SPECIAL REPORT: Vertical CRM Products Proliferate
GUEST COLUMN: CRM and top-line growth
CASE STUDY: CPG giant gets customized CRM
BY RICHARD KARPINSKI
Customer Relationship management (CRM) software targeted to specific industries, long available for larger companies willing to pay for the privilege of customized vertical applications, is starting to become available for small and midsize businesses as well.
The promise of vertical CRM solutions is that they can deliver greater value by providing software that is preconfigured to suit the data and process needs of specific industries, for instance, manufacturing, health sciences or consumer packaged goods. Companies in those industries and others deal with their customers in very specific ways. Vertical CRM applications aim to mirror those industry business processes right out of the box.
Vertical CRM is nothing new. Vendors such as Siebel Systems, SAP, Oracle and others have long focused on vertical CRM as their main method of targeting large CRM customers. Siebel, for instance, says that 80% of its customers use an industry-specific version of its CRM apps. At the same time, specialty CRM vendors have made a living targeting the CRM needs of individual industries.
Developments in recent weeks, however, seem to indicate this trend is ready to move to the massive CRM mid-market.
CRM pioneer Siebel, with partner IBM Corp., announced its first hosted CRM solutions-priced at just $100 per month per user-with industry-specific capabilities, focusing on eight different industries: insurance, high-tech, automotive, communications/media, financial services, life sciences, manufacturing and consumer goods. Siebel already offers 23 vertical versions of its on-premise CRM applications. SAP's 'fixed price/fixed scope'
Software giant SAP announced what it calls "fixed scope, fixed price" applications-including CRM-specifically for mid-market companies in the automotive, chemicals, consumer products, high-tech, industrial machinery/components and professional services provider industries. Along with partners, SAP even offers so-called "micro-vertical" CRM, which targets specific subsections of particular industries.
"To truly serve a customer need, you need to understand the vertical industry business environment they operate in," said Darc Dencker-Rasmussen, VP of SAP's CRM initiatives.
Hosted CRM provider SalesNet is prepping its first vertical applications for June release, focusing on the banking, telecom and media sales industries. SalesNet hopes to get a jump on fellow hosted providers such as Salesforce.com by combining industry-specific user interfaces along with deep support for specific sales processes, such as customer-centric selling, that are often used in those industries.
Innovation Associates, which makes software and systems to help pharmacies automate their businesses, has been using CRM software from SalesNet for more than a year. Although Innovation Associates purchased the system before the vendor technically began to deliver verticalized versions of its software, it bought the SalesNet solution because it supported customer-centric selling, which fits Innovation's sales process to a tee, said John Wilson, Innovation Associates national director of sales.
"The solution we have right now is as tailored to the pharmacy automation industry as could possibly be," Wilson said.
Vertical solutions in every box
Innovation Associates used Sales-Net's configuration tools to tweak the solution to its industry, something that future customers of SalesNet's vertical solutions will get "out of the box," said Dan Starr, SalesNet's chief marketing officer. But even more important are the prepackaged sales processes, Starr said.
"What really makes a CRM application different from industry to industry isn't just the terminology and [application] fields per se, but what's more important is understanding how they sell," Starr said.
For instance, because it markets and sells a highly complex technical product, Innovation Associates relies on a highly consultative sales process, Wilson said. With Sales-Net's CRM tool, Wilson and his reps can chart key sales milestones in the sales relationships that are unique to the pharmaceutical industry-and to Innovation Associates' sales processes.
"We put a premium on understanding customer goals and objectives and diagnosing what is standing in their way of accomplishing those goals," Wilson said. With the SalesNet solution, "I, as a sales manager, can see the deal steps and milestones from the initial interaction all the way through the final sale," Wilson said.
While Wilson's company sells enabling technology to pharmacies, Bioglan Pharmaceuticals relies on a vertical CRM solution to market and sell drugs itself, specifically, dermatology products. Bioglan has outfitted its sales organization with a CRM application from StayinFront, which specializes in pharmaceutical CRM.
"The main criterion for us [in choosing a CRM package] was to allow us to program our business processes without sacrificing any business details," said Boris Meyerson, Bioglan's senior director of information technologies.
For instance, StayinFront's CRM solution had built-in support for compliance with Food & Drug Administration regulations for drug sampling and distribution, Meyerson said. "We would have never even considered a CRM solution that had never been applied before in pharmaceuticals," he said.
Understanding vertical industry requirements is huge in the drug market, said StayinFront VP of National Sales Ken Arbadji. "A newcomer [vendor] walking into this industry is not going to understand the regulatory requirements and how they need to be integrated into basic things like the profile of a doctor [in a CRM application]," he said.
Vertical CRM capabilities are not only useful in sales force automation applications, but in other areas CRM touches as well, such as customer billing, call centers or Web self-help applications.
Take vendor SPL WorldGroup, which provides billing and customer care applications to energy and utility companies.
SPL's customers include some of the world's largest utilities down to small utility co-ops. Such companies need CRM apps tuned to their specific industry and regulatory requirements, said Guerry Waters, SPL's chief technology officer and senior VP-marketing and strategy. Horizontal apps overkill
"What we find is that horizontal CRM apps are just major overkill for this industry," Waters said. "Most are built for retail environments that are highly deregulated. We develop practical CRM applications specifically built for our industry."
SPL recently acquired a company that makes software to help utility companies manage outage situations, and plans to link that software to its core CRM applications, creating an "ERP-type" platform for the utility industry.
The ability to offer not only CRM but other tightly integrated business applications such as manufacturing or supply chain management-all with a strong vertical focus-is a major selling point for specialty CRM vendors such as SPL, as well as larger CRM vendors such as SAP or Oracle.
"The message we get, not only from larger enterprises but increasingly from companies in the mid-market, is that companies are looking for a platform that can run all of their business applications end to end, including CRM," Rasmussen said. "They can't afford any isolated pockets of information."
By ANDREW WEBB
Here's a quick test. Review the tools and processes your company uses for selling to and supporting customers; consider the interaction customers have with your employees and partners; and then answer this: Is the picture clear? Can you see your customers with enough focus to confidently make investments in growth? Can you see a straight line to top-line growth?
Achieving clarity about customer needs and expectations and translating that into effective execution is part of customer relationship management. By this term I mean an integrated framework-not merely the powerful software tools usually referred to as "CRM." Current CRM applications offer more functionality than most companies make use of. There are unprecedented opportunities to collect, share and analyze data about customers, prospects, channel partners and sales performance.
However, it is the human and the process-related elements of managing customer relationships-and the need for integrated execution by multiple functions-that require attention as the economy recovers and revenue growth climbs the corporate agenda. Cost reduction is not forgotten, however. One of the benefits of integrated execution is the capture and servicing of increased revenue at a lower cost.
The five principles I have outlined below put a common framework around the important issues of effectively managing customer relationships, achieving revenue growth and improving relative costs.
1. The customer relationship and how it is managed is the primary driver of growth.
In its earlier phases, CRM had an operational focus and a strong affiliation with IT. Increasingly, however, that affiliation is shifting. Business executives recognize that selling more to customers depends on knowing more about customers' business needs, their business processes and why they buy, stay loyal or leave. It means being customer-centric, not focused inwardly on products and organizational issues.
2. Inside sales and service, as primary touch points with customers, should be leading sources of customer insight, retention and loyalty.
Despite large databases of transactional data, real knowledge of the customer can be patchy. Reliance on resellers may not help, creating an arm's-length relationship with the ultimate buyer. Inside sales and service groups, however, can collect valuable insight if they are trained to do so. The most frequent contact a company has with buyers is often through customer support, and it is here that opportunities to learn, share and cross-sell are routinely lost. Data structures may be at fault, but so is the lack of training and a proactive mind-set among service reps.
3. Sales must adopt a disciplined commitment to new behavior.
This may be the hardest challenge in erasing the product-centric mind-set. After a corporate CRM initiative failed to gain traction, and cost-reduction had run its course, an electrical and electronic components manufacturer identified its real priority-reversing a multiyear slide in sales. Since the company had grown through acquisitions, the foundational challenges included integration of sales forces selling different product sets through some of the same distributors as well as training and motivation of the restructured sales force to sell across product lines.
Improved efficiency uncovered additional recommendations for making the company easier to do business with and is also identifying requirements for planned investments in ERP, business intelligence and CRM.
4. Channel partners have a crucial role in product/service differentiation.
A good example of this principle is a cable manufacturer that launched an improved offering into a niche market. Growth quickly reached double digits, but the market-leading company judged the results to be below expectations. It has to rely on distribution partners to embrace the product by stocking it and speeding up market penetration. The key to the rate of revenue growth in this case lies in finding the motivation for distributors and end users to switch to the product more quickly.
5. Marketing must balance what customers want against the requirement of making a profit.
Customer responsiveness does have limits. A company that differentiates itself with its ability to engineer specials puts profitability at risk unless the special order leads to additional business. Marketing is the natural candidate here to improve collaboration on revenue opportunities with sales, service and engineering. As the owner of product positioning, product management and market intelligence, the VP of marketing should also consider whether he or she wants to "own" CRM-and with it, accept some of the responsibility for revenue performance.
For today's b-to-b companies, the new context for CRM is the operational plan for achieving profitable revenue growth. While it can be narrowly defined as a set of operational tools, CRM is also evolving into the integrated business framework for all the ways in which companies, partners and customers interact.
Andrew Webb is a partner at Adroit Consulting (www.adroitww.com), a Chicago-based firm that works with mid-market companies to improve operations within marketing, sales, channel management and customer service.
BY KAREN J. BANNAN
Consumer Packaged Goods Manufacturer Colgate-Palmolive Co. has a wide variety of customers, ranging from large discount clubs such as Sam's Club to individual distributors. Its sales and marketing efforts are tailored to each specific channel, which is why when Ken Agena, the company's director of global demand chain development, went looking for a CRM program. He wanted something that was a little more specific than a plain vanilla package. He found what he was looking for in a version of SAP's CRM 4.0 with Trade Promotion Management designed specifically for the consumer products industry. 'Creating a goal'
SAP's package is a first for New York-based Colgate-Palmolive. Before last July, the company had a limited homegrown CRM implementation. But that didn't address the company's No. 1 business problem: helping sales and marketing communicate and work together on promotional plans, Agena said.
"One part of planning is creating a goal-this year we want to build these brands X%," Agena said. "That's a target that comes from the top down."
Vertical CRM helped Colgate-Palmolive build a collaborative space for sales and marketing that addressed that as well as other issues, Agena said.
"Sales has [marketing] activities through the retailers and marketing has activities that create pull-through such as special packaging," he said. "The software lets us create one place where all promotional activity is captured. We get better collaboration between sales and marketing and less of a silo approach to our overall marketing plans."
Agena's team of about 10 people from the Colgate-Palmolive global development staff has been working on the SAP CRM implementation for a year. Overall, the process went smoothly, Agena said, although the software did need some customization. The sales department needed a way to track and route its customers' rebates, for example. Agena's team built a custom application that would track rebates and automatically send an e-mail to customer service, where the rebates could be approved.
The first functionalities that went live were basic but extremely useful, Agena said. His team gave a limited number of users the ability to create or describe promotions, customer planning groups and pricing. At the moment, sales is the main focus, and only half of its pilot country-Mexico-is up and running today. That will change later this year, as more features and countries go live.
Colgate-Palmolive isn't done with its CRM implementation. This July, the company will add functionality specifically for its distributors, Agena said. Pre- and post-analysis
The biggest benefit that's coming is the ability to do pre- and post-analysis of a specific promotion.
"Hypothetically, we could pay for an in-aisle display-say a product that gives people 25% free, which is the variable component. Using CRM, I'll know when the activity is happening in stores, have shipment dates, capture all the costs and compare that to the baseline sales that would've been there had I not had a promotion," Agena said. "Say I usually sell 100 cases a week but during the promotion period [I] sold 200. We'll be able to see the overall net revenue of selling them, subtract the cost and the cost to promote, and compare the two numbers. It could be that this thing costs us money. Sometimes that's going to be OK, but the system will help us do it more consciously."
This will help with future planning. Marketers will finally have hard numbers to compare with current and future promotions.
"If we have a margin of 50%-for every $1 we invest in a promotion we need to get $2 back-we can change the numbers in the application and let it do the math for us," Agena said. "Say we want a 10% improvement, then we change the target from $2 to $2.20. If the calculations come back at $2.20, great. We send workflow to management to approve it. If it still comes back at $2, we don't do the promotion. It's all about setting targets."
Although Colgate-Palmolive doesn't have hard return-on-investment numbers, it's already seeing benefits throughout the company, Agena said. The most important benefit is a shift in the company's collective thinking.
"We've gone from having a perception that [CRM] is a sales issue to the entire organization seeing that this is enterprisewide-supply chain, finance and marketing are all more involved with each other than they were last July," he said. "The program and what we want to do with it demand that marketing share their plans with sales. It's causing the business to collaborate more." M Even seemingly small applications within the program have the ability to change the business. A planning and pallet application-also coming this summer-sounds basic but will help sales make more informed decisions. "Most customers buy by the case, but certain club stores buy by the pallet. This functionality will let the salesperson think in pallets," Agena said. "This goes towards the end result we want-top down and bottom up planning." "We have great plans for our distributors that will help 'incent' them to sell the right types of products at the right times. We're also looking at channel management for certain operating divisions," he said.
PROBLEM: The consumer packaged-goods manufacturer has customers of all sizes in multiple channels. It wanted a way to target each channel individually while coordinating promo-tional plans between sales and marketing.
SOLUTION: SAP's CRM 4.0 with Trade Promotion Management, designed specifically for the consumer products industry.
RESULTS: The CRM system allows the company to track all promotional activity in one place, enabling better collaboration between sales and marketing.