The customer has become used to being called "king", but rarely have companies been so eager to pay homage to potential buyers of their goods and services. In these harsh economic times, businesses need their customers more than ever. The internet age has made it possible for people to pick and choose online, and switch between digital and physical channels with ease.

"The customer is, without a doubt, at the centre right now," says Brian Hadfield, UK managing director of Unisys, the US IT company. "The customer is not just king, but dictator."

Thus, companies are eager to persuade their existing customers to spend more money with them. To do that, businesses need to know more about them and their buying habits, tastes and spending levels. They need to make better use of their customer data and be able to subject it to thorough analysis. At the same time, they want to attract new customers.

To help them do all this, a panoply of IT systems and processes called customer relationship management (CRM) has been developed by vendors, consultants and integration specialists. CRM applications mainly cover call centres, sales force automation, marketing, data analysis and website management.

The CRM market, worth about $23bn last year (including both software and services), is expected to more than triple by 2005 when it will exceed $76bn, according to Gartner, the US research group. But as it warned in a recent note, CRM involves more than just technology: "It requires board level vision and leadership to drive a 'relentless focus on the customer', otherwise it will remain fragmented."

Chief executives also have to be involved. John Thomas, chief technical officer at C³@Caribiner, a UK company specialising in CRM, says, "There has to be buy-in at board level and follow-through across the whole organisation."

For it is not just a matter of companies installing the right systems and then expecting customers to beat a path to their doors. This is a prelude to failure, as shown by the large number of CRM projects that have not worked.

"CRM has almost universally failed to live up to expectations," says Butler, the IT market analyst in a report on the sector. To succeed, CRM systems need to be integrated into companies' back-office operations so that the benefits flow throughout the company. People need to be trained fully to use the new systems, and corporate culture has to adjust.

Customers must be able to interact with companies through any channels they wish, whether this be the web, telephone, branches, or mobile devices. They must be treated the same however they choose to make contact, otherwise they will become frustrated and disillusioned.

"Unless you integrate the channels, it's no use," says Edmund Thompson, an analyst with Gartner. "You should provide a single view of yourself to the customer." Companies, therefore, need to take what some experts call a "holistic view" of CRM, seeing it not just as a separate application to please more customers but as a vital part of the whole business.

"Far too many CRM initiatives suffer from an inward focus on the enterprise, whereas the point of CRM is to achieve a balance between value to shareholders or stakeholders, and value to customers for mutual beneficial relationships," says Gartner.

The CRM strategy should be linked with the marketing strategy and give a lead to other business areas such as IT, human resources and production. Normally, this involves changes to internal processes, organisational structures, pay and incentive policies and employees' skills and attitudes.

Companies must also work with suppliers and partners. On top of all this, they must ensure that their data is of the proper quality and easily accessible. Most companies have numerous fragmented databases and systems and these first need to be put in order and streamlined.

"Customer information is key to CRM," Gartner adds. "It must be acquired, stored, analysed, distributed and applied throughout the enterprise-and potentially to its business partners-in a timely manner." With so much to contend with, it is small wonder that many companies find CRM so daunting.

Moreover, the CRM market is a confusing one. There are several hundred vendors, specialists and providers covering specific aspects of CRM. Some consolidation is inevitable but until this happens, companies have to sort through a jungle of competing offerings.

Despite the difficulties of implementation, the potential rewards are immense. Accenture, the business consultancy, has estimated that a company with sales of $1bn can add between $40m and $50m in profit through a 10 per cent improvement in 21 top CRM capabilities. This can be boosted to at least $120m if the improvements are more aggressive.

Accenture has singled out five CRM areas where it believes that the best returns can be achieved. These are: customer service; motivating and rewarding people; turning customer data into insight; attracting and keeping people; and developing selling and service skills.

However, companies do not have to try and become skilled in all these aspects at once. By isolating areas where specific improvements can be made, they can build up their CRM activities in easily manageable chunks rather than going for big unwieldy projects. This approach also fits in with the sharper focus on return on investment now being applied to IT investments during the economic slowdown.

In the end, though, it is the customer who counts. Since the days are long gone when someone could just walk into their local shop and expect the owner to know what he or she wanted, businesses now have to create an atmosphere of trust and satisfaction through a combination of technology, service and quality.

Many companies are still struggling to find the right formula for keeping people loyal and contented as their demands and expectations increase. Properly applied, CRM can play a crucial role in businesses' efforts to prevent them becoming dissatisfied and fickle.