CRM is probably the area that is causing me the most frustration as a sales representative. And I am not referring to my own usage of CRM systems, but in selling CRM solutions to clients in the financial services sector. My teachers in Solution Selling would probably be proud of me and my ability to generate interest from prospects by tailoring my message to challenges in the industry and the strategic ambitions stated in their annual reports. And the initial meeting is just as successful. The prospects confirm that they face the challenges and in most cases, they confide in me and share information on their specific problems and ambitions to address them. But something happens in the following phases that I do not see in other areas than CRM. All the prerequisites may be in place but in most cases the discussions just fizzle out. Sales Trainers will probably argue that the no-decision is due to the lack of a so called “compelling event” but I do not think that is the only explanation. In this blog post, I will share my hypothesis on why some clients take the CRM plunge whereas others that share the same needs stand by.
At the peak of my frustration, I decided to perform an unscientific win/loss review on some CRM opportunities in the Financial Services sector in the Nordics. The plan was to compare the wins, i.e. the ones that made the investment, to the losses, where the CRM initiatives were cancelled, to find some explanations. Let us call the two categories the “Wins” and the “No-decisions”. But, alas, there is no obvious differentiator, at least not that I can see. By focusing on the financial services sector, I knew that the two categories share the same challenges. They all have CEOs that stress the importance of being customer centric and meeting the increasing expectations from multichannel customers. And they share similar conditions in regard to organization, culture and strategy. I do not know for sure, but I guess that they all base their business case on the Customer Lifetime Value (CLV) where they calculate the present value of increased cash flow from improved retention rates and margins as presented in the simplified formula below.
And they probably get similar estimates on the customer lifetime value from an improved Customer Relationship Management. But, I think that the underlying principles for the formula may be the differentiator. The formula calculates the present value of the improvements in perpetuity! My hypothesis is that the Wins have a more long-term view on the benefits than their passive colleagues in the industry.
David Maister, an acclaimed professor at Harvard Business School and expert on professional service firms, wrote an appreciated article on strategy and stamina. In the article, Strategy and the Fat Smoker, he provocatively exclaimed that strategic planning is a waste of time! Similar to my experience with CRM ambitions, he said that all the companies that he has meet have roughly the same strategy. He used the analogy of his own health condition to explain the waste in strategic planning. According to him, we often know what we should be doing in both or personal and professional life. We also know why we should do it and often how to do it. As he explained, he was a fat smoker and knew what would be good for him in the long run, but he was just not willing to put off the daily temptations.
So looking back at my losses, I realize that my prospects probably knew the what, why and how on CRM but lost interest when they realized that they wouldn’t get a pay back in less than two years. The question that I should have asked them is why they have not done anything yet. Or to use David Maister’s words, are they willing to undergo a permanent change in lifestyle to get the benefits in perpetuity.
David Maister elaborates in the article on the key success factors that need to be in place to succeed in the execution of a strategy to attain the long lasting benefits:
- It’s about a Permanent Change in Lifestyle
- You must change the Scorecards
- Leadership: Get serious, or Get Out of the Way
- Principles are more effective than Tactics
- People must Volunteer
- People must Get on or Off the Bus
To summarize, CRM is a strategy, not a system. And the strategy is not a goal in itself but the “diet” that you have to embrace to get the long lasting benefits in becoming a customer centric organization that meets the increasing demands from multichannel customers (or a healthy non-smoker). Some have the discipline and stamina to embark on a CRM journey. Some don’t. That is the difference!