What Is CRM? — CRM Failures

CRM Software Failure Statistics

The Customer Relationship Management (CRM) software failure statistics are nothing short of depressing. For over two decades, research studies have shared than anywhere from 20% to over two-thirds of all CRM software projects have either failed to meet expectations or failed outright.

Despite some good CRM reviews, many CRM software buyers fail their due diligence, making CRM failure statistics legendary. Analysts such as AMR, Gartner, Forrester, IDC and Vantive have been studying the problem for over a decade and each has broadcast comparably alarming statistics along the way. A few sobering citations are shared below:

• 2001 Gartner: 50%+ CRM software failure rate
• 2002 Butler Group: 70% CRM software failure rate
• 2002 Selling Power and CSO Forum: 69.3% CRM software failure rate
• 2005 AMR Research: 18% CRM software failure rate
• 2006 AMR Research: 31% CRM software failure rate
• 2007 AMR Research: 29% CRM software failure rate
• 2007 Economist Intelligence Unit: 56% CRM software failure rate
• 2009 Forrester: 47% CRM software failure rate
• 2015 Venturebeat: As many as 70 percent of CRM implementations fail
• 2016 DMN News: Research turns up CRM failure rates as high as 63%
• 2017 CIO magazine: One-third of all customer relationship management (CRM) projects fail
• 2018 Small Business Genius: The CRM failure rate was between 18% and 69%
• 2019 Business2Community: Studies show failure rates between 47% and 63% for new CRMs

CRM failures result in financial losses, business disruption, months or years of misallocated time, red ink, dissatisfied customers and sometimes job loss or permanent damage to reputation. Many have been known to include career casualties and some have even been cited as contributing causes to disappointing financial performance results during earnings calls. Yet the well publicized tragedy is magnified when you recognize these failures have been reported for over a decade—with seemingly little action taken to reverse the trend.

So why implement CRM at all? The short answer is because its a cost of doing business. Any company that fails to adopt a customer strategy and support that strategy with software automation will most certainly leave themselves vulnerable to competitors who do align their businesses with their customers and supporting business software. Also, attributing CRM failures to CRM software is a lot like blaming victims for a high murder rate. While choosing the wrong CRM system is a significant contributing factor to CRM failure, a poor software selection decision, and the following software deployment challenges are not software dependent.

Also, many times these technology projects aren't complete failures. They may have produced some benefits, just not all the benefits the sponsors used to justify getting the project approved, or sufficient benefits to realize an acceptable return on investment.

What may be most frustrating is that while the CRM failure statistics vary from research study to study, almost all research studies show the failure rates haven't tended to decline over time. One of the first highly publicized studies, by Gartner disclosed a CRM failure rate of 50 percent. A decade later, a study by Forrester Research found a CRM failure rate of 47 percent. A decade after that is much the same.

The CRM failure trend is discouraging, but the underlying facts and root cause analysis reveal several common contributing factors which suggest better preparation and planning can mitigate failure and begin to reverse the tide. Most studies over the prior decade share that the majority of CRM failures stem from a limited number of causes. And these causes can be prevented if they are prepared for and identified at the earliest occurrence. When you clearly recognize why CRM fails you can take proactive measures to make sure your CRM project succeeds.

Here's Why CRM Software Fails

Here are the top 10 reasons why CRM software projects fail.

1. The project fails to acquire visible, vocal and active executive sponsorship—Successful CRM projects have committed and passionate executive sponsors. Unsuccessful CRM projects many times do not. Executive sponsors have to be visibly and vocally committed to CRM success—and the waning or absence of such a commitment is closely associated with CRM failures. Without executive sponsorship, all but the most limited CRM deployments are destined to fail.

2. The project fails to fully involve users—Many failures show a pattern of project managers, IT staff or software selection spearheads making a purchase decision in a vacuum, and without the input or detailed functional requirements important to the staff that will be using the application. This typically results in purchasing a CRM system that meets the executives requirements for information reporting, but not the users requirements for business process enablement, specific feature sets, ease of use, data entry methods, data management utilities and business process automation capabilities.

3. The project fails a proper software selection—This is often the result of choosing a software solution based on subjective criteria and without fully considering the specific functional capabilities that will align the software to the business needs. Many times over, this has been the result of getting enamored with bells and whistles during the CRM software demo and selection process—which is a recipe for a challenged deployment and failed ROI. Some CRM vendors are excellent at boasting the hype and only too proud to share their latest marketing awards or advertising runs. Others may emphasize the hype of their newest software features in a guided effort to change your buying criteria to align with their latest product capabilities. This dynamic adds even more complexity to an already arduous task of selecting the CRM system which best aligns to your most strategic objectives and resolves your biggest business problems. Even worse, force fitting new software features into a deployment effort may unnecessarily add significant cost and risk. Instead buyers are wise to focus the software selection on the most salient and concrete criteria gathered during internal information gathering and which most closely correlates with the organizations top strategic business objectives.

4. The project views CRM as a technology solution—When CRM becomes an IT or technology project, the endeavor is destined to be challenged and probably fail. One of the most common causes of CRM failure is to view CRM strategy as a software or technology solution. Far too many failed deployments begin with the IT department selecting and installing a system, getting it operational and then wondering why the users are reluctant and the strategic benefits fail to be realized. Even when the software installation and integration is near flawless, the project will fail if the technology fails to deliver for its internal customers or the company culture fails to embrace the customer's viewpoint and perspective.

5. The project selects a CRM system without regard to prior technology investments—Choices in CRM technology can have far reaching implications, which if not considered in advance may not be recognized until a deployment is underway and its too late. There are many CRM technology decisions to be considered, such as commercial or open source CRM, horizontal or industry specific CRM, or on-premise or on-demand (i.e. cloud or SaaS) CRM. Other technology decisions such as analytics, mobile CRM, social CRM, consumer technologies and legacy systems will likely all impact a new technology investment, for the better or the worse. These decisions are best made when they consider existing IT investments and the current IT infrastructure. When business users or rogue departments acquire cloud CRM systems without IT participation and IT infrastructure knowledge, these new systems can incur difficulties during integration, customization, upgrades and support.

6. The projects goals are vague—A failure to define a clear set of measurable objectives or outcomes makes achieving success virtually impossible. This risk also includes trying to manage a software deployment without measures and milestones.

7. Dirty data—Data quality must exist for data to be believed, trusted and acted upon. This is why data integrity and data quality measures are critical to CRM implementations. Many troubled CRM deployments incur an early project delay because of a failure to survey the data prior to the conversion. This is then followed by the untimely discovery of dirty, duplicate, incomplete and bogus data. This discovery then requires to project to add activities to the project plan for data cleansing and puts the project behind relatively early in the process.

8. Over-customization of the CRM software—This is often a knee-jerk reaction to selecting the wrong CRM application. No packaged software will meet every functional requirement. More so, it's often the unique feature sets that support the companies competitive advantages and are far more difficult for packaged software to accommodate. That's when software customization can be a viable strategy. But when software customization exceeds the core constructs of the application it inherits major risk of time and budget overruns. And even if and when it is finished its normally difficult to manage, cumbersome to upgrade and expensive to support.

9. Failing to fully prepare for user adoption challenges—User adoption kills CRM when users apply a slow and grudging acceptance of what management believes is inevitable change. Even though you might believe you are achieving your goal at first glance, simply because users are using the CRM software, if those users are not doing it enthusiastically, you will likely end up failing, albeit more slowly than if they had rejected it from the very beginning. Staff who are just going through the motions without the intent and motivation to achieve the cited business benefits are simply passing time and delaying the CRM benefits. Force normally doesn't work for the long term and trying to make it work is comparable to death by a thousand small cuts.

10. Big bang or waterfall deployments—Implementing every CRM software module concurrently often injects more business process and cultural change than most businesses can accommodate. The big bang or watershed practice often leads to cross-functional chaos that can delay or destroy implementation progress and ROI.