CRM Is Not The Savior
By Kim Wingate   ©2004 All Rights Reserved

The latest buzz in the industry seems to be around CRM, or Customer Relationship Management. The premise behind this latest "savior" is simple: Get a 360-degree view of your customers and you can learn more about them and serve them better. Of course, in serving your customers better, your profits will grow. But can you see the flaw in this logic?

It's tough to spot the flaw because the promise is so exciting. The solutions being offered in the CRM space tout the ability to bring together all of the various customer interactions into one consolidated view. With this consolidated view, you can provide your customers better service. With this consolidated view, you can more easily identify your most profitable customers. With this consolidated view, you can learn more about these profitable customers and tailor your marketing efforts to acquire more like them. With this consolidated view, you can more efficiently handle your customer base with fewer resources. The list of virtues goes on and on. Of course, the keyword in all of the above is "customer." Herein lies a flaw at the root of most of the current CRM fervor. In order to realize the fabulous benefits of customer relationship management, you must first turn a prospect into a customer. However, the majority of e-commerce sites on the Web are converting prospects to customers at the rate of 1-2%. This means that all of the effort and expenditure involved in a CRM implementation will be lost on 98-99% of visitors coming to these sites! CRM implementations can be extremely expensive and resource intensive. Some implementations will take months to complete and costs millions of dollars. Dedicating this much effort and money toward something that will impact only 1-2% of a site's "market" seems misguided. Couldn't the effort first be expended elsewhere for greater impact on both short-term sales and long-term ROI of a future CRM project? Spending time and resources improving these sites' conversion ratios would provide great benefit in two ways. First, there would be the impact on sales. An improvement from 2% to 4% would double sales. An improvement to 6% would triple sales. How many completed CRM implementations could boast this type of impact? This doubling or tripling of sales could result in millions of dollars of additional profits. These additional profits from increased sales conversion could pay for a future CRM project! And, these conversion ratio improvements would likely come from relatively minor effort and expense. These efforts usually involve identifying and executing simple tweaks to the site. In "Turning Visits Into Action," we provide many real-world cases where a few hours of time and effort resulted in dramatic improvements to Web sales conversion ratios. The second benefit of improved conversion ratios is their impact on any future CRM efforts. By improving your conversion ratios, you are increasing the number of customers you are acquiring. By increasing your customer base, the benefits of your CRM implementation can be realized by far more people - increasing the ROI of your implementation overall. Bottom line: To maximize return on investment for a CRM implementation, first make sure your site is capable of converting a large percentage of prospects into customers - improve your conversion ratios to improve your CRM!

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KIM WINGATE of AvidSurfer, is the publisher of "Big Time Banner Advertising" and "Turning Visits Into Action." Both of these informative Web business manuals, as well as a FREE conversion ratio case study, can be found online at: http://www.avidsurfer.com/default.asp?src=artp

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