• September 18, 2007
  • By Colin Beasty, (former) Associate Editor, CRM Magazine

CRM's Future Will Look Nothing Like Its Past

HOLLYWOOD, FLA. -- The CRM marketplace continues to benefit from a stronger economy and renewed attention to driving profitability -- and now, more than ever, chief executive officers are taking note, according to a leading industry analyst. As part of Gartner's annual CRM Summit here yesterday, that was the crux of the message from Scott Nelson, a vice president and distinguished analyst at the firm.

Citing recent Gartner research, Nelson said during his keynote presentation, "Why the Future of CRM Will Look Very Different from the Past," that 72 percent of CEOs stated that building better relationships with customers was the best way to increase revenue. "CRM is the result of the environment a company is operating in," he told the audience. "And thanks to the lessons learned from the past, most businesses' CRM practices are better because of it."

According to Nelson, whose speech had the familiar bent of past Summits, most businesses today have learned to focus their CRM initiatives in order to:

  • increase revenue;
  • cut costs;
  • drive brand awareness; and
  • improve customer loyalty.

Most businesses have learned--but not all, apparently. "I remember one financial services company that had spent close to $1 billion on their CRM project over the course of nearly a decade," Nelson said. "And they still hadn't determined which of these four areas they wanted to address first and foremost." (The arena most companies focus their CRM projects on, Nelson said, is in improving customer loyalty.)

Even as companies gain a better understanding of CRM and expand their expertise, many still have long way to go with their CRM initiatives, Nelson said. Some are still plagued by the problems that have bedeviled the market for years -- including an overabundance of options. "The [vendor] market is still a highly fragmented one," Nelson said, "and organizations are still struggling with many of the strategies and concepts."

But any company still disillusioned by failed CRM efforts had better get past them, Nelson said. Customers are driving the need for improved CRM strategies because the bar has been raised, thanks largely to well-known, innovative CRM practices. Nelson cited Amazon.com as an example: Consumers value its customization capabilities and now expect that level of personalization with other vendors they deal with. "Our customers use Amazon.com and compare us," Nelson said. "They know someone else can do it, so why can't we?"

However, as many who have tried CRM and failed realize, there are some caveats. "Many businesses are still product-driven organizations, and are struggling with making the transition to becoming a customer-driven organization. You can't just automate the front office without thinking about how it may bog down the back office," Nelson warned. If too much information comes in from different segments throughout an organization, he added, "you can bring the back office to a grinding halt."

To help organizations avoid this and other pitfalls, Nelson offered four principles for a successful customer-centric strategy:

  • Extend the breadth and depth of relationships.
  • Reduce delivery channel costs.
  • Reinforce the brand.
  • Focus on customer value and satisfaction.

Nelson also reiterated Gartner's half-decade-old "Eight Building Blocks of Customer Centricity," each of which, he said, is essential for organizations to have:

  • Customer Vision
  • Customer-Centric Strategies
  • Valued Customer Experience
  • Organizational Collaboration (among staff, partners, and suppliers)
  • Managing Customer Lifecycle Processes
  • Collecting and Distributing the Right Customer Information
  • Technology
  • Defining Internal and External Metrics for Success and Failure

The adoption of these eight building blocks helps determine where a company sits in the CRM maturity model, of which Nelson said there are five stages. The first stage of what Gartner calls its "Customer-Centric Generational Framework" includes companies that have no vision or customer-centric strategies, don't know the customer experience, collect only basic and fragmented information, and have very fragmented technology with weak functionality. These Stage One companies also are hindered by departmental silos and have little to no organizational collaboration or processes.

Most companies, according to Nelson, are right where they were a year ago -- and two years ago: between Stage Two and Stage Three. Companies mired there have initial productivity and visibility into their customer bases; isolated customer-centric strategies initiated from the bottom up; and minimal progress on developing customer-experience strategies. Also, these midlevel firms are noticing the first signs of organizational collaboration, starting to optimize processes for efficiency, launching team-based (and, unfortunately, fragmented) customer-information campaigns, and implementing technology (albeit with limited functionality).

The fifth and most advanced stage in Gartner's guide to customer centricity includes companies that have the following:

  • a value network enabled;
  • a value-based collaboration strategy for mutual benefit;
  • an understanding of a wider scope of the customer experience;
  • shared customer centricity with goal alignment;
  • end-to-end process optimization;
  • shared information and insight beyond the company; and
  • strong technology functionality implemented beyond the company to partners.

To reach that upper echelon of Gartner's customer-centric framework, Nelson told the crowd, it's critical that companies understand the most important aspect of CRM success: "It's about defining the business processes and strategies," he said. "Companies still struggle with their CRM initiatives because they struggle to identify and automate the customer processes, or [they] automate broken ones."

And, in the end, companies also need to understand technology's a proper place in the big picture, Nelson said. "You can do CRM without technology; you just need technology to scale it."

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