CRM 2.0

Dec. 21, 2004
Companies are building more focused customer strategies as products emphasize low cost, quick implementation and extended capabilities.
Step right up, folks, for your happy customers. Yes, just push this button, and all of your unhappy customers will be transformed instantly and forever into delighted customers who will never stop buying things from you. The name of this magic potion? Why it's CRM of course!" Perhaps this snake-oil pitch seems familiar in describing the sales tactics for large-scale client-server CRM products in the '90s. Indeed, many vendors selling mega-CRM (customer relationship management) solutions have taken heat for misrepresenting the capabilities and monetary and time costs of their products, although they boast a slate of satisfied buyers as well. One could argue that the "magic potion" theory came largely from the companies buying the CRM products. For many companies -- including manufacturers -- that plunged into CRM when it first emerged, the promise was all about the technology, and that technology was of a grand scale, frequently costing $1 million or more for large companies and requiring many months of training and implementation. These days, CRM is more often about strategy first and technology later. In addition, the emergence of smaller-scale, sometimes Web-based CRM products is making it easier for small and midsize manufacturers to implement customer-centric strategies; and companies with older, established CRM systems are working toward better capabilities and integration. "There have been entities that have made significant investments in CRM, and now there's a bit of an indigestion period," says Chicago-based Jonathan Copulsky, a partner with Braxton Consulting Group. "Either it [the CRM investment] didn't return all of the results they expected, or they're a bit overwhelmed with what it is they actually got, and they're trying to sort it out. They looked at technology as the end-all and be-all, and it's not." Additionally, other companies know they need to do something, but are looking at their aforementioned peers and saying, " 'Boy, we don't want to do one of those,' " Copulsky says. "Then you've got companies that due to capital constraints are saying, 'Even if we did want to do something, we wouldn't be able to.' " Spokane, Wash.-based Pearson Packaging Systems, a private $30 million manufacturer of secondary packaging machinery, used to be in the latter category. In 2001 it was in the midst of implementing an ERP system. The company knew it needed both CRM and ERP, and all of the ERP vendors it considered offered CRM modules, but: "Because of resources, financial and labor, we decided to just implement the ERP module," says Mike Senske, president. "But sales and marketing really needed that [CRM] tool." On the recommendation of a salesman, the company tested, a Web-based CRM solution that sells by the license and ultimately cost Pearson about $16,000 for about 30 seats. The program went live with the sales team in 30 days. Senske says the promised ease of implementation was a clincher for the purchase because the ERP project nearly was exhausting the company's IT resources. "Our IT department and salespeople recognize that this has been an unusually painless technology implementation, most likely because it required no software and yet has tremendous power," Senske says., a product of Inc., San Francisco, solved Pearson's biggest CRM challenge: "islands" of customer information living on each salesperson's computer. Now all of that information is compiled on a server and accessed via the Internet by Pearson employees. The product comes in several editions, including offline, wireless and enterprise. Senske says in addition to building the customer information database, allows employees to be more collaborative in terms of solving customer problems and empowers users to make assignments to one another to ensure follow-through. At first, Pearson was skeptical that a Web-based tool could provide the functionality that the company needed, Senske says, but today he is convinced the solution helped land an additional $1 million in sales in the last fiscal year because of prompts that led salespeople to follow up on languishing leads. In addition, forecast accuracy has increased 50%. A Web-based CRM solution might not be for companies insisting that all of their data be housed internally, but in terms of Pearson's specific CRM needs, Senske says was a perfect match. Last month, the company expanded its use to its customer service department. "If you took away, it would be very difficult for most people to get by. I wish I had done this sooner." A Web-based solution met the specific CRM needs also of Davis Controls, a Montreal-based distributor and manufacturer of instrumentation controls and factory automation products. The $15 million company invested in e-Synergy from Exact Software in 2001. According to CEO Neil Montgomery, the company invested $150,000 in network upgrades and initial purchase of the solution, which it began using almost immediately. e-Synergy is a broad application and includes several modules. Montgomery says the company began with the human resources management component, and then added component-by-component over two years until today, when: "Our entire corporate strategy spins from the e-Synergy nucleus." That strategy is based on customer satisfaction, he says, and these days customers want information, information and more information. "Product differentiation is becoming harder to claim as our value proposition," Montgomery says. "In fact, we don't even try to claim it anymore. Products and product features are so often copied, it's impossible to differentiate yourself on product, and it's even more difficult to charge a premium for that product. It doesn't really exist. We see our differentiator as information for customers, suppliers and employees." e-Synergy records every electronic conversation or action that occurs at Davis Controls, and that information can be viewed by anyone that Davis Controls chooses to give access to. In addition, e-Synergy was integrated with the Macola ERP system already in place. "It's all being driven by customer relationships," Montgomery says. "It allows customers to use their Web connection to see up and down through their supply chain to track their order from purchase order to payment." Montgomery says e-Synergy was attractive to Davis because the company had an established relationship with Macola, which Exact purchased in 2001. In addition, the price and implementation requirements were right at a time when the company's customers were demanding more information. "All businesses have to achieve some comfort level with e-business," he says. "There are going to be a lot of mid-market companies like us that are going to be looking for a solution that must be less expensive than Siebel and SAP. We couldn't even hope to afford to buy into a solution like that." Braxton's Copulsky, a leader of the customer and channel strategy practice, expects to see more Web-based CRM products in the future and more products that allow customers and employees to see the same information. These products will likely be portal-based and accessed via granted permissions. In terms of early, large-scale implementations, the future will bring a lot of rework, says Mike Gorsage, global CRM practice executive with EDS. "There are organizations that are saying, 'I've spent a lot of money, and I'm not sure I'm getting my value, so let me go back and relook and see if I can make it better,' " describes Gorsage, based in Atlanta. EDS has, in fact, introduced a tool called Ghostwriter in 2002 that allows companies to input information regarding customer relations and obtain back a list of processes that need to be changed, how much time and money the changes will cost and which vendors can fulfill those needs. The market for CRM tools is hardly saturated. Gorsage says analysts are estimating 10% to 15% compound-annual growth rate on a global basis. But, he says, there is more realism on the part of vendors regarding what companies will buy. "The major vendors are finding that people will buy modules and components today and defer incremental investments until they have a really good view and plan. Vendors still want to sell you everything at once, but that's really not realistic today." Netherlands-based Baan is one larger vendor that is having success selling CRM to smaller manufacturers on a piecemeal basis. Generally, Baan sells CRM as part of an overall integrated suite. Baan's CRM module consists of direct sales, indirect channel sales and enterprise service management. Aaron Equipment, a small manufacturer of industrial equipment in Chicago, invested in iBaan SalesPlus, a subset of the direct sales module, specifically to automate its sales force. The economic downturn has required the company to reduce its sales force and support staff by 25%, but sales have held steady, productivity is up and closings have increased 3%. CEO Alan Cohen credits the iBaan investment, with two crucial improvements: focusing the sales force and improving the company's RFP response ability. "There was certainly a lot of paperwork and information flowing around [before iBaan], but much of it was not very focused. Our salespeople were always reacting to the last phone call rather than being proactive and strategic." A tightly focused strategy and limited implementation such as Aaron's appear to be indicative of CRM's future. Both Braxton and EDS are advising clients to do a lot of thinking and planning before buying CRM technology. The early history of CRM is that companies tried to do too much, too fast. "Organizations have not clearly articulated in their minds what it is they're trying to accomplish," Gorsage says. "So instead of being very focused, it's 'Well, we're going to do everything from sales-force automation to ramping up all of my interaction to Web-based technology,' rather than thinking about where's the biggest bang for the buck. They are thinking about it from their perspective instead of their customers' perspective." Gorsage gives this example: The most frequent interaction a customer has with a company is billing. Yet, confusing invoices and rigid payment rules often make this area the most frustrating for customers. Reformatting invoices and identifying customers that are valuable enough to have flexible payment terms are two easy ways to help keep customers and top-line revenues, he says. Copulsky says Braxton also tells clients "don't try to solve world hunger. Try to address one or two pain points." One of the first steps to this is assessing the cost of maintaining customers and identifying those that bring the most value. A high-sales client might actually be a drag on profits if it's a costly customer to maintain. Companies would do best to identify which customers contribute most to bottom-line revenues and then concentrate on getting it right with those. Both Gorsage and Copulsky say also that it's vital to change behavior and attitudes, an aspect that was missing from CRM 1.0. Companies need to articulate what is expected from employees and build reward systems and rules to achieve those expectations, such as in the hospitality industry, which has specific requirements and training for greeting guests, for instance. "I'm appalled when I hear some of our clients say, 'I don't want to change process. I don't want to change behavior. Just give us the technology to let us do what we are doing faster,' " Copulsky says. "I just kind of slap my head and think, 'Well how well is this going to work?' " Not well at all, as many companies are learning.

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