The CRM State of the Union: It’s Time for Empathy with the Customer

Amazon’s purchase of Whole Foods over the summer wasn’t just another notch on its belt. It showcases a trend that is consuming the marketplace. We no longer live in the Age of the Product. We’ve entered the Age of the Customer—where consumers now command the conversation about how companies act, communicate, deliver their products, and portray their brand.

Before, consumers made decisions primarily based on quality and availability. But today, the market presents consumers with a sea of options to chose from in almost every category imaginable. This uptick in choice, along with the proliferation of subscription-based business models, is changing how customers select and interact with products and services.

While businesses began adopting a customer-centric approach decades ago, customer relationship management (CRM) software and methodologies have failed to keep pace. CRM still treats customers as mere line-item sales prospects in a database, rather than as lifelong relationships that businesses must nurture.

Businesses that understand and act on this change are already reaping substantial rewards. According to Forrester Research customer experience leaders enjoy five times the revenue growth that laggards do; and customers who receive excellent experiences will pay 4.5 times higher price premiums than those who receive poor ones.

However, many businesses (and CRM systems) fall short. According to Forrester, although 84 percent of firms aspire to become a customer experience leader, only one in five delivers good or great customer experience. Inadequate CRM and sales force automation (SFA) systems are often to blame.

Forrester analyst John Bruno writes: “Over the last two decades, SFA has actually done very little to help salespeople sell. Instead, the features and functionality of SFA solutions were designed around the needs of managers and executives. These tools allowed organizations to scale their businesses, but as buying behaviors changed, the solutions and strategies around them were slow to react.”

CRM as we know it needs to change.

Evolution of the CRM Market

The seed of CRM took root in the 1970s when companies increasingly housed customer information in the data layer using mainframe computers. But this rudimentary customer data management provided little insight into how to improve the customer’s interactions with the business. In 1993, Siebel Systems unveiled what is now legacy CRM via new technologies and business strategies designed to optimize sales and marketing efforts using customer data. By the end of the decade, Salesforce.com introduced the burgeoning cloud-based CRM market and has dominated the definition of CRM ever since.

However, this definition has myopically focused on customer data management and the optimization of business processes. The problem remains that this interpretation and implementation of CRM does not place the “relationship” at its center. This definition views the customer as something to manage and optimize for profitability, rather than someone with whom to build a lifelong personal relationship. CRM is used primarily to analyze customer buying behaviors, entice them into a sales pipeline, and report this process up the management chain.

This is a failing strategy in the Age of the Customer. CRM systems shouldn’t just manage customers; they should help businesses build relationships with them. It’s time to put the R back in CRM.

 

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