Are We There Yet? The Ongoing Evolution of Customer Relationship Management

by Michael Harnish & Tricia Casari

Application Consulting
Universal Advisor, 2004 Issue No. 1 

By now, most of us have heard the buzz surrounding Customer Relationship Management, a.k.a. CRM. Beginning in the ’90s, a proliferation of software applications designed to handle customer relationship management activities (namely sales force automation, marketing automation, and customer service and support) became available to companies wishing to improve success rates in attracting, developing, and retaining new and existing customers. For many early CRM application implementers, it was a long and bumpy ride. However, the current state of CRM offers clearer paths and more enjoyable journeys. Here’s why.

In the Beginning

Early CRM systems involved deployment of large, cumbersome software packages that often required years to implement. Like most applications of the time, mobility was not adequately addressed, much to the dismay of many sales personnel who viewed these behemoth applications as additional work that distracted from their true goal — sales.

The result, more often than not, was failure for a multitude of reasons, including lack of organizational discipline, key staff departures prior to system completion and, most importantly, a belief that computer systems were the answer to CRM woes. CRM failure was the rule rather than the exception for many early adopters, but lessons were learned along the way, including the reality that solid and uniformly embraced sales and business processes drive the relationship and sales effort. Certainly technology can be critical to the successful support of good processes, but it can’t be the driver.

A New Day, A New Way

The late ’90s introduced a new breed of CRM software that was configurable, customizable, mobile, modular and, above all, process oriented. Keeping it simple, yet delivering key functionality, provided focus on mobility and process and achieved better results. In addition, advances in Internet utilization and security ushered in a new breed of light and mobile CRM — the “hosted CRM solution.”

This solution is available through the Internet and maintained and provided by a third party — often with greater resources at their disposal than any single user company could provide. Hosted CRM solutions eliminate the need for costly hardware and software investments, system maintenance and upgrades, and trained help desk personnel. This new breed of CRM solution finally enhances the underlying processes, providing exciting features at an attractive price for companies of all sizes. Features include ubiquitous access, multi-language and multicurrency support, user dashboards, document management libraries, team selling, workflow and process tools, off-line and wireless mobile capabilities, standard integrations to popular messaging and office applications, and customer self-service features, to name just a few. Hosted CRM has become the tool for smaller companies to level the playing field with their larger counterparts.

Down the Road

CRM is finally becoming a core need of many businesses — especially in challenging economic times. Watch for these trends to take hold in the CRM arena:

• Hosted Models Gain Increased Popularity— Aberdeen research conducted during 2003 indicated that CRM application hosting is benefiting from a surge in interest. Furthermore, Aberdeen predicts this surge will kick off a long term trend, rather than a short-term fad.
• Increased Vertical Solution Offerings — The burden of vertical customization has historically fallen primarily to CRM buyers. Now, the days of “one size fits all” CRM are ending. As various business models abound, vendors are beginning to develop specialized, verticalized solutions to tightly match each industry and model yet still allow the user to easily customize to their unique needs.
• Increased Marketing Automation — The rally for customer privacy, as witnessed by “do-not-call” legislation, will force companies to improve marketing management. As such, CRM marketing technology will need to help companies adhere to opt-in/opt-out programs, do-not-call listings, and customer-dictated contact preferences.
• Focus on Improved Analytic Tools — CRM vendors look to refine embedded analytical tools specifically targeted to help companies improve marketing effectiveness, correct customer service issues, and provide strategic decision support.
• Price Optimization Technology on the Rise — Companies are increasingly looking for applications to address ineffective pricing models, according to findings from AMR research. In the past, ineffective pricing models were tolerated by buyers, due to the unavailability of pricing information. Laura Preslan of AMR states in a recent report, “Today, increased customer visibility into pricing through retailer and automotive Web sites, trading exchanges, auctions, and such, are putting major pressure on companies to reduce prices.” Price optimization applications are designed to determine the upper limit of pricing that will be acceptable to buyers.
• Internet-Based Self-Service Functions — Companies are learning that much of the world is embracing the Internet and willing to ask for and enter critical information on their own. Smart companies are starting to capitalize on this to better route and escalate information and eliminating the cost of labor to enter information already obtained from prospective buyers and customers.

A Word for Wise Travelers

For anyone heading down the CRM path, there are a few simple things to remember. Start with clear goals and measurable objectives. Document, prioritize, and communicate the desired outcomes of your initiative. A few examples follow:

• New Customer Acquisition — Achieve X percent increase in new customer acquisition during the upcoming fiscal year.
• Cross and Up-Selling — Identify $X worth of cross and up-selling opportunities during the upcoming fiscal quarter.
• Customer Retention — Reduce customer turnover to X percent by the end of the third fiscal quarter.
• Customer Satisfaction — Obtain average customer service ratings of X.

Take one step at a time. While your CRM vision can and should include lofty goals, your likelihood for overall success will increase by tackling goals separately. Start with narrowly defined business goals involving a comparably smaller pilot group, yet promising high impact upon delivery.

Consider all points of the CRM triangle — people, process, and technology. A successful CRM project, like many initiatives of our time, involves the planning and execution of appropriate changes to all three. Make sure you have uniformly understood and embraced processes for sales and marketing and communication.

Lastly, when asked “Are we there yet?” the answer should always be, “Yes and no.” Initial deployment and successful delivery of predetermined objectives can be considered milestone events. However, these events mark the beginning, not the completion, of CRM. The process of managing CRM over time is just that — a never-ending process of continual measurement and improvement.