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The Return of CRM

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It used to be that CRM was the favorite whipping boy of marketers. Back in the day, multimillion-dollar CRM systems were installed by corporations and then followed a high failure rate of many implementations, thus giving the process a black eye and creating a backlash among marketers. Talk about your dirty acronyms.

However, due to the rise in availability and sophistication of customer analytics tools and the ability to use those tools in conjunction with CRM, direct marketers' can get closer to the holy grail of reaching customers with relevant, targeted marketing messages.

Customer analytics is an area that is growing rapidly due to enhanced usability and better data integration capabilities, so it now plays a pivotal role in the b-to-b world.

"[Marketing] executives feel that analytics are the key to unlocking the value in CRM applications and are buying analytics solutions to leverage investments previously made in transactional CRM applications," said William Band, a principal analyst at Forrester Research who covers the CRM market.

According to Thomas H. Davenport and Jeanne G. Harris, co-authors of "Competing on Analytics" (Harvard Business School Press, 2007), companies in a variety of industries are enhancing CRM with predictive analytics and are enjoying market-leading growth and performance as a result.

Total annual revenues for CRM providers are expected to be $8.5 billion this year, and by 2010, organizations will spend $11 billion annually on CRM solutions, according to Forrester.

Gartner Group forecast CRM spending this year will exceed $7.4 billion, a 14% increase from 2006, and predicted CRM software spending will grow to more than $11.4 billion by 2011.

CRM and analytics combined make possible insight into customer behavior that in turn enables smarter marketing.

"The CRM package is where the information lives," said Sherri Leopard, CEO of Leopard, a b-to-b agency and a unit of OgilvyOne Worldwide. She said marketers are using the information gathered from CRM systems, combining it with data they might buy from outside sources and then analyzing that information. "They are doing very sophisticated analytics to build out programs," she said.

SAP, a leading CRM vendor, makes analytics a linchpin of its own CRM.

"One of the things [we've enhanced] in the last year or two is our ability to get more rock solid with marketing analytics," said Lloyd Adams, VP-small and midsize enterprise field marketing at SAP. "You need to invest more smartly and sharply, and our ability to have analytics in customer and prospect insights makes all the difference. Without it, you're really in the dark."

Adams is currently using those data to build models of typical customers among small and midsize companies.

"One of the things we're doing is we're trying to look at insights we can draw from our current customer base—growth trajectories, when they purchased in the history of their growth, their [company] size—and applying that [information] to other data sources so we can build a model," he said. "Once we build a model of the typical SAP customer in a certain segment, we can model that out and find a pocket of noncustomers that look, and feel and breathe similarly; and it allows us to swarm on them and identify folks who are more inclined to speak with us."

While SAP has been doing this kind of modeling for some time, Adams said, it has become more institutionalized.

"We're doing it now in a programmatic way," he said. "Analytics has come to the forefront as more of a key lever in the business."

Another reason CRM has been revivified is the increased popularity in the past couple of years of software-as-a-service CRM packages. Companies such as Salesforce.com are seen as a software-as-a-service CRM alternative to giants in the space like Oracle and SAP.

The SAAS CRM providers continue to develop tools and functions that improve the usability of CRM and make it more widely available to companies of all sizes.

In Salesforce.com's case, the company, which is considered an on-demand CRM leader, shows no signs of slowing its pace of innovation, most recently weaving Web 2.0 technologies into its applications with the September release of its latest CRM software. Its new Faceforce, a mash-up of Salesforce.com and Facebook, was recently unveiled along with other new products to complement contact information contained in Salesforce.com with Facebook profiles.

And such companies as OneSource Information Services, Aprimo, and EmailLabs have announced enhancements that integrate their campaign management software with Salesforce.com's CRM platform.

Even the big guns in the CRM space have created on-demand versions of their products in response to the popularity of that model.

Microsoft Corp. has an SAAS CRM application, Dynamics Live CRM, as does Oracle, with its Siebel CRM On Demand product.

Just last month, SAP introduced its own Web-based CRM product to go up against nimbler companies like Salesforce.com. The product, like other SAAS software, is sold by subscription rather than the hefty upfront licensing fees SAP typically charges.

NetSuite is yet another on-demand CRM provider that gets high marks for its usability and low upfront costs; in July, the company filed a statement with the U.S. Securities & Exchange Commission for an IPO.

But for all the innovation and technological improvements, there is one thing about CRM that has not changed, and that is the notion that CRM is really about process and people, rather than the technology.

"In some organizations, CRM initiatives have degenerated into technologycentric projects aimed at basic process automation," Forrester's Band said.

He said companies need to redesign underlying processes and determine how employees will work effectively within those processes.

"The potential of CRM lies not in technology itself but in the process of using technology alongside an in-depth understanding of the customer to drive unique, valuable customer interactions. The most successful CRM initiatives are framed in terms of their overall impact across the organization and the customer, but are implemented in focused, incremental steps."

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