The Essential CRM Guide

Why do CRM Systems Fail?: This article is an excerpt from our free CRM Essentials e-book series.

Updated October 2022

CRM Failure Rates

The number of CRM system installations that are regarded as failures is far too high. Depending on whose statistics you read, failure rates for CRM systems are somewhere between 50% and 80%. If motor vehicles had those sorts of failure rates we’d have carnage on the roads and dysfunctional transportation systems. We would also have an outraged public demanding that something be done to improve reliability.

Of course, before we swallow those statistics as damning evidence of unsuitable products and shoddy installation, we would need to know how failure is defined. What, in terms of CRM, constitutes a failed system? It is quite probable that you would get different answers from CRM vendors and CRM users.

In the CRM Survival Guide, Scott Gingrich says the biggest reason for the huge failure rate with CRM projects is ignorance. This is an astounding statement in that it implies, on the surface, that either the purchaser and user of CRM systems is ignorant, or the vendor of CRM systems is ignorant. In fact, what Gingrich goes on to clarify is that both are ignorant. This is a harsh judgment, but there is an element of truth in it – particularly in light of the number of people who believe CRM starts and ends with software.

Perhaps the failure is not a result of ignorance so much as it is a failure to communicate. Never before in the recorded history of humankind have we had such sophisticated communications systems. Despite that, or perhaps because of that, we seem to have lost the ability to communicate with each other as people.

As a purchaser of a CRM system, the only way to avoid being labeled as ignorant, or as being the cause of your CRM system failing, is to make sure you know what it is that you want, and to know how you are going to achieve your goal. As a CRM system vendor, the only way to avoid being labeled as ignorant is to listen to what your potential customers are asking for.

If CRM vendors were to apply the core philosophy of CRM systems to their own businesses, their systems would have a much higher success rate than what is currently achieved.

“Think about your own interactions with customers. Is there something they’ve been asking you to fix, but you just haven’t been able to figure out how? Sit down with the smartest people on your team, and come up with a solution. Get it done. Then, go back to every single customer who has ever mentioned it – and even those who didn’t – and let them know that you figured out how to solve the problem. Doing this will do more good for your sales than any amount of marketing or selling. People are surprisingly forgiving, and will send as much business your way as they can, if you demonstrate a willingness to care. (Kristin Zhivago, 2008)”

IBM became a legend because of their customer service ethic, and they did not have CRM software to help them. The driving force was management attitude. Hugely successful organizations such as MacDonald’s and Starbucks did not require CRM software to tell them the secret of good customer relationships. They knew that a warm smile and good service would keep the customers coming back. And they knew it because management lived and breathed customer service.

This does not mean that you do not need a CRM system. It means that having a customer-centered service ethic is vital to the success of any CRM system. Nor does it mean that you should not consider CRM as a business option. If you have sales and leads from a website, take telephone orders and sell over the counter to walk-in customers, you need a way to collate all your sales data. If you have leads coming in from multiple marketing methods, it makes sense to establish which marketing effort is giving you the best returns on marketing spend.

People, Not Software, Solve Problems

Most people, when asked, will say that CRM is a software system – and the people who believe this include staff in companies who are installing or have installed CRM systems. This could well be one of the reasons why CRM systems have such a high failure rate. After all, believing that software will suddenly solve all your customer relationship problems is like still believing in the tooth fairy. Software does not solve problems – it simply computerizes them.

“A Pardon My Planet cartoon has a character saying, “Aargh! I hate this computer! All it helps me do is make a huge amount of mistakes in the shortest period of time. I’ve nicknamed it my Tequila Machine.”

A basic tenet of software installation is that the software is doomed to failure if some sort of a system is not already in place. It does not matter if your system is manual, mechanical, electronic, or any combination of those. The fact remains that you have to have an existing system that works before you can computerize it.

So, what is your organization’s attitude towards customers? What is the pervading culture within the organization – and we are not only referring to the sales staff, but also to technical staff, administrative staff, and more importantly, to management. If management pays more than lip service to customer service, employees will soon get the message about where their priorities lie.

“In too many companies, the customer has become a bloody nuisance whose unpredictable behavior damages carefully made strategic plans, whose activities mess up computer operations, and who stubbornly insists that purchased products should work. (Lewis H Young, Views on Management, 1980)”

Thomas J Peters and Robert H Waterman, authors of In Search of Excellence, refer to the Lewis Young quote. Then, they go on to say:

“That a business ought to be close to its customers seems a benign enough message. So the question arises, why does … this need to be written at all? The answer is that, despite all the lip service given to the market orientation these days, Lew Young and others are right: the customer is either ignored or considered a bloody nuisance. (Peters and Waterman, 1982)”

It would seem that little has changed in the last 30 years, except that customers are now more demanding, have less loyalty and, courtesy of the Internet, have greater mobility. To counteract waning loyalty levels and increased customer churn, some companies have taken to offering loyalty programs rather than making a real effort to retain customers. However, loyalty is like trust; it cannot be bought: it has to be earned.

If you want customer loyalty, you have to treat your customers as if they really matter. You have to care for them and cater to their needs. Successful businesses have understood this for centuries. The research on which In Search of Excellence was based showed that:

“… the excellent companies were, above all, brilliant on the basics. Tools didn’t substitute for thinking. Intellect didn’t overpower wisdom. Analysis didn’t impede action. Rather, these companies worked hard to keep things simple in a complex world. … They insisted on top quality. They fawned on their customers. They listened to their employees and treated them like adults. (Peters and Waterman, 1982)”

The key sentence, in a paragraph full of important sentences, is “They fawned on their customers.” Thomas Watson Sr., CEO and President of IBM until 1956, was a man who had strong views about customer service. An anecdote about him tells of a meeting of sales managers with Watson Sr. to assess customer problems. On a table in the room were piles of papers, each pile categorizing problems by source, such as manufacturing problems or engineering problems. Watson walked to the table and with a sweep of his arm, sent papers flying all over the room. Turning to his audience he said, ‘There aren’t any categories of problems here. There’s just one problem. Some of us aren’t paying enough attention to our customers.’ Then he walked out of the room, leaving twenty sales managers wondering whether or not they still had jobs.

Get the Data Right

An IBM global data management survey of 600 major organizations found that 75 per cent of the respondents reported significant CRM system problems as a result of defective data, including violated contract terms, failure to bill or collect for services or products delivered, delays in or abandonment of new system projects and extra accounting costs.

Dirty data is one of the major problem areas with systems that are deemed to be failed. Take the time to do a full data audit and ruthlessly edit what you have.

Get the Timing Right

An oft cited cause of CRM project failure is that the project takes too long to implement. If you’re a small business, and your system is still not fully functional after twelve months, you’re in trouble. If it isn’t, then you have probably chosen the wrong system or chosen a system for the wrong reasons.

When we spoke about ad-hoc teams and getting the job done quickly, we were not suggesting that you make hasty decisions. On the contrary, all your decisions in selecting and implementing CRM must be well considered. But don’t waste your time drawing up lengthy reports couched in obscure terminology that will have the reader pausing after every second paragraph to wonder what you really meant. George Orwell had some rules to make any writing easier to read and understand. These rules apply equally to fiction and to your reports.

  • Never use a long word when a short one will do.
  • If it is possible to cut a word out, always cut it out.
  • Never use the passive where you can use the active.
  • Never use a foreign phrase, a scientific word or a jargon word if you can think of an everyday English equivalent.

Keep both reports and meetings short. If you have staff that tends to take a long route to get to the point in meetings, remove the chairs from the room before the meeting. This thrust for brevity does not say that you should ignore pertinent information or skimp on the facts, it is merely to illustrate that there ways to keep the project ticking along well and at the same time cover all the important ground.

  • Encourage staff to get to the point quickly
  • State the issue clearly and briefly
  • Point out the implications, both good and bad
  • Suggest remedies and approaches.