CRM Failure Rates, Causes and Lessons

What You Need to Know

Highlights

  • Harvard Business Review took 12 analyst reports that collectively found CRM failure rates to be between 18% and 69%. The author also advised that when executives were asked if the CRM system is helping their business to grow, the failure rate was closer to 90%.
  • But on the flip side, getting this technology right delivers a big payback. A Customer Relationship Management ROI study by Nucleus Research found companies can earn $8.71 for every dollar spent. Another study found the average CRM ROI is 211 percent.
  • So, after decades of mixed history, I'm using this blog post to show the CRM failure rate, the top causes of a recurring disappointment, and how you can benefit from the lessons learned.
Johnny Grow Revenue Growth Consulting

An Inconvenient Truth

For most companies, Customer Relationship Management software isn't optional. But being a business necessity doesn't make it easy. In fact, the continuous drumbeat of failed CRM implementations reinforces the challenge of getting it right.

Research published at market leader Salesforce advises that over several years, 9 analyst or media firms have published statistics showing the CRM software failure rate ranges from 30 percent to 70 percent. The article also noted that these results may not reflect implementations that fell short of planned expectations and operate with below-par performance and little to no ROI.

CRM Failure Rates

More current research performed for the CRM Failure Report measured the percentage of implementations that achieved their slated objectives, time and budget. The report published the below findings:

  • The CRM implementation failure is 55 percent. Failure is defined as Customer Relationship Management software implementations that did not achieve their planned objectives.
CRM Failure Rate
  • 10 percent of all implementations were cancelled prior to the planned go-live event. This cohort was included in the above failure rate.
  • 41 percent of implementations achieved their forecasted time duration. That data also demonstrated that as implementation time was exceeded, project objectives were removed and reduced.
  • 36 percent of implementations achieved their planned budget. Larger companies skewed the data toward higher negative cost variances. The data demonstrated the larger the company, the more likely of incurring implementation cost overrun.
  • 25 percent of implementation projects achieved their planned objectives, time duration and budget.
  • 34 percent of implementation projects missed their planned objectives but achieved their estimated time and budget.

Some Things Never Change

When considering all the failure reports over a two-decade period, the results are disappointing as the problem clearly persists. So, I thought it might be helpful to drill down and understand if the causes of failure are shifting and companies are having a hard time keeping up.

I went back and reviewed several reports on failed CRM implementations and the top risk factors. The earliest report I found was published in January 2000 by Meta Group (later acquired by Gartner) in a report titled, Leadership Strategies in CRM. The bar chart below shares their results.

CRM Risk Factors

The report went on to say that the most common reasons for failure fall into the below categories:

  • Poor objective setting
  • Lack of senior leadership
  • Inadequate planning and scope setting
  • Implementation missteps
  • Lack of change management

Fast forward to 2023.

The CRM failure research survey asked participants to cite up to 3 of the most significant obstacles to application deployment success. Their responses are show below.

CRM Implementation Top Challenges

See the CRM software implementation failure rates, top causes of failure and lessons to do better.

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I find two things particularly interesting.

First, the overlap between the top challenges reported by Meta over two decades ago and the top challenges from the most recent respondents is significant. In my opinion it is stunning as it suggests the industry has learned little despite a disturbing failure rate and the significant cost consequences.

Second, none of the top 5 factors most contributing to failed software deployments from either research study had much to do with software. The obstacles are entirely strategy, people and processes.

A Consistent Problem

Over two decades of research share common problems of implementing technology in a vacuum and giving short shrift to engineering the software to achieve user, customer and business outcomes that matter.

Be clear that technology is not a business outcome. It's a tool that can facilitate business outcomes. But unless you link the software with business processes and metrics to achieve results such as acquiring more customers, increasing customer share or reducing customer churn, you have implemented technology for technology's sake.

Also recognize that users only embrace this type of application when it helps them do their jobs better.

Most implementations state goals in software terms and not people terms. They apply design to software and not user experiences. They emphasize software ascetics over usability. They blindly add features and functions at the expense of simplicity and ease of use. Their project budgets favor investment for technology while skimping on process improvements and change management.

They operate under the premise that if they build it, the users will come. Unfortunately, decades of implementation history suggest otherwise. Prioritizing technology over people has clearly contributed to the troubling CRM software failure rate.

So How Do You Do Better?

From over three decades of CRM implementation experience, I offer two overarching recommendations to avoid becoming part of a troubling statistic.

First, start with a proven implementation methodology or framework. There's no need to reinvent the wheel.

Any good methodology will be driven by a CRM strategy, built on best practices and measured in outcomes that matter, such as increased revenue growth, decreased cost to serve and other financial results.

Without a framework it's easy to confuse activity with progress and difficult to separate the urgent from the important. Without a framework, project teams attempt to navigate without a map and execution becomes aimless. When they veer off course with investments and effort that do not directly drive progress, they delay and degrade the most important objectives and put the project at risk.

Applying a proven and repeatable technology implementation framework will define, de-risk and maximize the likelihood of achieving CRM success.

Second, apply risk management throughout your implementation.

Every CRM project carries with it a certain amount of risk. And every failed CRM project incurred a risk that was either not recognized or not addressed.

Risk management is the process of measuring and prioritizing risks, implementing strategies to manage them, and creating plans to prevent, mitigate or respond to high likelihood or high impact risks which threaten project objectives.

You cannot eliminate all risk or anticipate all the challenges that may occur during a software implementation, but risk management is the best tool to lower the likelihood that big problems will occur and that concerns can be dealt with before they become crisis.

Risk management provides assurance to project teams and stakeholders that they will not be surprised by something that will unexpectedly change the course of the project and negatively impact success.