Why SFA Failure Rates Will Increase

CRM: A History of Failure?

Are customer relationship management (CRM) projects prone to failure? ZDNet reviewed analyst firms’ reports to chart general CRM failure rates for 2001-2009:

• 2001 Gartner Group: 50%
• 2002 Butler Group: 70%
• 2002 Selling Power, CSO Forum: 69.3%
• 2005 AMR Research: 18%
• 2006 AMR Research: 31%
• 2007 AMR Research: 29%
• 2007 Economist Intelligence Unit: 56%
• 2009 Forrester Research: 47%

Failure is defined broadly, covering projects that didn’t meet expectations (at best) or failed outright (at worst). Because these statistics come from different research firms using dissimilar research methodologies, you can’t accurately compare year-on-year trends. But to pick just about any given year, my immediate reaction is: There’s no need for CRM failure rates to be this high.

Will project success rates improve? In fact, I predict that sales force automation (SFA) project failure rates are going to increase even more. (The majority of CRM implementations today are for SFA.) Why is that? Simple: Companies are shooting without aiming, just like it was 1999 all over again. The only difference is that instead of implementing on-premises CRM software, they’re using SaaS.

SFA Success Starts With a Plan

What can companies do to ensure that their SFA—or broader CRM (encompassing not just sales, but also service and marketing)—projects meet expectations?

For answers, let’s flash back to 1999, when Lee Iacocca, then CEO of Chrysler, was still a well-known business figure. In those days, he talked a lot about planning as a way of saving money.

Here’s the great thing about planning: you don’t need to spend much money to get a great return. For example, say you spend less than 1% of your expected return on a one-week—or, if you like, two-week—exercise to identify the objectives of your SFA system, as well as what your two-year plan will be to achieve those goals.

As a result of having that plan, you’re probably five times as likely to achieve your objectives, versus just implementing this or that software. And really, what did the planning cost? If your returns are over 100 times that initial planning exercise investment, wasn’t the planning more than justified? In fact, why would you neglect such a foundational step, given the potential returns?

Is SaaS Short-Circuiting Our Brains?

If you follow the Freakonomics camp, you know that psychologically speaking, we humans approach financial matters not from a rational perspective—though we think we’re being objective—but rather with our emotions. And perhaps that’s the answer: SaaS offers the opportunity to have something up and running in days or weeks. It’s the latest and greatest. You want it now. Why bother pausing for even a week or two, to plan?

Just as we’re not naturally adept at rationally analyzing financial patterns, when it comes to CRM projects, we also need to check our innate tendencies at the door. Meaning, sit down and figure out what you really want to do, and how you’re going to do it. Unless you want to fail?

Planning Is Cheap

Based on our experience, and—organizationally speaking—having lived through the dot-com bust as well as the boom that preceded it, we’ve continued to emphasize this theme: Want to succeed? Then don’t just implement software. First, plan.

The good news is that over the past 12 years, we at Innoveer have codified what people should be doing in terms of their CRM planning, and have developed best practices to very quickly help people determine what their plan should be. So whereas a decade ago, planning may have been relatively expensive, today, it’s much easier and less expensive, because we already know the best practices for sales effectiveness, marketing, or customer service.

As a result, creating a plan doesn’t require starting from scratch. Rather, to create an SFA plan, one excellent starting point is to benchmark your company’s sales capabilities—in such areas as relationship management, territory management and pipeline management—against other companies to see understand where your organization excels or needs work.

We’ve found that companies often continue to invest in what they’re already good at. In fact, we recommend investing in what you’re not doing well, because that weakest part of your SFA—or wider CRM—program is what holds you back. Of course, you won’t learn that from just having SaaS CRM software. To find out, you need to build a plan.

Learn More

Innoveer offers a brief workshop to help organizations identify the cost, time and business benefits associated with achieving new and more advanced—meaning, more effective—SFA capabilities. During the workshop, Innoveer examines the five core elements of an organization’s field sales program, identifies the optimal enhancements, and produces specific, technology-agnostic recommendations for building plans and budgets, with detailed estimates of the required project time and costs to improve specific elements of your sales program.

GR5XBKAZA6HJ

Selling Starts at Home: Enticing Salespeople to Use SFA

Some people will do anything to escape having to use SFA software. Photograph by DerrickT.

After spending a significant amount of money on a new sales force automation (SFA) system, you’d think that a large manufacturing company would review all leads, pipelines and forecasts from within the SFA software, right? But every week, sales managers at all levels walked print-outs and Excel documents into conference rooms to discuss sales activities.

No wonder, then, that SFA utilization hovered at a pitiful 20%. On top of that, was the information in the SFA system even reliable — were salespeople actively entering opportunities, and was the data clean? Sales managers didn’t know.

Many companies, like this one, contact Innoveer after rolling out SFA or customer relationship management (CRM) software because their utilization is at best 20–30%. That’s not surprising. Too often, SFA launches with a burst of hype, and no plan for the long haul, or a program to ensure that sales managers themselves become SFA proponents.

“We’ll just make them use it, or else.” That’s how the head of one investment firm in Silicon Valley once referred to his company’s approach to pushing employees to use SFA or any other software. In fact, it’s how many sales VPs approach SFA utilization. And it’s completely wrong. Give salespeople something they want to use, and adoption, not to mention productivity, will largely fall in line.

How can companies turn stalled SFA projects into success stories? Based on Innoveer’s numerous engagements over the past 10 years — with 1,100 projects spanning 400 customers — these five rules stand out:

1.  Make SFA the Only Reality

At the aforementioned manufacturing company, SFA utilization has now reached 80% — an excellent improvement. How did this company end up at this point? Using a number of process changes, Innoveer helped the company foster a culture in which sales managers live in the SFA system.

When a sales manager meets with a salesperson on Monday morning to review previous activity, new leads and expectations, the conversation is conducted with the SFA application open. This SFA-driven discussion now happens at every level. When the regional sales manager reviews the pipeline with local sales managers, they let the information in the SFA application guide the discussion. Same again up the ladder when regional managers review pipelines with the VP and so on. All sales activity should live in the SFA system — from number of calls to meeting notes, all the way through to incentive plans and bonuses — so that the value of the system is seen day in and day out.

2.  Balance the Carrot and the Stick

You can beat your sales team into submission. That’s the approach taken in probably nine out of 10 CRM projects. But while that may result in 50% utilization, it will never lead to 80% or better.

For SFA projects, we recommend striking a balance between helping to increase the sales team’s productivity, and giving management what they want. This has to be an explicit bargain with salespeople because they are keeping score. Let’s be real: If you build a new SFA system, all it’s really doing is tracking what the salespeople are doing. Are they supposed to be excited about that?

What do salespeople want? Perhaps for you to enter all leads into the system for them automatically. Or if they must cull prospects from a large volume of leads, give them sharper segmentation tools. The best approach? Ask them.

3.  Buy Them Off

Tie part of your sales compensation to SFA utilization. In short, alter their behavior through incentives which don’t have to be large to have an effect. As everyone knows, even slight monetary incentives influence human behavior. I recommend giving them a small boost for doing a good job using the SFA system, and a negative for not applying themselves or complying with SFA requirements.

4.  Train For Real Life

Too often, training programs focus on helping users simply navigate the new system. I find that approach to be completely ineffective.

What’s better: training salespeople in the scenarios they actually require. Show the “what’s in it for them” — namely, the ability to more quickly, easily and successfully do their jobs. And if your CRM system isn’t doing that in the first place, then you shouldn’t be rolling it out.

5.  Speak “SFA” From Above

Perhaps the single greatest incentive for salespeople to use SFA is to have someone in power actively flog the SFA software. For example, at one of our clients, Experian, the head of sales regularly fires off an email to one of his salespeople based on information in the SFA system. “What’s going on with this deal at 20% probability? I thought we had it signed.” Now, he may only do this four times per month, picking deals at random. Even so, that goes a long way toward keeping salespeople hyped about using the system and reminding them that senior executives are watching, while also reinforcing that their SFA efforts are not going unnoticed.

Learn More

In a Q&A, Robeco Direct talks about strategies for overcoming user resistance to CRM and BI.

In-depth guidelines for improving SFA utilization and balancing the needs of senior executives and salespeople are located in our “Striking a Balance” whitepaper.

For related thinking from an industry perspective, see “Finding the Middle Ground” for our high-technology focused paper, “Maximizing Growth and Optimizing Sales Through CRM” for our medical device point of view and for our pharmaceutical paper, visit “Transforming Customer Data into Sales and Marketing Intelligence.”

Finally, for additional information on how to balance competing business, organizational and technology requirements during CRM implementations, and create a CRM system that people will use, see “The Value of Working with CRM Experts.”

Separating Segmentation and Targeting

Mixing is for drinks. Photograph by Global Jet.

Lately, I have been involved in a number of conversations regarding segmentation and targeting. I state it this way, segmentation and targeting, as if it were one topic with two words in the name because that is how many folks I have been interacting with refer to it. Combining the two terms, as if one, is a bit like giving this the status of something like gin and tonic. Gin and tonic water are two uniquely different things, but when mixed together they become a single, recognized entity. Segmentation and targeting are two uniquely different things and when combined together don’t become an entity, they remain two different things.

Now, the first thing you might ask yourself is, what possible difference does it make if people refer to these two things as if they are one thing? My answer is simple. They serve two different purposes, and if they are mixed up, there is a good chance you are getting the benefit of one and ignoring the utility and benefit of the other. I think it is important to get the benefits of both. If you mix gin with tonic (and add a wedge of lime) you get the benefits of both. But if you mix up segmentation and targeting, you are probably assuming they are the same thing and you are accomplishing only a portion of the value of what each can bring to your CRM program.

My plan here is to offer up my definition of each topic plus make some effort to show how they might be connected (but not synonymous). However, without doubt, I will define them incorrectly according to one of your favorite marketing reference books. Likewise, I will define them in reverse according to some of you – this I know because I have already engaged in that debate. No matter, I stick with these definitions, and I think you can find them useful. Here goes:

Know Your Segmentation …

This is the process of differentiating your customer and prospect base into discernable categories, which aid in positioning the correct resource with the correct segment. Mostly this helps determine who talks to whom and who gets the priority attention. My customers use segmentation most often for territory management and channel assignment. For example, A customers get top coverage by the field sales force, B customers get secondary coverage by the field and primary coverage with tele-sales, and C customers get covered through the web and by tele-sales if they come through a campaign. You can use a number of different criteria for segmentation. Consumer banks use socio-economic status. Many B-to-B companies use factors that indicate buying potential. Some companies just follow a simple formula based on size (revenue, employees, customers, etc.).

… From Your Targeting:

This is the process of selecting customer or prospect segments or sub-segments for the purpose of a specific activity, such as a campaign, messaging, or promotional programs.

Targeting is all about rifle shooting versus the shotgun approach – getting the right message or offer to the right customer at the right time. Typically, targeting takes the basic categories of the segmentation structure and then divides up the population by another characteristic such as buying behavior, purchase lifecycle stage, customer base, or other trait. While there are a handful of common segmentation criteria, there are literally hundreds of thousands of criteria for targeting, all industry-specific.

What’s The Difference?

So, what is all the fuss about getting these confused? They serve a different purpose. Segmentation is really critical for building account strategies. Targeting is really critical for building marketing plans. Yes, they have a key overlap. Targeting typically takes into account the segmentation structure as one dimension, but it is usually more refined – there are more target groups than segments. Account planning can also include targeting strategies, and are best if done in collaboration. But, if you mix them together and think they are the same thing, chances are you are leaving out something.

Relying only on the process of segmentation probably means your messaging is only as refined as your segments. Relying only on targeting probably means you are focusing on the messaging process, but not on differentiating your focus on territory management and the prioritization of your reach.

One crude distinction that I tend to make is that segmentation is a sales process and targeting is a marketing process. But, that is a dangerous simplification as they really need to be well integrated. Unfortunately, I have seen too many companies where sales uses one segmentation structure for managing accounts and marketing uses a completely different targeting structure for programs. This is a disconnect that promotes the typical issues we see between these two functions. Targeting and segmentation have to include some element that links the targets to the segments. A lot of budget can be wasted on campaigns otherwise.

Mix up those gin and tonics, but keep your segmentation and targeting integrated – not mixed up.

Learn More