CRM Meets ERP
Supporters of customer relationship management (CRM) are squaring off for a fight with enterprise resource planning (ERP). CRM is the upstart challenger-ostensibly uniting under one banner all three varieties of front-office automation: sales automation, customer service automation and a repackaging of best practices database marketing called "marketing automation." ERP, in contrast, is the well-entrenched veteran in systems integration that's already subdued manufacturing, purchasing, inventory control and various other back-office systems-and sits poised and ready to annex financial infrastructure systems as well.
The ERP side wants to extend its information management methods out into the front office-forcing sales, service and marketing to work within rigid, systems-driven, back-office-style parameters. The CRM folks want to stand on their own and maintain the flexibility required to bend with customers who care little about your system and insist you adapt to theirs. Some brave CRM folks even want to step onto ERP's turf to influence how back-office systems manage data tied to specific customers. And a brazen few want to push for one customer record used by every functional area-but, mind you, managed by front-office relationship managers.
Front-office chest-beating aside, CRM, at least what we see of it, seems undermanned for the impending fight. ERP has far more power, more influence, more experience-plus it is already the undisputed champion of the back office.
Imbalance between the two sides or no, who wouldn't fight when the opposition starts invading your territory? SAP and Baan have already made incursions onto CRM turf. Oracle, while not an ERP force but a back-office player through and through, is so confident of its success that it is broadcasting its invasion plans on television. Its ad touts up-to-the-minute, worldwide sales forecasting by permitting sales reps to enter via browser into an Internet database their "best guess" about size and probability of projected new orders. Never mind that those best guesses are likely pie in the sky. If the Federal Reserve Board used such wildly inaccurate forecasting methods, we'd still be in search of a chicken for every pot. But that sounds good to an outsider. And in the CRM biz, there are many more outsiders in positions of influence than insiders.
Despite the melding of sales, service and marketing automation under one CRM flag, together they'll be hard pressed to limit ERP to only a partial victory. They need an ally. Fortunately, they don't have to look very far for more firepower. In fact, they don't even have to look beyond CRM.
The Fourth Leg
Although CRM technologists have been slow to grasp the full breadth of CRM, the principal CRM technologies-sales, service and marketing automation-represent only three legs on the four-legged CRM stool. Until now, the fourth leg has remained nearly invisible in the background. But that's about to change.
What is this powerful CRM leg lurking in the background? None other than Marketing with a capital "M"-which is undergoing a transformation from being product- and media-based to customer relationship-based. Not "marketing lite," the automated database communication stuff-but strategic marketing, which commands exponentially more dollars, influence and media coverage than front-office automation.
Why has marketing been so far so content to lay back and remain aloof from the fray? Because as long as sales, service and marketing automation could only operate separately, they remained tactical tools that traditional marketing could (and usually did) ignore. But when integrated, these systems provide a potential so huge that the new breed of relationship marketing has quite a vested interest in protecting and nurturing them. And it turns out that integrating disparate sales, service and marketing automation systems together is virtually impossible in the absence of relationship marketing strategies that guide our dealings with customers. Suddenly, there's a symbiotic relationship between relationship marketing and front-office automation. And that's bringing marketing to the fore.
Suddenly, there's a symbiotic relationship between relationship marketing and front-office automation.
Before continuing our "war story," let's take a closer look at the interdependence of relationship marketing strategies and front-office automation systems-in the consumer car sales arena. How cars are marketed, sold and serviced has been the basis of some of the worst stereotypes in business. The damage comes from the economic short-sightedness perpetuated by car manufacturers that are fearful of changing distribution-and retail distribution that is fearful of changing anything. Here's how it "works."
Car manufacturers and dealers advertise to the tune of approximately $500 for every person they get onto the lot. These customers then often experience one of two scenarios. Either they get accosted by a commission-hungry car salesperson intent on making a quick sale, or they're ignored by sales reps who lean against the watercooler and wait for customers to approach them, pen in hand, saying, "Where do I sign?"
What a way to throw away $500. If a customer does happen to buy a car, they record his name on 11 different documents-not one of which is available to future salespeople. And if the customer doesn't buy, he is deemed irrelevant and not worth tracking for another car and another day.
The next phase occurs when the customer's car needs servicing-and he discovers he does not exist on record, although there is a computer listing of his automobile. But the service department does create a record of the customer, which consists only of name, address and a daytime phone number for authorization to make unanticipated repairs.
The final phase happens when the customer's lease is about to expire, and he is considering what and where to buy next. From the dealer-deafening silence. The salesperson who sold the car is long gone. No one has organized usable records of just when the customer might be needing another car, even with a fixed-term lease. From the manufacturer-a very fancy and expensive four-color brochure mailed to the customer six months before lease end, but there is no personal contact. So like a high percentage of car owners, once a customer needs to replace his car, he has to start the whole process over as if he had no prior relationship.
Front-office automation will have to sacrifice much of its freewheeling nature to survive.
Now let's look at what CRM strategies and systems can accomplish here, and what front-office automation alone cannot accomplish.
What would happen if we tried to push sales automation out onto the dealership floor? Nothing. The sales automation system would get only a portion of the data it needs to work effectively-because it is cut off from service and from the manufacturer's database marketing to boot. Worse yet, car sales people and their sales managers would never use it. They don't want it. The only thing that would put sales automation into play on the dealership floor would be the fourth leg of the CRM stool-a comprehensive marketing strategy big enough to drive major changes in the environment, including the people. No one's going to make such big changes to implement a piece of software.
And what would happen if we tried to implement real service automation? The kind that would let the company representative on the phone with a customer know how many cars that customer purchased from them. The kind that informs and empowers service staff to make independent decisions for the good of the customer relationship. We'd never get it out of the box. Dealers don't want to empower their service departments to think independently. They want to control what service does. So do the manufacturers, at least at the less-than-executive level. And again, that is not changing for the sake of some software program.
And what about marketing automation? Companies could personalize the direct mail they send customers, and even send it at the right time. They could figure out who is most likely to buy from them when and inform dealer sales. Or, manufacturers could bypass dealers completely and sell to current owners of their make new cars over the Web-but to do all of this, they would first need a distribution strategy in place.
In fact, implementing CRM systems, without leadership and support from relationship marketing strategies, faces a much higher bar than implementing individual front-office automation technologies.
So what's going to bring front-office automation to the consumer automotive business? Fresh, customer focused, executive-level thinking, expressed in customer focused, relationship marketing strategies-backed, in this case, by the full force of the manufacturers who are the only ones that can push through the requisite changes to this unfortunate culture. That's what it will take for front-office automation to succeed. It's going nowhere fast unless accompanying relationship marketing strategies lead the way.
Now, you can probably glean from this automotive example how readily ERP or other back-office folks can push front-office automation right off the lot. In fact, it's already happening. Automotive industry software makers are adding limited functionality "sales automation" packages to their core products. What an excuse for not doing the real thing. The real stuff will have a hard time putting a dent in the automotive market-until backed by strategic imperatives coming from high places.
Admittedly, I used the bleakest possible example. Yes, we can get sales automation by itself off the ground in many situations. Granted, not the full-bore systems that support dynamic new marketing approaches and processes. Likewise for service automation, and the same for marketing automation. But not all three front-office technologies together-that would require far too much change to support the technology without relationship marketing strategies to clear the path. It would take a primary strategy to drive change of that kind.
The mess we've already made attempting to implement front-office automation technologies, individually or collectively, without a strategic base further underscores the point. Without the marketing leg, the CRM stool falls, making CRM easy prey for ERP interlopers-who, undoubtedly, would make an even bigger mess.
But now, front-office automation technologies will have the support they need to tangle with ERP-and win. All front-office automation folks need do is marry the nearest relationship marketing strategist, make CRM together, and live happily ever after, right? Not quite. Truth be told, becoming part of a larger marketing initiative in order to maintain the integrity of front-office automation will be a hollow victory to some-especially those that have relished the rough and tumble of going it alone. While those needing nothing more than the opportunity to swim in this customer-driven sea of change will be happy fish in CRM-waters, what about those attached to being big fish in a small puddle? Front-office automation will have to sacrifice much of its freewheeling nature to survive. Like it or not, front-office automation is about to become "mainstreamed" as one component of the new breed of relationship marketing.
Will being "componentized" hobble the growth of front-office, CRM technologies? Not at all. Without having to blaze technology trails in marketing territory, the systems side of CRM will prosper and mature. And as happens in most every maturing industry, customers will enjoy more and more choice among better products and services that are more and more targeted to specific applications. They will be the big winners. Not ERP or even CRM.
In fact, a good many on the CRM side will long for the "frontier days" of front-office automation. When, as the stories tell, this small band of renegades bravely stood their ground against a much better-armed, better-equipped ERP foe, then drove them off before the marketing cavalry appeared on the horizon.
Or let it so be told.
This article includes excerpts from the author's book, Customer Relationship Management: Marketing's Digital Nervous System, scheduled for publication in the Fall of 1999.