As corporations feel pressure to build customer relationship management (CRM) solutions due to competition, customer complaints, or the pursuit of profits, they are creating sophisticated CRM plans. Meanwhile, CRM costs are skyrocketing due to overlapping product offers and poorly coordinated spending, according to a new Report by Forrester Research, Inc. (Nasdaq: FORR). Companies can either save money by managing their investments and leveraging CRM systems to meet their most pressing problems or plan on spending an unsettling $60 million to $130 million over a three-year period.

“As consumers continue to expect a high level of customer service and company leaders feel intense pressure to build CRM solutions, CEOs will need to closely evaluate what drives their CRM spending,” said Bob Chatham, principal analyst at Forrester Research. “Many companies have made no formal evaluation of their CRM program, and as much as 20% of typical CRM implementation is wasted due to overlapping software and lack of coordination across functions like marketing, sales, and call centers. CRM is of the same scale as the ERP initiatives that firms spent tens of millions of dollars on and needs — and deserves — the same level of attention. After all, this is how a firm expresses its personality to its customers.”

In order to understand how CRM costs diversely affect different industries, Forrester explored three sectors: retail catalogers, manufacturers, and regional banks. Following is a brief snapshot of each industry, highlighting CRM cost culprits and solutions recommended by Forrester to control these expenditures.

Retail catalogers like L.L. Bean must replace broad-based paper-catalog tactics with highly focused email-based marketing. Catalogers can leverage technology to control CRM costs by encouraging customer self-service through revamped content centers and by identifying frequent buyers and offering timely sales. This will require significant investments in data warehousing and analytics that can get in sync with customers’ purchasing habits and predict cross-selling opportunities.

Forrester found that manufacturers spend 51% of their CRM budgets on communications between corporate and field channels. To reduce these costs, companies must evaluate the need for full-blown sales force automation. They should seek to optimize sales lead tracking and provide better leading indicators to improve yield management.

With the explosion of customer contact channels, such as ATMs, email, voice recognition, and wireless, banks are faced with the challenge of tracking and pitching profitable customers wherever they appear. This drives up CRM costs on three fronts: contact centers, application licensing fees, and integration with legacy apps. Banks can rein in these costs by training customers to serve themselves and bridging customer-marketing campaigns across different products and services.

“As leaders seek to build credibility for their CRM initiatives, they¿ll need to demonstrate cost-efficient programs based on profitability,” said Chatham. Firms need to realize that CRM technology is more than just software. It involves critical business decisions about production, customer data, and workflow that affect the entire organization.

For the Report, “CRM: At What Cost?”, Forrester spoke with industry executives from thirty-four Global 3,500 firms. To estimate what firms should budget for CRM, Forrester built a detailed cost model — assuming a baseline of zero investment — of the technology and services required over a three-year period to build, maintain, and provide content for CRM.