June 9, 2010
By Denis Pombriant, founder and managing principal, Beagle Research Group

Is Your Community of Customers Sustainable?

Sustainability is the up-and-coming issue for business, and CRM is no exception. When we think about sustainability, many of us think about some form of conservation—maybe something “green”—and that’s not a bad place to start.

Sustainability is rooted in the notion that all systems—all resources—are finite. When demand is relatively low, those resources appear to be infinite, but that’s just the perception. Two centuries ago, we headed west to what seemed like an infinite frontier; by 1890 the Census Bureau closed that frontier because the West had been settled.

The same thing happens in markets. When a product category is new, uptake is brisk; everyone seems to need what you’re selling, and you may even struggle to keep up with demand. Sooner or later, though, demand slackens. The explosive market transforms into a replacement market. Sales growth becomes dependent on factors such as normal population growth, or breakage and wear. Smart vendors innovate within products, adding value or taking out cost, increasing demand by enticing customers to upgrade.

I see signs everywhere that our economy is moving into a zero-sum mode, in which replacement is a driving force and sustainability is a requirement. In a zero-sum market, taking cost out of the equation becomes a very high priority. Unfortunately, as products reach commodity status, they require commodity pricing and volume sales; that hampers profit. (Geoffrey Moore wrote eloquently about this in Dealing with Darwin; I refer you to him for more.) But sustainability has several definitions. One is developing business processes that use fewer internal resources, but another involves treating customers as the limited resources that they are.

Most front-office business processes that I’m familiar with have a customer component. A zero-sum market (there I go again) is a lot like the American frontier: There may be a huge number of customers out there but once they’re all (or mostly) taken, you can no longer get more simply by staking a claim. You have to buy them from a competitor.

We’re already seeing some zero-sum competition. Just look at the fierce battle for mobile-phone service and the number of features that vendors are cramming into new devices.

The software that we use to manage sustainable business processes looks a lot like conventional CRM but there are important differences. Vendors have performed many experiments over the last few years with tactical additions to their suites that include various types of social media and Web 2.0 ideas. And while these additions have been welcome and interesting, this incrementalism has not yielded an integrated strategic vision of how CRM can help reduce costs beyond labor or include the customer as a strategic resource. Still, even if they seem reluctant to embrace the terminology, many of the major CRM vendors have begun positioning products on the road to sustainability.

Oracle has a loyalty module that incorporates customer history and handheld devices into retail selling. Salesforce.com has its Sales and Service Clouds designed to harvest important intellectual property from business processes and recycle that material to improve customer interactions. Microsoft and several others offer unified communications servers thatsave time and expense in customer outreach and intra-organizational communications. Smaller companies are also in the mix: Kadient offers sales playbooks; BrainShark makes content powerful by making sharing simple; Unisfair can cut travel costs with virtual meetings and conferences; and so on.

In an ideal world, all these solutions (and more) would be incorporated into a new, strategic approach to sustainability. The reality suggests just how important platform technology is and will remain. As our industry approaches the beginnings of a recovery, there’s great opportunity, especially if you can identify the new frontier.

Denis Pombriant, founder and managing principal of CRM market research firm and consultancy Beagle Research Group, has been writing about CRM since January 2000, and was the first analyst to specialize in on-demand computing. His 2004 white paper, “The New Garage,” laid out the blueprint for cloud computing. He can be reached at denis@beagleresearch.com, or on Twitter (@denispombriant).