Taking a Second Look at CRM
Vendors, integrators and service providers still have much to learn from CRM systems. As the technology evolves, so should your appreciation of how it can affect the bottom line.
Corporations' professed love affair with customers has kicked off an unprecedented interest in customer relationship management (CRM). But just as personal relationships evolve, so do CRM systems. There are opportunities for players of all types in the CRM arena—solution vendors, systems integrators and service providers—but first you'll need to understand just how this evolving area can affect your bottom line.
As corporations struggle to stay competitive and retain customers, they find that some of the older CRM implementations leave much to be desired. Enterprisewide implementations not only prove costly and time-consuming, but most are poorly designed and fail to accomplish what they set out to do.
According to a recent study by AMR Research, only 12 percent of companies that have implemented CRM software believe it has exceeded their expectations. This is largely because employees are adverse to technology that changes the way they do their jobs. As a result, only 37 percent of current CRM projects include Sales Force Automation.360-Degree View of a Customer
Traditionally, CRM was internally focused, providing access to customer data across the enterprise and helping the organization to respond accordingly. "Now CRM is directly touching the customer," according to Kelly Sprang, an analyst with Current Analysis. She cites the evolution of Web-based self-help knowledge bases as enabling customers to mine enterprise data themselves.
As enterprises extend their reach further to include multinational sales forces, channel partner suppliers and e-commerce customers, the demands and requirements of CRM follow. The market is heading toward merging internally and externally focused applications equally to service internal customers (employees), external customers, partners and suppliers.
Faced with tremendous customer churn, particularly in the telecommunications field, and a dried-up investment capital environment, many companies are turning their attention to the most reliable path of driving revenue and achieving profitability: customer loyalty.
To achieve this loyalty, companies are exploring integrated solutions that will help them deliver the best thing for customers in each interaction. Most companies will blend all the different channels of customer interaction, whether call center or Web chats, shattering traditional silos of sales, service and marketing.
However, rethinking how customers move across an organization is still in the early stages, according to Current Analysis' Sprang. Instead of being organized by department or function, organizations across the board are taking responsibility for customer interactions. Sprang says a limited number of companies are considering a Chief Customer Officer (CCO) to serve as a customer advocate.
Changes from Within
Corporations also are changing the way they purchase and deploy CRM applications.
"Two or three years ago, CRM strategy was primarily application-led," asserts Debashish Sinha, Gartner senior analyst for CRM Services. According to Sinha, organizations first chose an application platform and then determined the services they'd need to implement that application.
Going forward, organizations first will identify the service provider who will implement and manage the solution, then use the provider's understanding to identify the right platforms and application suites.
After suffering through one or more CRM projects that failed to meet expectations, organizations are beginning to understand that a CRM solution does not stop with the implementation of an application. Sales Force Automation (SFA) was the biggest thing in CRM just two years ago, Sinha says. "SFA ended up being no more than a reporting and sales tracking tool because of the lack of integrated customer information from across the enterprise."
Meta Group's Sam Clark reports that many early CRM adopters were dissatisfied with the level of marketing support that leading CRM packages provided for first-tier (Fortune 1000) and mid-tier companies. Many vendors tried to correct deficiencies by partnering with other players, for example the partnerships between Vantive and Annuncio, Vantive and Rubric, and Clarify and MarketFirst.
Now companies are seeking service providers who can offer a total solution that includes consulting, development, integration and implementation, along with platform relationships. As companies become more e-commerce savvy, they'll realize the need to extend relationships to channel partners and suppliers.
Choosing a CRM Vendor?
Companies looking for a CRM vendor should consider the following:
- Examine the viability of the vendor. Look not only at the strength of its technology, but at whether the company can survive the market shake-off.
- Look at the vendor's ability to integrate CRM into broader business systems such as supply chain, ERP and other back-end applications.
- Determine long-term commitment and support in terms of upgrades and the degree to which a company is revamping software, which will impact your ability to upgrade going forward.
Because there are currently too many players offering too few things, consolidation in the CRM marketplace will continue. "Large communications vendors, strong in call-center and traditional voice communications, are trying to shift into the Web," says Current Analysis' Sprang, "Ultimately, CRM providers are narrowing their focus to single applications in which they excel."
In difficult economic times, vendors return to their core strengths. The good news is that enterprises gain a clearer sense of what part of the CRM problem a specific vendor can help address.
Consequently, systems integrators and vendors that provide enterprise application interoperability will flourish, along with outsourcers who can handle the entire CRM challenge for a corporate customer.
"Hosted outsourced services can help companies leap-frog in their advancement of deploying CRM solutions," says Patricia Seybold Group's E-business Solution Analyst, Lynne Harvey. "In some cases, it can be very cost-effective, because companies can end up paying on a monthly or subscription basis, which can be a fraction of the total cost of deploying their own CRM system."
A May 2000 Web-based survey of 1,526 respondents, ranging from start-ups to members of the Fortune 1000, confirms that companies are embracing the application service provider model as a way to achieve cost-effective, high-end business applications.
According to the survey, conducted by the Information Technology Association of America, CRM is among the most popular ASP offerings. In fact, prospective users prefer subscription-based services (71.4 percent) to a per-transaction services (19.5 percent) and services based on one-time fees (12.6 percent).
The challenges for companies looking to implement CRM systems themselves are staggering. The cost can be in the millions of dollars. The time to deployment can be measured in months or quarters. And, although this new awareness may lead companies to the doorstep of outsourcers who can test solutions, organizations may still question if the outsourcers are any more qualified than their own in-house staff. "You have to ask whether they have the talent and staff, and the capability to offer 24x7 support," notes Meta Group's Clark.
Analytics Supply Intelligence
In the last 12 months, companies have shifted their focus from operations to intelligence.
"Analytical CRM is a definite hot button now," declares CRM strategist Nelle Schantz, who defines analytics as in-depth predictive modeling, compared to simpler reporting, and slicing and dicing of data.
Analytical CRM involves understanding who the customers are, analyzing data to understand what you should do for them and then pushing that knowledge into the operational CRM systems (the call centers, Web sites and sales force automation solutions).
"Some of the [CRM] solutions already have the analytics embedded in them," says Patricia Seybold Group's Harvey. Because most companies track their business by unique measurements, some custom work still needs to be done. "In other cases, if they have the measurement in the call center, it's a matter of replicating them either online or using the other touchpoints that they're trying to put together using the CRM system," she states.
E.piphany, fortified by its acquisition of Octane, illustrates how strong analytics can help organizations determine ROI, particularly in understanding the value of a customer, what customer segments people fall into and what value that segment would be to a company.
Technologies such as E.piphany's real-time personalization solution help organizations look at customer behavior while they're on the Web site or on the phone. This knowledge helps companies decide the best course of action for the customer.
"Every prospect has already invested in elements of CRM, so it's important to supplement those systems in place," says E.piphany's Paul Rodwick. "If someone already has invested in a call center, it gets a lot of customer data coming in from its ERP system, so we gather that together and make intelligent recommendations."
CRM: Where the Money Is
A January 2001 report on the worldwide CRM services market from Gartner Dataquest shows that the total CRM market for 2001 will reach $25 billion, with a projected growth to $64 billion by 2005. The CRM market includes hardware, software and maintenance functions; professional services such as consulting and development; and integration, infrastructure and business process management. The total services market is six to eight times the application market.
Taking a more conservative stance, Meta Group sets the overall CRM market opportunity at $15 billion, according to Meta Group's program director Sam Clark.
The Value of Customization
Enterprise-level CRM solutions must be customizable. No two companies have the same systems in place, nor do they have the same goals or ways of measuring their customers. Examples of ways in which CRM solutions are customized include building browser-like interfaces for ease of use and enabling applications to run over wireless devices.
SAS is witnessing a new interest for analytical CRM in the financial services industry. Banks, for instance, may charge extra credit card fees to less-profitable customers. But if they are able to analyze their data in a larger context, they may discover that these classes of customers are actually more profitable than they initially thought, says Schantz.
"People realize that a true customer relationship needs to combine the data from the e-channel and integrate that with the channel from the branch, call center and credit bureau and pull it together to have one comprehensive view of the customer," Schantz explains.
Building Smarter Campaigns
Many companies find that predictive modeling enables them to create and maintain more effective business campaigns. An example of this is Newport News, a 25-year-old direct-marketing catalog company. The company's marketing analysts use business intelligence to package the mailings and Web offerings to reach individual customers.
"We need to be able to determine by what channel people come inWeb or catalog," says Newport News' market system analyst Van Rhodes. "Crunching the different combinations and assembling all the pieces of data in one place put a strain on our existing system."
The company chose SAS because it wanted a partner that had a solid mainframe background and understood how to transport large amounts of data from one place to another.
Newport News sends catalogs to four million customers. Within its mass mailings, however, it has many different offers. "That's why SAS is so good," Rhodes says. "We don't send the same catalog to everyone. We break that down into segmentations of customers. Now we're able to drill down to the individual customer and do lifetime profitability. We've [gained] insights we've never been able to see before."
Taking a Modular Approach
Enterprises encumbered with legacy systems don't need to postpone integrated CRM systems because of time or budget constraints. They can take advantage of modular implementation approaches offered by vendors such as YOUcentric Inc.
Using the Java-based YOUrelate Customizer tool, companies can grab desired objectssuch as sales informationand map them to different divisions. The resulting applications offer a complete picture of what a customer wants or needs.
Companies can specify object permissions so that trading partners can see some objects while employees can view different objects. Federal Express uses YOUrelate Customizer within its three divisions, each of which has a unique sales force.
The Big Payback
Companies are learning a tough but important lesson from today's global environment: Satisfied customersand not just standard business efficienciesdrive the bottom line. Many companies already have basic data collection systems in place, but the data is often locked up or available only to a select few.
Intelligent CRM systems help unlock this data and funnel it intelligently across organizations, their partners, their suppliers and their customers. The result is an improved customer experience and a stronger, smarter and more agile business.