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In Mike Judge's wicked 1999 satire of corporate culture, Office Space,
there's a delightful character named Milton. Poor Milton. He's all but invisible.
No one likes him, no one talks to him, and coworkers are forever stealing his
stapler. Management doesn't notice him enough to fire him. Instead, Milton is
shunted from desk to desk, each time losing more of that precious commodity
denoted by the film's title, until he finally winds up alone in the basement,
where he plots the delicious revenge he'll take on the company.
In times past, customer relations staffs were where the Miltons of the world most likely landed. If you couldn't
do anything else, you could probably listen to phone complaints all day. No
one wanted to, but somebody had to do it. And so they did, until they went
mad from boredom or frustration.
That was then. Today, there's a new shine on customer relations
departments, and the field has earned itself a fresh, glossy title and a
widely recognized abbreviation: customer relations management, or CRM. And
it's become an integral part of the SaaS (software
as a service) industry.
The Rear-View Mirror
But first turn back the clock to the 1970s, before the real blossoming of
the computer revolution. In that era, most companies – especially those
in the Fortune 500 – paid little attention to customers, who were
largely forgotten after they'd ordered something. Big company execs, knowing
they had enormous resources at their disposal, along with a major market
presence, had the attitude that they could always replace customers, if
necessary.
Then came the dawn of the Information Age, with evermore powerful
business computers and personal machines that began to proliferate in buyer's
homes. Now people could make more informed decisions about whom they wanted
to buy from. Globalization eased the task of switching suppliers if they were
unsatisfied with someone's customer service. At the same time, businesses had
rapidly increasing computing power at their fingertips.
The confluence of these two factors led directly to the beginnings of CRM
in the 1980s.
At first, with the rise of sophisticated database creation and
maintenance technology, it was referred to as "database marketing."
Databases were employed to create focus groups to communicate with customers,
particularly the most valued. Problem was, data was gathered primarily
through repetitive and inefficient surveys, and in the end surveys don't
yield a great deal of useful information.
There were processing and analysis hurdles, as well. No task-specific
software yet existed that could take all the data being amassed and spit
something actionable out the other end. Eventually, companies came to realize
that what they needed was to compile simple information they could make plans
around: what the customer was purchasing, in what quantity, how often, how
much was being spent, and what was done with the products purchased.
Sounds pretty basic today, but it wasn't until the '90s that the phrase
"customer relationship management" was coined, and more
comprehensive versions of the software were written. Everything that could be
automated, was.
CRM, however, is not just about technology. As it has evolved, it has
also become more complex, more of a two-way street. While gathering
information for the purpose of decision-making remained primary in order to
drive increasing profits, companies also put some effort into building
strong, enduring relationships with their clients in order to build loyalty.
Many began giving back to favored customers, in the form of gifts, discounts,
perks, and sometimes even cash.
Customer support, integrated into a CRM system, became more solid, even
as machines were taking over much of the heavy lifting. Management began to
treat the old saw, "the customer is always right," with greater
respect. That was more difficult before the computer revolution. Now it's a
cinch. When customers complain, their grievances can be handled quickly and
efficiently, on an individual basis. And the mistakes that caused the problem
can immediately be rooted out so that they don't happen again.
Sales, once made, can be logged into the database and tracked. They can be
cross-referenced to any number of other areas, and analysis can proceed from
different angles. Customers' interests and buying patterns can be identified.
Sales managers can have direct access to information that allows
personalization of the buyer's experience. Electronic sifting of sales data
can help drive product development in the best possible direction. And
customer follow-ups can be generated automatically, according to any criteria
desired.
Designing a CRM System
In order to achieve these goals, it's important for the architecture of a
CRM system to be broken down into three broad categories:
- the
collaborative, which deals with communications between companies
and their clients
- the
operational, which deals with the automation of as many processes
as possible
- and
the analytical, which analyzes customer information and uses it
for business intelligence purposes
Collaborative CRM involves all the interactions a company makes with its
customers – either face to face or through electronic means such as
telephone and Internet. Here, the personal touch is very important. Customers
must be provided not only with goods and services, but with whatever
assistance and information they may require. Satisfied customers become
repeat customers, and CRM can use multiple technologies to bring that about.
Operational CRM deals with the automation of business processes such as
enterprise marketing, customer service, and sales-force matters. All data
relating to customer interactions is stored in a database, allowing for staff
to pull information specific to that customer as needed.
Within Operational CRM:
- Enterprise
Marketing Automation gives the company quick and easy access to aspects
of the business climate, data on competitors, industry trends, and other
critical input. That access yields strategies a company can employ to
guide its overall marketing plan.
- Customer
Service and Support Automation takes care of
such things as returns and customer complaints.
- Sales
Force Automation (SFA) covers demographics, special customer needs, and
accounting management, with access to information made available not
only to salespersons but, in appropriate instances, to clients as well.
Finally, there is Analytical CRM, which deals with analysis of all data
input that bears upon customer service capabilities. Some examples would be:
cross-selling products to customers; finding ways to retain customers who
might be switching to competitors; and providing important information to
customers without delays. Analytical CRM is also a tool for fraud detection
and/or prevention, and for pattern recognition with regard to sales,
inventory, and profits. It can be applied to product development and risk
management, areas in which it needs to be particularly dynamic, so that the
business plan can respond in a timely manner to any winds of change out in
the real world.
When these are all integrated into a cohesive whole, then the company can
realize substantial benefits in a competitive environment. But managing such
an extensive suite of procedures is a daunting task for many companies to try
to accomplish in-house. It means adding considerable (and expensive)
expertise. A bespectacled software engineer lurking around every water
cooler.
On the other hand, what if you could simply purchase what you needed, in
the form of software as a service?
It was a good question, and people on both the user and provider ends of
things began asking it. The result: creation of an instant niche for
companies with CRM software products that were more cost effective than hired
IT guns, and that were applicable across a wide spectrum of the business
world.
CRM as a Service (SaaS)
First to jump into this space in a big way was Siebel Systems, founded by
Thomas Siebel and Patricia House in 1993.
Siebel began by offering only sales force automation software, but with
the explosive growth in demand for CRM through the '90s, it quickly expanded
to include marketing and customer service applications. By 1999, it was by
far the dominant player and was named the fastest-growing company in the
United States in that year by Fortune magazine.
Along the way, Siebel pursued a strategy of forming strategic alliances
and making acquisitions to provide e-business solutions for CRM and related
areas; as of late 2000 the company had more than 700 alliance partners.
The company went public in 1996, and in 2000 its annual revenues broke
through the $1 billion mark. A year later that had doubled, and in 2002
Siebel peaked, grabbing a 45% market share. Today, Siebel is a brand name
owned by Oracle, which bought out the company in September of 2005 for $5.8
billion. Although its market share has slipped considerably, it is still a
major player.
Next to throw its hat into the ring, in 1998, was the giant German
multinational software company SAP. It was followed by Salesforce
in 1999 and Microsoft's Dynamics CRM in 2002. Together with Oracle, these
companies make up the Big Four of CRM vendors, collectively holding about 60%
of market share.
Obviously, three of the four are large, diversified companies, for which
CRM represents only a fraction of their revenue stream. Salesforce
is the upstart. It's a company whose NYSE ticker symbol is, fittingly, CRM.
That's what it's always specialized in (even though of late it has been
moving aggressively into the social-networking arena).
The Rise of Salesforce
Salesforce established its position by
targeting smaller to mid-sized companies, an area largely neglected by its
bigger rivals – primarily because the high cost of the CRM solutions of
the day was affordable only by big-budget outfits. It also pioneered the
delivery of subscription-based CRM software online. Put the two together, and
you have one of the biggest corporate success stories of the new century.
And no wonder. According to its website, "With Salesforce,
every step of a sale – from phone calls and emails to collaboration
with colleagues – is tracked in one place, so reps stay on top of deals
and build stronger relationships with their customers. The average
Salesforce.com customer experiences: +29% increase in sales; +34% increase in
sales productivity; +42% increase in forecast accuracy."
Salesforce currently has more than 82,000
customers and over 2 million subscribers. It's international – with
regional headquarters in Switzerland, Singapore, and Tokyo – and its
software supports 16 different languages. It is annually recognized as one of
Fortune's 100 best companies to work for, with a ranking that vaulted
from 52nd in 2011 to 27th in 2012.
The company is working hard to utilize social-networking websites and to
lock up a dominant role in mobile CRM. It's a leader of the migration to the
Cloud, as can be seen in the way its CRM suite is broken down:
- The
Service Cloud enables companies to create and track cases coming
in from every channel, and automatically route and escalate what's
important. For their part, customers have the ability to track their own
cases 24 hours a day.
- The
Sales Cloud provides sales representatives with a complete
customer profile and account history, allows the user to manage
marketing campaign spending and performance across a variety of channels
from a single application, and tracks all opportunity-related data
including milestones, decision makers, customer communications, and any
other information unique to the company's sales process.
- The
Data Cloud leverages crowdsourcing via its member community to
create a highly accurate worldwide business contact list. Sales leads,
changes of contact information, and organizational profiles can be
viewed within the Salesforce application, all
generated from up-to-the-minute data created by real business
interactions.
- The
Collaboration Cloud utilizes the type of features embraced by
Facebook and Twitter users, and with it employees can tap into social,
mobile, and real-time technology to collaborate on documents, business
processes, projects, and application data. Components include profiles,
status updates, and real-time feeds.
- The
Custom Cloud is a platform that allows external developers to
create add-on applications that integrate into the main Salesforce application and that are hosted on Salesforce's infrastructure.
For its efforts, Salesforce has been amply
rewarded. It's jumped from nothing to over $2 billion in revenues in 13
years. Its CAGR for the past five years has been 22.2%. It led the field in
market share addition in 2010-'11, with a 2.8% increase. Since it IPOed at $11 in June of 2004, its share price has
rocketed to around $145 today, a rise of better than 1,200%. And along the
way, it steadily buttressed itself (and dampened competition) through
strategic acquisitions, gobbling up 24 other companies between 2006 and 2012.
Though nothing in this fast-evolving space is certain, of course, the
consensus is that Salesforce will continue to eat
market share, as this projection graph against two of its primary competitors
illustrates:
And Salesforce is expanding in all the right
ways. According to leading technology analysis firm Gartner, the SaaS-based CRM sales the company specializes in are
expected to leap to $6.4 billion in 2015, from $4.5 billion this year. That's
the biggest slice of the SaaS pie, as can be seen
in this table from Gartner:
At the same time, clients will be integrating social media into their
customer service centers; while only 1% of companies adopting CRM are now involved
with Facebook, Twitter, and the like, by 2017 that number will reach 25%,
Gartner believes.
The Tentacles' Reach
CRM is continually pushing into new industries, as well.
Telecommunications leads the customer list at the moment, with the energy/utilities
and financial-services sectors close behind. But health care and public
services are coming on strong, and are expected to take over the top spots
relatively soon.
There is also plenty of room to broaden the reach of CRM services.
Whereas CRM systems originated as uncoordinated, separate department servers,
the key word today is "integration." And there seems to be no end
to the number of corporate elements that can be drawn together, as you can
see from this near-octopus that depicts the CRM of the future:
The goal – always – is to put customers first, and to offer
them a buying experience that is seamless from beginning to end. The vending
company's website becomes the portal through which customers can browse
inventory to find what they're looking for, place orders, track order status,
and provide feedback about the results. On its end, the company can gather
data about customers, personalize its response to them, and set itself up to generate repeat interactions. All of this
allows the vendor to transform itself from a purely static entity to one that
is much more dynamic.
The Magic Quadrants
With Oracle and SAP losing market share, Salesforce
and Microsoft seem poised to benefit the most. But what about other potential
competitors, those that make up the 40% not controlled by the Big Four? Might
some serious challengers arise?
They might – at Casey Extraordinary Technology,
we're always on the lookout for them.
Each quarter, Gartner publishes its famed Magic Quadrants, in which it
divides technology firms in a given field into four categories –
Visionaries, Niche Players, Challengers, and Leaders – and places them
inside a square partitioned into boxes. A company's position in the Magic
Quadrant depends upon how Gartner sees it in relation to its peers.
There is no Magic Quadrant for CRM as a general designation; rather,
there are separate charts for different aspects of the business. Thus we have
this one for MultiChannel CRM Lead Management:
And quite a different one for Sales Force Automation:
There are others as well, but these two identify some of the
up-and-comers in the business.
According to CMSWire, lead management
involves "processes [that] take in unqualified leads from sources
including Web registration, direct mail, digital and email marketing, social
networks and tradeshows. CRM lead management solutions automate and optimize
how those outputs are then qualified, scored, nurtured, augmented and
prioritized for delivery to direct and indirect sales personnel and
organizations."
In this category we find companies like top-ranked Eloqua,
which Gartner cites for its ability to support complex, multichannel lead-management
processes and easy-to-use user interface, and which grew revenues by 39% last
year. Another is Marketo, which specializes in B2B
(business-to-business) transactions, and which experienced 130% growth.
On the SFA side, SugarCRM had a big year in
2011, landing a major contract with IBM that brought aboard 75,000 users. The
company is interesting in that its CRM software and associated community are
open source, which enables collaborative, customer-driven enhancements. The
open-source community develops and refines new capabilities, which SugarCRM then incorporates into subsequent commercial
releases of its software.
The Future
Whither from here for CRM? There are probably as many answers to that
question as there are those giving them. But a few themes emerge.
One of these is the integration of social media with corporate CRM. It's
even got its own buzz term, "SocCRM." And
one logical extension of SocCRM is what is
generally referred to as "value co-creation."
Through the use of social media, companies have the ability to interact
with the customer base as never before. There is a ton of information
floating around out there, and it can be tapped into. Now, even major
decision making can be based on real-time feedback from users. Design, marketing
of product, pre- and post-purchase service – all can become true
collaborative efforts, the goal being to create a win-win scenario for
both the vendor and the customer. Some startups are even creating social
networks before they bring their product to market, in order to find
out what it is that the market really wants.
Value co-creation – both in the beginning and as an ongoing part of
the toolkit – can be extremely advantageous for the company because it
is, in essence, outsourcing much of the heavy lifting of product development,
and getting it done for free.
With regard to its Dynamics CRM software, Microsoft put out a white paper
in which it suggested uses that its product might be applied to. Among others
noted by Microsoft:
- Manage
online class registration automatically. In addition to automating the
registration process, one could track student activity like attendance,
grades, certifications, and course evaluations, as well as track and
report on marketing activities, including social media, to measure the
success of campaigns.
- Medical-product
manufacturers and distributors can automatically notify product owners
of a warning or recall; answer product questions with confidence using a
CRM-based knowledgebase; and suggest additional products that could
enrich a customer's life.
- Help
municipalities respond to citizen requests more effectively.
- Ditch
the paper order form. Work alongside customers to configure an order and
send the quote immediately from a tablet device.
- Track
customer goods in transit with map integration, in response to
customers' expectations for knowing where their product is in the supply
chain once they have ordered it.
- Compile
a comprehensive view of lapsed customers and generate automated lists of
customers who might be re-attracted based on purchase history.
- In
a phone conversation with a clients or prospects, employ guided
dialogues to prompt follow-up questions based on answers and build
decision tree interviews.
- Fine-tune
customer contests to meet fan interests.
- Keep
track of where backup paperwork specific to each interaction is located.
But in the end, how do you get sales staff, who
may be very set in their ways, to actually use this stuff?
That's the question posed by Dr. Michael Wu, principal analytics
scientist and blogger for Lithium.com. Wu writes that "one of the
many challenges facing Social CRM will be adoption. In fact, traditional
enterprise software (e.g., sales force automation) often experiences a very
steep learning curve and is not well adopted within the enterprise. Even if
it is adopted, people often hate to use it. Employees only use it because
their job requires it."
His simple solution: "gamify" CRM
software.
That is, people are more apt to learn new skills, and to warm to new
technologies, if they're presented as a game. "Social gaming
dynamics," he says, "can foster team work, collaboration, and even
a healthy level of competition within your organization. The result is
ultimately a huge boost in productivity …
"So if you ever get involved in [CRM] software design, make sure
it's entertaining! Never underestimate the power of fun."
Sounds like an idea whose time has come.
Casey Extraordinary Technology is another idea whose time has come.
Learn why from CET Senior Editor Alex Daley.
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