Overview

Customer Relationship Management, or CRM, is an information technology industry term for methodologies, strategies, software, and other web-based capabilities that help an enterprise organize and manage customer relationships. What does all this mean? The best analogy is that CRM is a return, in principle, to the days of the “mom and pop” corner stores. In those days, store-owners not only knew you, they also knew what you liked. With this information, they were able to make proper recommendations on products.

Today’s markets extend much further than your local neighborhoods. Global enterprises require CRM to manage the nearly infinite amount of information that can be gathered about their customers, potential customers, vendors, distributors, etc. For example, “if a marketing department runs an outbound campaign, all of the information about the customers and the program should be retained for the sales staff to follow up on, the customer service representatives to answer any queries, and technical support to provided any field support. The idea is to have the same information available to all in the company so that any product or service need of the customer is met. CRM implies that everyone in the enterprise is focused on the customer.”1

So where did this great idea come from? In the beginning, there were sales departments and account managers using Personal Information Managers, or PIMs, to allow them to keep track of contact information such as name, address, phone number, etc. At the same time, we had the customer service and technical departments using a completely separate help desk or call center application to keep track of issues or “tickets” pertaining to a customer. These applications also required the same contact information to be entered. As a result, “double-entry” was very common. In addition, account managers didn’t have access to pending issues with their clients, information that is vital to better manage the account.

Though Customer Relationship Management has been around for quite some time, it has experienced many changes, both in thought and function, along the way. Many people consider the beginning of CRM, as we know it now, to date back to the late 1990s when Siebel Systems acquired Scopus. Siebel System, at the time, was the leader in Sales Force Automation, or SFA, and Scopus was the leader in Call-Center Automation. “The marriage, many say, put Siebel on the path to dominate the CRM marketplace, once that opportunity began to unfold. More importantly, the combination of call center automation and sales force automation became the working definition of what was considered essential to a good CRM suite.”2

Emerging Trends

What does the future hold for Customer Relationship Management? There are several things to be considered when addressing this question. We must look at the big picture, the organization as a whole – business strategies, relationships, communication medium, and existing systems.

With the advent of the Internet, companies today have changed the way they form relationships with their clients and vendors. “There is a trend toward using the Internet, not instead of, but in addition to the way you do things now. Thinking about your business this way may open up a range of new possibilities.”3

From an application standpoint, CRM suites have become very comprehensive. They include traditional sales, marketing and service functions, as well as e-commerce capabilities and integration into back-office applications.

Shift in Business Strategies: According to Peter Keen, “we are on the threshold of a shift from a transaction-based economy to a relationship-based economy.”4 Many organizations are learning that you don’t just implement CRM solutions with a view at automating existing business procedures. A successful implementation of CRM is one that must be driven by the development of an organizational culture that is completely customer centric, rather than product-centric. One way they are doing this is by building virtual communities in certain target markets. “By establishing communities of their customers or business partners, companies become trusted advisers. This is companies helping customers, not selling things to them.”5

In addition to changing the way a company looks at its customers and suppliers, it must also change the way it views the implementation of a CRM system, it must take on a more holistic approach.

eCRM: There are two conflicting definitions of eCRM. One is Electronic Customer Relationship Management, encompassing trends such as Interactive CRM and Wireless CRM, two topics that I will cover later. For this reason, I have chosen to adopt the alternative definition of Enterprise-wide Customer Relationship Management. I have produced a diagram that shows how an ideal eCRM system would work. Obviously only certain companies have the ability to implement the entire model.

See Figure 1

The customer interacts with your company via e-mail, telephone, web or face-to-face, through your company’s back office (administration, financial), sales, marketing division, etc. As the interaction progresses to a sale, service query or quote, the information from that interaction is stored and fed through middleware into a database. This data can then be used to create data marts, warehouses, etc. and drawn upon by sales, service, marketing or business to add a greater functionality to those departments. Some examples of how this information is used is if management saw, from querying the data, that a certain product line is failing, and therefore either drop the price or withdraw the model. Marketing may see that a certain product has been bought by 40% of a certain target market and decide to advertise it strongly at the other 60% instead of your entire customer database. By sending it to only some of their customers they reduce the cost and length of campaign. Also, sales may see that a customer bought a certain laptop and no printer and the next time there is interaction with that customer, suggest they purchase a printer at a discounted price. And these examples look at the possibilities only with customers, the same can be done with suppliers and other business partners. The uses of centralized customer data are endless.

Unlike most CRM diagrams my diagram has no arrows showing data flow. This is because the data is fluid. The transfer and update of data is continuous with all areas talking to each other all of the time.

Interactive CRM: With the tremendous advancements in CRM technology, customers are demanding round-the-clock support, whether it is online self-service, e-mail, online chat, or a live company representative. Once customers experience such services from one company, they expect a similar level of service from all companies.

According to Frost & Sullivan, "Traditional CRM was based on making customer service representatives more efficient on the telephone. Today’s interactive CRM are designed to make it easier for a customer to do business with a firm— rather than with its competitors — by providing online self-service capabilities, knowledge transfer, and information sharing."6

One emerging trend in Interactive Customer Relationship Management is the use of portal access to information. The portal is quickly becoming the way all users can access customer information. This framework is a critical technology for two reasons. First, a portal is considered to be a poor man’s integration tool by allowing information from several different systems to be integrated, sometimes quite seamlessly, in the background. And second, the portal framework has the ability to personalize the flow of data and can be accessed and analyzed anywhere inside or outside the company. It has become the way to truly leverage Web services.

I have produced another diagram showing how a CRM system would use a portal framework to have the ability to be interactive.

See Figure 2

The diagram is similar to the one used for eCRM, only this time the customer interacts with your company via only the web and directly into your CRM system or middleware. As before, the information gathered from the session is stored and fed into the databases, and the data is then used throughout the organization. The difference is, of course, the point-of-entry and the information available to the customer. Some examples of this information are the ability for a customer to track his or her own order via the Internet. Another is the customer’s ability to not only see the exact specifications for a PC recently purchased, but also have the ability to download appropriate software, such as drivers.

Wireless CRM: In the past and today, mobile CRM users have the ability to access CRM systems through offline capabilities by allowing portable notebooks to sync via a wired Internet connection. The ability to access corporate e-mail messages and CRM databases anytime, anywhere over wireless mobile devices such as PDAs and laptops is allowing companies to leverage their CRM investments. Although this market is still emerging, rapid growth is expected as bandwidth and interconnectivity capabilities expand. According to Frost and Sullivan analysts, “Wireless CRM is expected to reach $2.5 billion in 2008, up from right around $300 million last year.” 6

These same analysts have said, "Large enterprises can not even fathom doing business without a CRM package. Now the same thing is happening with mobility. Always-on wireless access to corporate CRM data systems is becoming more important than voice access to the average business person." 6

Back Office Application Integration: The ability to integrate existing data, including legacy systems, to all areas of your business is a vital component to CRM. Though this integration has been around a while, I decided to consider it an emerging trend because of the greater emphasis recently placed on this function.

Most companies, over the last ten years, have acquired various financial, marketing, sales and service applications. Employees use these applications confidently and a radical change may mean re-training and the possible loss of valuable business. These entire legacy systems should, as much as possible, be taken into consideration when adopting a CRM system. Before they can be looked at, the integration and migration of all existing data into a single database should be undertaken allowing all of your company access to the same centrally stored data.

There are many things to consider when implementing a CRM system, and many things that can go wrong, which brings me to my next point…

Barriers

Studies have shown that half of CRM projects in the US and more than 80% of European CRM projects are considered failures. These massive failures have caused millions of dollars per company.7 So what’s the problem? There are a few pitfalls that companies need to avoid.

Implementing CRM before creating a customer strategy: As I mentioned before, a good CRM solution goes beyond purchasing and installing the application software. There must be a definitive plan in place, many times going as far as restructuring a company’s entire business plan. CRM is, by definition, managing customer relationships, the organization must be customer-focused.8

Throwing good money after bad: According to the Harvard Business Review, “Many executives automatically assume that CRM has to be technology intensive.” The truth is that CRM need only be as technical as you want it to be. They go on to say, “companies with well functioning CRM programs dot all points of the technology spectrum: low-tech, mid-tech, and high-tech.” 8

Stalking, not wooing, customers: The customer is the reason a company is implementing a CRM system in the first place. It’s about forming the right kind of relationship with the right kind of customer. If this pitfall is not avoided, companies end up trying to build relationships with the wrong customers, or trying to build relationships with the right customers the wrong way. 8

Not satisfying the CRM users: Though CRM is about the customer; we must also consider the end-user. In a recent study conducted by CRMGuru.com, it was found that overall, CRM users not very satisfied with the software. It also found that the ease of implementation and customer focus were the top two problem areas, followed closely by pricing.9

Why CRM

A study published in Harvard Business Review concluded: “Some companies can boost profits by almost 100% by retaining 5% more of their customers.” A similar study revealed “that a dissatisfied customer would tell between 7-10 people, whilst a satisfied customer would recommend a company to 3-4 of their friends.” A study commissioned by Ventura found that “eliminating all customer service problems could double profit growth over a five-year period”.10

Conclusion

Keith Fletcher summed it up best by saying, “ While CRM could achieve major strategic objectives, the failure to do so is often down to management inadequacies, rather than a failure in the system.”11 CRM is not a magical cure-all, but as you can see, by focusing on customer retention, CRM is not only good business sense, but it is also a means of survival. The new economy has shortened product lifecycles; companies no longer enjoy the sustained financial benefits of being product innovators. Not only can competitors bring copycat products to market quicker, new generations of products are introduced more quickly making service and support key to the retention of existing and future customers.

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