When Is a Guarantee Not a Guarantee? When It’s Coming from a CRM Vendor

Written by Evan Schuman
May 22nd, 2006

A CRM vendor on Friday introduced a new CRM package, promising a rock-solid ROI guarantee. Vendors seem to be embracing the word "guarantee" these days. Too bad they’re not also embracing its definition.

There are few things harder to deliver in a provable and concrete way than a good return-on-investment. It’s what CEOs and CFOs insist that IT departments deliver, and yet it’s incredibly hard to prove.

Smelling an opportunity, tons of hardware, software and services vendors are trying to lock in sales with promises of guarantees, sort of like ROI service level agreements. (Please shoot me if start referencing ROI SLAs as though it’s meaningful.)

The idea is laudable and should be encouraged, but these vendors seem to have conveniently forgotten that the word "guarantee" is not a synonym for "vague promise." An essential element of guarantee is "If we don’t deliver what we promise, we will give you XXXX." That’s the guarantee part, as in "if this product doesn’t last for months, we’ll give you your money back" or "if this window doesn’t reduce your heating costs by 20 percent, we’ll pay you the difference" or my personal favorite: "double your money back."

A couple of years ago, ISP Earthlink started offering an upgraded technical support plan which—for an extra fee—"guaranteed" that a tech support service person would answer the call within five minutes. I went 20 rounds with their marketing people, asking "What happens if they don’t?" to which they replied "They will." A guarantee isn’t a guarantee without an answer to "What happens if you don’t?"

On Friday (May 5), Loyalty Lab introduced an outsourced CRM package that promised "guaranteed ROI outcomes for the most common problems faced by consumer brand marketers." They promise—in exchange for a $68,000 flat fee—several rather specific deliverables, including a 20 percent revenue increase for second sales, a 30 percent increase for smart E-mail and a doubling of customer acquisition through an automated refer-a-friend program.

Thus far, their program is laudable in that it gets a lot more specific than the vast majority of CRM programs out there today. But, you might ask, what’s their guarantee? What do they do for the customer if those impressive benchmarks are not reached? Do they make up the difference between the promised gain and the realized gain? Do they at least refund the $68,000 fee for the service? Nope. Their punishment if they fail to deliver what they guarantee is that the customer is not obligated to pay Loyalty Lab any more money. After their initial six months, they can walk away.

Watch for this strategy to be adopted by Detroit. If a GM car doesn’t last for the promised number of miles and/or years, the customer no longer is required to buy more stuff from them.

Loyalty Lab CEO Mark Goldstein argues that this is an especially good deal as many CRM firms today do indeed lock customers in for one year or far more. "We’ve reduced the minimum to six months," he said.

Not sure which is more sad. The fact that this is indeed better than what most vendors offer or the fact that most retail IT execs are so beaten down by unfair licensing terms from software vendors that this will be something that they will see as extremely attractive.

Please don’t get me wrong. This is indeed one of the better deals out there today. This may be more of a marketing issue than anything else. There’s nothing wronwith introducing an attractive package, but why try to make it into something it’s not? Why try and position it as a guarantee when it clearly isn’t?

The reality is that provable ROI with marketing (think Web ads) or with software or services is a fallacy when those improved results are dependent on the actions of thousands of customers and prospects out there somewhere. The best that can be hoped for is a reasonable increase in the probability that something will help.

But logic and reasonable requests do not dominate corporate boardrooms today, especially when it comes to technology. The boards demand concrete ROI promises, even when those demands are not realistic. The CEOs dutifully oblige after the COO, CFO and CIO eventually fall in line.

How many meetings can they argue that the request is not reasonable and that no answer they give should hold up under hard questioning. Explain how you can be so sure that a better understanding of these customers will force them to give us more money? Have you factored in their expenses and other demands on their dollars? Economy weaknesses that might lay some of them off? Gas prices, eating away at the dollars available for them to spend? What about cost reductions from some of our rivals or their decision to craft their own packages inhouse?

But CEOs and boards rarely ask such questions because the last thing they want to hear are the answers. They’d much rather hear, "Our software vendor guarantees 30 percent ROI." That makes the CFO happy, as long as no one in the room asks how such a number could possibly be assured. Fortunately for software firms, those execs also rarely ask what happens if they don’t deliver.

On Friday, I was drinking a supposed health drink (it was one of the more neutral tasting versions of soy milk) when I noticed that the second most plentiful ingredient was "organic evaporated cane juice." Wait a second. That would be "cane" as in "sugar cane." Sugar cane juice is just sugar mixed with water. Evaporated cane juice is then sugar mixed with water with the water removed leaving ….. sugar.

I think I’ve figured out where unemployed CRM software marketers get jobs.


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