• January 1, 2012
  • By Donna Fluss, president, DMG Consulting

Redefining CRM

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When I was an analyst at Gartner back in 1997, we wrote and introduced one of the foundational definitions of CRM. In a column that I published in 2001, I wrote that "CRM is an enterprise business strategy for using customer information to maximize the long-term value and profitability of [a business's] relationship with its customers." Industry experts can and do argue about the exact definition of CRM, but one thing we all agree on is that it's about increasing profitability.

CRM, like many popular buzzwords (or acronyms), has its merits. It has helped business and IT leaders justify and obtain the investment dollars needed to enhance service, sales, and marketing functions. And for vendors, it's created a marketplace that has attracted investment expenditures.

To give credit where it is due, Tom Siebel was the founding father of CRM. Siebel Systems invested hundreds of millions of dollars to popularize CRM, even going so far as to run ads during a Super Bowl broadcast. The problem was that Siebel sold a solution based on a faulty premise—the idea that a single business solution could address all enterprise sales, marketing, and customer service application needs. Siebel caught on to CRM's limits in later years, and his company tried to distance itself from the market that it had created, but by then it was too late.

Many buzzwords/terms have entered the industry lexicon since CRM was first introduced: customer managed relationships (CMR), enterprise relationship management (ERM), and customer experience management (CEM), just to mention a few. Yet, CRM still hangs in there, and business leaders sheepishly return to this phrase, as it seems to encompass the essence of what they need to do.

The concepts upon which CRM is based are very much alive and always will be. The issue is that vendors took the phrase and turned it into an application that was impossible to build and utilize effectively. In the contact center alone, there can be over 40 different applications, with new ones emerging all the time. It's hard enough to get different departments within the same company to agree to use the same phone or email system, let alone to find consensus for a "servicing" solution that makes or breaks a department's performance (and bonuses).

Looking Ahead

CRM has served its purpose. It's fought a great war, and has won more battles than it lost. It woke the market to the necessity of investing in customer-facing activities and applications to improve customer profitability. It fueled a new generation of systems and applications to meet these needs, although it never succeeded in convincing sales, marketing, and customer service groups to work together to achieve corporate goals. CRM did begin the process of getting organizations to focus on the importance of putting their customers first, even if each department within a company had a different understanding of what this meant.

The downfall of the original CRM strategy was that it was too internally focused and led managers to believe that customers were happy to be managed. And from a systems perspective, it convinced business managers that one solution, like a CRM suite, could meet the needs of all customer-facing groups—even though departments did not share the same goals.

It's time to say good-bye to the old definition of CRM—it is no longer viable as a leading business or even systems strategy. At this point, we know that its faults are greater than its benefits. However, the original CRM strategy is going to continue to hang around as a concept until a new strategy emerges to better address enterprise goals.

Donna Fluss (donna.fluss@dmgconsult.com) is founder and president of DMG Consulting, a leading provider of contact center and analytics research, market analysis, and consulting.

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