What’s Going on in CRM?
By Doug Hornig, Casey Research
In Mike Judge’s wicked 1999 satire of corporate culture, Office Space, there’s a delightful character named Milton. Poor Milton. He’s all but invisible. No one likes him, no one talks to him, and coworkers are forever stealing his stapler. Management doesn’t notice him enough to fire him. Instead, Milton is shunted from desk to desk, each time losing more of that precious commodity denoted by the film’s title, until he finally winds up alone in the basement, where he plots the delicious revenge he’ll take on the company.
http://www.youtube.com/watch?v=_IwzZYRejZQ&feature=youtube_gdata_player
In times past, customer relations staffs were where the Miltons of the world most likely landed. If you couldn’t do anything else, you could probably listen to phone complaints all day. No one wanted to, but somebody had to do it. And so they did, until they went mad from boredom or frustration.
That was then. Today, there’s a new shine on customer relations departments, and the field has earned itself a fresh, glossy title and a widely recognized abbreviation: customer relations management, or CRM. And it’s become an integral part of the SaaS (software as a service) industry.
The Rear-View Mirror
But first turn back the clock to the 1970s, before the real blossoming of the computer revolution. In that era, most companies – especially those in the Fortune 500 – paid little attention to customers, who were largely forgotten after they’d ordered something. Big company execs, knowing they had enormous resources at their disposal, along with a major market presence, had the attitude that they could always replace customers, if necessary.
Then came the dawn of the Information Age, with evermore powerful business computers and personal machines that began to proliferate in buyer’s homes. Now people could make more informed decisions about whom they wanted to buy from. Globalization eased the task of switching suppliers if they were unsatisfied with someone’s customer service. At the same time, businesses had rapidly increasing computing power at their fingertips.
The confluence of these two factors led directly to the beginnings of CRM in the 1980s.
At first, with the rise of sophisticated database creation and maintenance technology, it was referred to as “database marketing.” Databases were employed to create focus groups to communicate with customers, particularly the most valued. Problem was, data was gathered primarily through repetitive and inefficient surveys, and in the end surveys don’t yield a great deal of useful information.
There were processing and analysis hurdles, as well. No task-specific software yet existed that could take all the data being amassed and spit something actionable out the other end. Eventually, companies came to realize that what they needed was to compile simple information they could make plans around: what the customer was purchasing, in what quantity, how often, how much was being spent, and what was done with the products purchased.
Sounds pretty basic today, but it wasn’t until the ’90s that the phrase “customer relationship management” was coined, and more comprehensive versions of the software were written. Everything that could be automated, was.
CRM, however, is not just about technology. As it has evolved, it has also become more complex, more of a two-way street. While gathering information for the purpose of decision-making remained primary in order to drive increasing profits, companies also put some effort into building strong, enduring relationships with their clients in order to build loyalty. Many began giving back to favored customers, in the form of gifts, discounts, perks, and sometimes even cash.
Customer support, integrated into a CRM system, became more solid, even as machines were taking over much of the heavy lifting. Management began to treat the old saw, “the customer is always right,” with greater respect. That was more difficult before the computer revolution. Now it’s a cinch. When customers complain, their grievances can be handled quickly and efficiently, on an individual basis. And the mistakes that caused the problem can immediately be rooted out so that they don’t happen again.
Sales, once made, can be logged into the database and tracked. They can be cross-referenced to any number of other areas, and analysis can proceed from different angles. Customers’ interests and buying patterns can be identified. Sales managers can have direct access to information that allows personalization of the buyer’s experience. Electronic sifting of sales data can help drive product development in the best possible direction. And customer follow-ups can be generated automatically, according to any criteria desired.
Designing a CRM System
In order to achieve these goals, it’s important for the architecture of a CRM system to be broken down into three broad categories:
- the collaborative, which deals with communications between companies and their clients
- the operational, which deals with the automation of as many processes as possible
- and the analytical, which analyzes customer information and uses it for business intelligence purposes
Collaborative CRM involves all the interactions a company makes with its customers – either face to face or through electronic means such as telephone and Internet. Here, the personal touch is very important. Customers must be provided not only with goods and services, but with whatever assistance and information they may require. Satisfied customers become repeat customers, and CRM can use multiple technologies to bring that about.
Operational CRM deals with the automation of business processes such as enterprise marketing, customer service, and sales-force matters. All data relating to customer interactions is stored in a database, allowing for staff to pull information specific to that customer as needed.
Within Operational CRM:
- Enterprise Marketing Automation gives the company quick and easy access to aspects of the business climate, data on competitors, industry trends, and other critical input. That access yields strategies a company can employ to guide its overall marketing plan.
- Customer Service and Support Automation takes care of such things as returns and customer complaints.
- Sales Force Automation (SFA) covers demographics, special customer needs, and accounting management, with access to information made available not only to salespersons but, in appropriate instances, to clients as well.
Finally, there is Analytical CRM, which deals with analysis of all data input that bears upon customer service capabilities. Some examples would be: cross-selling products to customers; finding ways to retain customers who might be switching to competitors; and providing important information to customers without delays. Analytical CRM is also a tool for fraud detection and/or prevention, and for pattern recognition with regard to sales, inventory, and profits. It can be applied to product development and risk management, areas in which it needs to be particularly dynamic, so that the business plan can respond in a timely manner to any winds of change out in the real world.
When these are all integrated into a cohesive whole, then the company can realize substantial benefits in a competitive environment. But managing such an extensive suite of procedures is a daunting task for many companies to try to accomplish in-house. It means adding considerable (and expensive) expertise. A bespectacled software engineer lurking around every water cooler.
On the other hand, what if you could simply purchase what you needed, in the form of software as a service?
It was a good question, and people on both the user and provider ends of things began asking it. The result: creation of an instant niche for companies with CRM software products that were more cost effective than hired IT guns, and that were applicable across a wide spectrum of the business world.
