Customer relationship management is one of the hottest management tools today. But more than half of all CRM initiatives fail to produce the anticipated results. Why? And what can companies do to reverse that negative trend? The authors--three senior Bain consultants--have spent the past 10 years analyzing customer-loyalty initiatives, both successful and unsuccessful, at more than 200 companies in a wide range of industries. They've found that CRM backfires in part because executives don't understand what they are implementing, let alone how much it will cost or how long it will take. The authors' research unveiled four common pitfalls that managers stumble into when trying to implement CRM. Each pitfall is a consequence of a single flawed assumption--that CRM is software that will automatically manage customer relationships. It isn't. Rather, CRM is the creation of customer strategies and processes to build customer loyalty, which are then supported by the technology. This article looks at best practices in CRM at several companies, including the New York Times Co., Square D, GE Capital, Grand Expeditions, and BMC Software. It provides an intellectual framework for any company that wants to start a CRM program or turn around a failing one.

In the rush to build Internet businesses, many executives mistakenly concentrate all their attention on attracting customers rather than retaining them. But chief executives at the cutting edge of e-commerce--from eBay's Meg Whitman to Vanguard's Jack Brennan--know that customer loyalty is an economic necessity: acquiring customers on the Internet is very expensive, and unless customers stick around and make lots of repeat purchases, profits will remain elusive. For the past two years, the authors have studied e-loyalty. Contrary to the popular perception that on-line customers are fickle by nature, they found that most of today's on-line consumers exhibit a clear proclivity toward loyalty, and Web technologies, if used correctly, reinforce that inherent loyalty. In this article, the authors explain the enormous advantages of retaining on-line buyers. They also describe what Grainger, Dell, America Online, and other Internet leaders are doing to gain their customers' trust and earn their loyalty. By encouraging repeat purchases among a core of profitable customers, companies can initiate a spiral of economic advantages. This loyalty effect enables them to compensate their employees more generously, provide investors with superior cash flows, and reinvest more aggressively to further enhance the value delivered to customers.