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Tail Wagging the Dog
For future business historians the development of the CRM market and
applied usage of customer management strategies within business will be
an interesting and rather perplexing puzzle.
As recently as 1997 CRM (and the term had only just entered usage to
describe some rather disparate application areas) was a Cinderella
industry. Certainly it was dwarfed by ERP systems and out publicised by
the nascent internet revolution. Now, only four years later, most
analysts would agree that CRM is at the heart of the biggest application
area we have yet seen. Hewson Group figures show that the CRM market
grew 100% in Y2000 to be worth $7.8bn and will be well over $30bn in
2004 which means breaking through the $100bn barrier when you take into
account associated services and integration. All this is on a rather
narrow definition of CRM which looks only at the customer interaction
area. If you include, as we now must, all transactional data and process
and the very important role of supply chain and collaborative working
then you see an all embracing market worth hundreds of billions of
dollars in the next decade.
Given the rather dizzy rise it is perhaps not too surprising that much
of the deployment of CRM that we have seen so far lacks logic and for
many companies a disappointing lack of Return on their Investments.
Looking back over the 1990s we can see three main threads where
businesses tried to deploy customer facing systems.
 | The first was in database marketing.
| The second in call centres.
| The third was the attempt to bring control and efficiency to
salesforces. |
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Paradoxically, it was the latter that can be seen to have ‘engined’
the start of the real rise in CRM. I say paradoxically because Sales
Force Automation (SFA) – a silly term if ever one was coined – was
always a dubious start point for a revolution in customer management. In
truth, most SFA projects were no more than exercises in control over a
resource that had little shape or structure and where the culture was
profoundly antipathetic to ‘control’ type systems.
If we look at the history of CRM then it is tempting to attribute
everything that has occurred to a sort of linear development of
technology. Certainly it is a common mistake to consider CRM as a
technology. In fact, this is probably the most important mistake that
people make and it fails to take into account the profound cultural and
organisational changes that need to be in place for customer management
(or market management) strategies to work. Without any doubt at all, the
changes in available technology in the past ten years have had a
profound influence on the possibilities for customer management.
The Internet, mobile communications, sophisticated call handling
devices, database developments have all contributed to our growing
ability to interact with each other. These developments have widened
customer choice and heightened expectations of how business might be
transacted. But, important as these technology enablers are they are
subordinated to a big driver that was already starting back in the
1980s. The notion that the customer was king and that a service culture
existed to support this took root at this time. Sophisticated
advertising and messaging encouraged consumers in the belief that they
held the power. Early adopters of a customer service philosophy created
differentiation and the realisation that it customers could get what
they wanted on their terms. This dramatic change in customer expectation
is now firmly entrenched and will never revert to the former take it or
leave it era. The customer is, to use a hackneyed expression, empowered
and knows it. He or she wants to transact in the channel that they want,
at the time of their choosing and to be in receipt of the information
they deem relevant. Anybody reading this article will recognise this as
true because we are all consumers with these attitudes.
Conclusion
All this takes me back to the paradox that I discussed earlier.
Understanding customer behaviours and expectations and acting upon this
knowledge will be the key to business success. In a sense this has
always been a business truth but the need now stands in much starker
terms. The paradox is that CRM so far has been mainly about the
deployment of ‘operational’ systems – contact centres, salesforce
management, direct marketing and so on.
The part that logically might have come first is the determinants of Go
to Market strategies and therefore how operational resources should be
deployed. Yes, analytics have, for most companies in most sectors bought
up the tail end of CRM strategy. It might be thought that understanding
the wealth of customer and market knowledge contained within a customers
own domain would be the overarching imperative and yet it is not.
Hewson Group
Hewson Group believe that there are two reasons why analytics (along
with are deep level integration) have come late to the party.
| The first is cultural and organisational. We consider that most
businesses are afraid of analytical CRM. It is complex and most
marketers do not have the experience or the skills necessary to make
it work. This stands as no criticism of them for that as little
precedent exists for them to work with. The result is that most
businesses can neither determine the answers that they should seek
from the knowledge base they undoubtedly have nor can they
adequately frame the questions.
| The second reason is that operational systems have been badly
deployed with inadequate process and strategic alignment and
therefore, with incomplete or misleading data. |
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From now on the failure to understand the part that analytics will play
in the competitive position of businesses will have growing and
significant impacts. Already the investment community is starting to
judge companies performance by customer metrics criteria – with a
consequent effect on shareholder value. Perhaps, more importantly, it
will not be possible to deploy the very expensive operational CRM
systems, the necessary front to back processes and product development
unless customer expectations are well understood and their likely
behaviours well monitored. This means not only gaining an understanding
of historical data but profoundly understanding the implications for
future behaviour. This is a real and fundamental challenge for
businesses everywhere. The history of CRM has been the tail wagging
the dog, now it is time for the dog to wag the tail.
Nick Hewson
Nick Hewson started his career as a lawyer but became involved with the
CRM industry in 1987 with one of the earliest software houses in the
area. He established Hewson Group in 1989 together with Wendy Hewson, a
former Andersen consultant and subsequently a well known academic.
Hewson Group became renowned in the nineties for both CRM related books
and leading edge research. Nick is a well known speaker on CRM issues
and contributes to leading newspapers and journals. He is also actively
involved in merger and acquisition work worldwide and in recent
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