itself a major factor in the cost of
(including ombudsman processes); development, unless there are different types
— risk management and pricing; of user with different business requirements,
— Other industry-specific regulatory and for example, field sales versus contact centre
compliance issues (Telco, Pharma, etc). sales. The number of users usually affects
cost mainly through the number of software
Profit and portfolio management licences needed and recruitment and
training costs.
— profit assessment and management;
— fraud detection. ‘BIG BANG’ OR STAGED
DEVELOPMENT?
The activities commonly found in CRM Complexity and scale, however, both affect
projects include: the time it takes to develop and roll out a
CRM system of given functionality. ‘Big
— contact centre for sales and/or for Bang’ approaches, the creating of large-scale
customer administration and service (and projects with high levels of functionality, are
in some cases this will include with some not uncommon. However, although this
self-service via IVR or voice recognition, approach might seem risky, it can be greatly
although some projects were focused on de-risked by not tightly coupling too many
adding this to an existing contact centre); elements of the programme. For example, a
— adding additional capacity, for example, company which wants both to improve
a new contact centre, sometimes but not dramatically the quality and scope of its
always based on an existing system; customer database and the quality of
— web-based customer management (which interaction with customers in the contact
implies a move to more of a self-service centre does not have to premise its
model); investment on using the new data through
— integration of customer management a new customer interaction system. Some
across several channels, for example, or all of the new data can be planned to
branch, contact centre, web, back-office; be used with existing customer interaction
— customer database development; system, even if full exploitation of the data
— data warehouse or data mart — mainly has to wait until the customer interaction
for analysis and planning; system is completed. So, although we know
— marketing campaign and resource that in information technology projects,
management; project risk increases with project size, the
— integration of any existing CRM system risk can be reduced by having several
with core/legacy systems; interlocking projects where attention has
— support of mobile or field, sales or been paid to developing a ‘Plan B’ for
service, staff. deployment of whatever has been

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 Foss, Stone and Ekinci

successfully developed even if there are slips The waterfall model is a sequential process
in other parts of the programme. for developing software in which
Many companies reduce risk by staging development flows steadily step by step, like
the development of any particular a series of small waterfalls, through
functionality or group of functionalities, so requirements analysis, design, development
that benefits begin to be delivered early on, and integration, testing, implementation and
and continue to be developed from maintenance. Although there are many
deployment experience. This also reduces arguments about the pros and cons of
the political risk of such programmes. For following this model, it seems that large-
this reason, many suppliers of CRM systems scale projects that use this approach tend to
and consultancy have created CRM have a high risk of failure, longer time to
programme planning and deployment benefit and are also less adaptable to
methodologies that support accelerated early continuous learning during the
development stages. At the heart of such development and deployment process. As a
methodologies must be a strong CRM result the development effort invested in
programme planning methodology that is some functions may be wasted. The
understood by senior management as being waterfall model is associated with another
the central focus of their governance for systems development idea — that of Big
their CRM improvement efforts. The figure Design Up Front, in which system design is
below, from Customer Essential, illustrates agreed early on in the project so that the
such an approach. systems development effort can focus

The risk of a Big Bang approach is that consistently on the required design. Of
all the requirements for development course, there is no perfect model for
changes are gathered at the beginning of systems development. Indeed, the waterfall
the project and applied in one continuous method is often criticised because in the
development period, before ‘waterfall’ testing real world requirements do change, as
takes place and subsequently deployment. systems frequently need design changes

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 What makes for CRM system success — or failure?

before their development is finished. As a This speed was usually achieved because the
result it is usually not possible to have CRM programme was defined as
smooth, step-by-step progress from design development of a single function (eg
to implementation. Instead, an iterative marketing campaign management), with
approach often proves much more effective some integration to existing systems and
at delivering appropriate business value in data sources (even though this might
stages and reducing programme risk. We effectively be the first stage of a
believe that companies which think hard multi-stage CRM programme). In other
about the options for their CRM cases, it was achieved because the
programme phasing and systems programme consisted of minimal
development methodology and consider customisation of an existing CRM package
them as related aspects of the same task are with very limited integration with existing
more likely to get the CRM systems they systems or data sources.
want. Projects that took between two and four
years involved multi-function developments.
These are the majority of what we would
‘OUT OF THE BOX’ OR
call ‘comprehensive’ CRM programmes.
CUSTOMISED?
However, when we analysed the responses
The appropriateness of the software chosen
we received, we saw signs that these
to implement a particular functionality is
programmes are now being completed a
also important. Some packages are suitable
year or so more quickly than they used to
for implementation ‘out of the box’,
be. We think this is because of the
provided that the company is prepared to
increased maturity of CRM software and
change how it works to fit with what the
the wider availability of CRM services,
software designers conceived. Others require
skills and proven development
significant customisation or development.
methodologies.
Of equal importance is the choice of
Projects that took five or six years appear
systems integrator (unless the work is
to be, on the one hand, very large projects
done in-house). Systems integrators with
or where investments are deliberately
good track records of success (and this
stretched out over a long period, or on the
covers not just development, including
other what are known as ‘troubled’ projects,
experience with integrating the particular
which run well over time and budget
software products chosen, but also
compared to initial investment estimates.
implementation and subsequent support)
When analysing recent primary and
are more likely to deliver a successful
secondary research we found that CRM
outcome than those with questionable
projects and programmes grouped by
records in this area.
duration time as follows:

HOW LONG? Up to one year: These were mostly

We asked our respondents how long it took single-phase or single-focus projects, usually
to complete their CRM programme. Given including limited or no customisation,
what we have said above about the content integration work or business change.
of a programme, it is no surprise to see that Two, three or even four years: These
the answers varied dramatically according to multi-phase or topic programmes were of
this. Some respondents gave examples of various complexity, they often included
initial development periods as short as 16 substantial development, customisation,
weeks from ‘go’ decision. Many others were integration and/or associated business
developed within a year from decision date. change.

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 Foss, Stone and Ekinci

Five, six or seven years: These were managers often return to management for
often very large-scale programmes (eg IBM approval of more time and budget, as
and Citigroup global rollouts), while many overruns become recognised, but at each
were ongoing incremental programmes request the confidence of management in
(eg Lloyds TSB customer insight project achieving an on time, on budget and full
or BP forecourts project). Some projects benefit deployment is reduced. If delays and
in this category would have been classed as overruns continue, management confidence
‘troubled projects’ at some time, where a is lost and the programme is cut severely to
major redefinition and reset would have been focus on minimal deliverables. Such
required at some stage. programmes may be gradually rebuilt over
time, with additional budget, as confidence
In addition to the above timescales, we also
in the programme returns.
identified programmes that had no specific
During the period of delay and recovery
scope or end date. This is not because they
user departments often suffer budget freezes
were poorly planned, but rather because the
until the programme starts to deliver again,
company is on a long ‘CRM journey’ and
as the programme was probably put in place
committed to making a series of
to provide for the primary needs of the
improvements to its CRM capability as
user department. Even where requested
changes take place in its distribution
budgets are related to new investment areas
channel strategy, customer base, competition
not covered by the programme they may
and the like, as customer management
still be held back until the programme
technology changes, and as the company
makes a little progress. During this time
learns what works and as their customer
the business can be seriously affected
learn to be responsive (or not!) to the new
by the delay. In 2007 a loans company
customer management approach.
collapsed from the costs of continual
parallel running of an old and new system
WHAT HAPPENS WHEN THINGS for a few years after the new system
GO WRONG deployment went continually over time and
A significant finding from this research and budget.
our own experience is that many issues The additional costs and lost benefits are
remain unrecognised for far too long after not only those of the programme but can be
they are first identified. While this can be much wider. Business benefits are often
the result of misunderstanding or a delayed or lost (eg customers not retained,
deliberate cover-up, it seems in most cases cross-sell not achieved, new business areas or
insufficient assurance enables the severity propositions not launched, new markets not
and impact of issues to remain undiscovered entered). In one case a company almost
by the programme for far too long. By the completely withdrew from a profitable B2B
time issues become recognised it is often marketplace where the executives determined
too late to address them with tactical and that there was insufficient capacity to operate
immediate corrections, as a result the there while recovering from a CRM
programme is often proven to be over time ‘troubled project’ in their priority B2C
and budget and the downstream programme business. In some situations projects are
can only be rescheduled. Unless the delivery completely scrapped and financially written
contract with external suppliers protects the off, usually following a tough assessment of
budget, rectifying any issues will take the progress by the board. Future programmes in
programme costs beyond the spending plan, such businesses usually receive far more risk
forcing later deliverables to be cut unless management attention at all stages from
more money is available. Programme justification to deployment.

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 What makes for CRM system success — or failure?

The keys to good governance are THE KEY QUESTION

(mostly) well known, but often not applied. In the end, the most important question is
The role of the board is central and often — did the system work? The Gartner
underestimated, at all stages from Group researched whether CRM
justification to deployment and through the programmes met expectations and identified
achievement and measurement of resulting that just over half were considered
benefits. Key factors include: unsuccessful, though many delivered
substantial benefits. In Gartner’s view, too
— board involvement at all stages; many companies failed to set clear
— clear objectives and benefit outcome objectives or to recognise the business
rather than transactional measures; change needed and often considered the
— staged developments, deployments and CRM programme to be just a systems
benefits realisation efforts; programme. We agree with this conclusion,
— programme board with regular meetings as did many of our respondents.
and ‘clout’, key suppliers can be included;
— working board and self-assuring
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