Article

The Hidden Costs of a CRM

May 2010, Auto Dealer Today - WebXclusive

by Tom Herald - Also by this author


Customer relationship management (CRM) software and systems can be an incredible waste of time and money, and the resulting exposure to liabilities is an ever-growing concern for the small business owner. These systems can also be the most valuable tool available to stabilize revenue and grow your business, and the difference starts at the top.

A simple CRM system is very affordable, or you can pay a small fortune in setup charges and monthly fees for a Ferrari Testarossa-type system when you only need a Chevrolet Malibu to get the job done. This takes me to my first point for highlighting the hidden costs of a CRM – understand the purpose of your CRM. A CRM is only a tool. It’s up to you to decide what you want—but more importantly, what you need—the system to do for you.

Many companies claim huge successes with the implementation of a CRM. Many companies claim their average client realizes a 34 percent increase in revenue by using their systems. However, there are just as many that complain about no increase in sales. Three reasons that CRMs fail are:

1. Poor Planning – The CRM purchase decision is not centered on the business needs. Do you have multiple departments that will use the system? Besides tracking customer information, what follow-up tasks are required for each department? Your CRM should remind the team to accomplish the basic necessary tasks of each department. Anything more can be overkill and an unneeded feature of your system.

2. No/Low Collaboration – When designing or tailoring a CRM for your business, the end users and managers of each department should collaborate on its functionality for tasks, data gathering and reporting. You should also hold quarterly meetings to reinforce the collaborative thinking of your team regarding the purpose of your CRM. Three questions should be answered at these meetings: Does our CRM meet our needs? How can we improve productivity and profitability with the CRM? Are there better alternatives available?

3. Lack of Buy-In – Garbage in is garbage out! Any CRM is only as good as the data it contains. If you have to force people to use it, you are wasting money. Your team instead needs to fully understand and buy into the fact that your most valuable asset is your customer base. This database of real people needs to be cultivated and prospected, not cold-called.

A CRM should not be used as a report card on sales activity. That only creates a conflict between managers and salespeople. Instead, you have to teach and reinforce the value of prospecting, networking and follow-up for effective selling. If your team truly understands the purpose of these three sales fundamentals, they will quickly realize the value of automation to improve productivity, but if they only see the CRM as a worthless task generator, you’ve just wasted a lot of time and money. Most importantly, you’ve just wasted a lot of data that is critical to your business.

Another hidden and growing cost associated with a CRM is your exposure to liabilities and huge fines. Any CRM contains a database of sensitive personal information, and it is your duty to protect this information using industry best practices. Otherwise, the penalties can be extremely expensive.

The tidal surge of identity theft protection is continuing to grow at both the federal and state levels, as governments continue to mandate that businesses safeguard the consumer information they gather. The Federal Privacy Act of 1974 already prohibits the disclosure of private personal information without a person’s prior written consent. But, due to the abundant errors by corporate America in safeguarding this data, states are passing and implementing regulations and laws to further protect consumer data.

It is your responsibility to protect your database from cyber-pirates, disgruntled employees, competitors, security negligence, or even the inadvertent slip by a diligent employee. Treat personal information just as the military handles classified information; limit access on a need-to-know” basis; develop security procedures in a detailed information security plan to which everyone in the organization adheres; employ industry best practices with firewalls and network security protection. Raise awareness with anyone who handles private information. This is most definitely one area of concern where an ounce of prevention outweighs a pound of cure.

We live in the information age where anything we want to know is practically at our fingertips. And like it or not, as a society we continue to track more and more data on one another in the spirit of capitalism. Within the past 10 years, CRMs have evolved from basic client contact managers to a virtual sales force and a $10 billion-per-year industry.

So, whether you are looking at your first CRM tool, contemplating upgrading your existing one, or completely satisfied with your current CRM, don’t forget the purpose of keeping in constant contact with your customers. Also, when people entrust you with their personal information, protect it as if it were your own.

Vol. 7, Issue 3

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