Why Do Most CRM Projects Fail?

Nov. 24, 2008 - PRLog -- Is this headline is a mistake? Global CRM spend is estimated at US$ 14 billion annually (AMR Research). With such a huge amount of expenditure, can it really be possible that most CRM projects fail? In Barack Obama's words: "yes, it can".

And the rate of failure is staggering. Gartner Group estimate that 65% of CRM projects fail. The Meta Group has suggested failure rates of between 55 and 70%.  If we take Gartner's 65% failure rate and AMR Research's market size estimate this means that an amazing US$ 9.1 billion was completely wasted in corporate CRM spending in 2007 alone! If this continues, given AMR's projection of a US$ 22 billion global CRM market in 2012, this number will have risen to US$ 14.3 billion.

In this research note we draw upon our own experiences of failed CRM projects to draw up a list of lessons learned from real world scenarios. We focus solely on the Sales sub-segment of the CRM market, which Gartmore has estimated as the biggest category - accounting for 40.5% of global CRM spending (or US$5.67 billion) in 2007.
By far the most common CRM failure involves the wrong system being rolled out. Let's look at a couple of examples before we discuss what we learn from the mistakes management made:

Buying an Inappropriate System is the Fastest Route to CRM Failure

CRM Failures: Case Study 1: US Printing and Publishing Company

A US-based printing a publishing firm failed to adopt Salesforce.com as it was too complex for their user base. As the organisation had a fairly high turn-over of staff, Salesforce was simply too complex and too expensive to adapt to the requirements of a rapidly changing sales call centre. As a result, the sales manager decided to move away from Salesforce, but struggled to find a solution on the market which could meet both requirements of functionality and simplicity.

Lessons from Case Study 1:

It sounds obvious, but so many companies still get it wrong. The system adopted must be flexible enough to 'breathe' with your organisation. If your company has a fast-pasted sales culture, with a high staff turnover rate, a complex 'enterprise' application (whether it is hosted locally or SaaS) is unlikely to be a good choice. By the time the sales staff have received sufficient training to be able to use it properly, they are likely to have moved on - wasting precious training budget and (even worse) meaning that the system is never properly implemented. If your average sales staff turnover is one year or less you must adopt a system which is simple and easy to adopt on day one. Most likely, this will be a Saas package delivered on-demand. Our advice would be to register online for a package which appears aimed at companies who need to get up and running quickly.

CRM Failures: Case Study 2: UK Media Company

We recently spoke to a media company in the UK. They had attempted two full Siebel implementations with little success. Each time, the company met with the sales force to determine the reasons behind their lack of CRM usage. Sales reps provided a list of reasons and requirements, and changes and modifications were made to accommodate the concerns expressed by the sales force. But even after investing further in development and training, the CRM usage by sales reps remained the same as before - zero.

Lessons from Case Study 2:

Our analysis of the problem revealed that there were two fundamental issues: 1) related to the complexity of the system itself, and to the time it took for the salespeople to move from one record to the next. Given the fast-paced nature of the salespeople's' work, the system was simply not able to keep up with their minute by minute requirements. This led to frustration and an inevitable decline in usage. 2) was more fundamental. On investigation we found that management had actually spent insufficient time and planning on really understanding what was needed from the system. This company actually needed to manage leads ('opportunities') and not 'clients'. The needed a sales process management system to track the progress of leads through a sales process, but instead had purchased a cumbersome contact management database. This had resulted in little but-in from the sales staff and even less value-added from management, because no meaningful analytics on the sales process were available.

Conclusions

Our investigations into CRM failures throw up a couple of crucial lessons. The first is that companies should not 'over buy' their CRM solution. Often times a less expensive and simpler SaaS solution will end up being more valuable if it is actually adopted and used by the people it is supposed to serve, i.e. the sales staff.

The second vital lesson is that management has to understand clearly what kind of a sales CRM system they need. For many, relatively static, companies with a limited number of very deep and stable customer relationships, a contact management system with a sophisticated data structure may be the most appropriate. But for other companies who are essentially moving 'leads' rapidly through a sales process chain a very different system will be necessary, one that puts the sales 'opportunity' at the centre of the process.

So in summary, management needs to be precise in its analysis of its own organisation, but also realistic and focused on what their sales staff will actually use and derive benefit from.

# # #

CRM sales software. Simple and easy to set and use. For sales by salespeople. 100% free for basic edition. Professional and enterprise editions also available.