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Market Focus: Manufacturing -- Customers, Meet Your Makers
Thanks to increased adoption of CRM, manufacturing is putting things together.
For the rest of the January 2008 issue of CRM magazine please click here
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Because manufacturers have little face time with the end users of their products, it's not surprising that the industry overall has traditionally made CRM a low priority. The market today mainly comprises a handful of multinational conglomerates -- but at the next tier, many manufacturers are significantly smaller, and CRM has never been their top priority. Still, CRM adoption has gained momentum lately as manufacturers continue to discover what many other businesses have already learned -- the benefits of knowing more about consumers.

The primary challenge facing manufacturers today is handling increasingly complex business functions, according to William Band, vice president and principal analyst at Forrester Research. Whereas many traditional CRM users may have already connected their front and back ends, manufacturing companies face the more daunting obstacle of synching up CRM with enterprise resource planning (ERP) technology significantly more complex than what most industries have.

Manufacturing's recent uptake of CRM can be attributed to two developments, Band says: vendors creating solutions better suited for small and midsize firms, and the availability of software-as-a-service (SaaS), which made CRM not only cheaper but easier to deploy.

The "right" CRM solution for a manufacturer depends on which of three core selling models the manufacturer uses, according to Dale Hagemeyer, research vice president of manufacturing at Gartner. The first model is iterative -- products are consumed at regular, consistent intervals (unless there's a promotion that calls for a quantity increase) and the process is simplified through automation (e.g., Colgate Palmolive selling soap to a drugstore).

Next, manufacturers engage in the influence model. No direct transactions are made, but, as part of the sales cycle, the company "gives" its product in the hopes of persuading its channel to promote the product down the line (e.g., Gatorade provides its beverages to sports teams during games).

Lastly, the opportunity model is a linear sales cycle that flows from identifying the prospect to finally closing the deal. Products in this model are often more expensive, and the process often takes significantly longer (e.g., Boeing selling an airplane to Delta). Whatever model your company belongs to, "there's a maturity level in the [CRM] market to where solutions exist for most anything that a manufacturer sells," Hagemeyer says. "No one's having to go buy a 'vanilla' CRM solution where you have to [add] your own nuts, toppings, and cherries."

Manufacturing is highly transactional--and the CRM evolution in the industry today is thanks to functions that are more analytical and predictive of those transactions, Hagemeyer says. With so much data available, companies have long been frustrated with having to sort through their basement files. Once loaded into a CRM system, though, that data can finally become useful. By being predictive, Hagemeyer says, manufacturers will better recognize when and how often to contact customers and prospects, what products to market to them, and the optimal order size for those products.

CRM is seeing a shift of its own as well. "CRM applications have been pretty good in getting in data, [and] spitting out data," says Claes Fornell, a professor at the University of Michigan and head of the American Consumer Satisfaction Index (ACSI). Clean and relevant data, however, can be a taller order, Fornell says, and CRM is often hard-pressed to provide it in manufacturing, especially for line-of-business employees. "Predictive capabilities are going from being projects with esoteric tools run by Ph.D.s to tools being run by average users," Hagemeyer says.

Hagemeyer, in fact, jokes that the only "Ph.D." required by today's CRM stands for "Push Here, Dummy." In other words, no longer will the user have to understand complicated algorithms to get simple, comprehensive, and actionable insight. (The value of predictive capabilities is clearly evident in other areas of the enterprise software industry -- witness the multibillion-dollar efforts to acquire business intelligence vendors in 2007, in the hopes of gaining that competitive edge: Oracle bought Hyperion Solutions, and late-year moves by SAP and IBM to acquire Business Objects and Cognos, respectively, were in process at press time.) Hagemeyer expects that the industry will soon enable optimization in real time -- basically doing everything, but faster.

Most manufacturers that previously attempted to create their own CRM have since abandoned those efforts. Hagemeyer applauds: Why build a solution when you can buy one that's not only cheaper as a whole, but more powerful -- especially when ready-out-of-the-box SaaS solutions are available? The technology is available to help manufacturers better connect with the end user, but the burden is on the CRM vendors, Hagemeyer says. "If you don't have the industry-specific functionality as a vendor," he says, "you already know that you're not in the game."

Top 3 Vendors, in 3 Segments: Source: Gartner

  •  
    • Cegedim Dendrite
    • Oracle's Siebel Systems
    • StayInFront
    • Oracle's Siebel Systems
    • SAP
    • CAS
    • Salesforce.com
    • Oracle's Siebel Systems
    • SAP
  • Pharmaceuticals:

    Consumer Goods (durable & consumables):

    B2B (lead generation/management, pipeline management, back-end configuration)

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Every month, CRM magazine covers the customer relationship management industry and beyond. To subscribe, please visit http://www.destinationCRM.com/subscribe/.
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