Thursday, June 28, 2012
Customer relationship management (CRM) has the potential to drastically improve a company's operation in a number of ways. Numerous observers, such as Business 2 Community's William Vicary, have noted that CRM, particularly when combined with social media, can help organizations develop relationships with customers. By gaining valuable knowledge about existing customers' desires and attitudes, businesses can tailor their offerings to improve quality.
However, as significant as CRM's offerings are, there are also potential pitfalls that organizations must avoid to make the most of the technology. This point was recently highlighted by CRM Buyer's Christopher Bucholtz. According to Bucholtz, companies must be particularly careful not to fall victim to sunk costs.
Sunk costs, as Bucholtz explained, are resources (such as time and money) that an individual or organization invests in that is ultimately a wasted effort. When these develop, it is critical for the person or people involved to acknowledge that something went wrong and take steps to avoid making those same mistakes in the future. However, this can be extremely difficult to do. It requires a significant degree of objective self-analysis and the admission that a great deal of time and effort needs to be abandoned as a loss.
Bucholtz argued that many companies face this dilemma when it comes to CRM. They become too narrow-minded with their use of the technology by, for example, focusing exclusively on acquiring more customers, that they ignore other benefits of the technology to their own detriment. If this occurs, the company must objectively analyze where it went wrong with its CRM deployment and make adjustments, even if this is a messy, unpleasant process. Otherwise, the firm will never be able to maximize its results from its CRM platform.