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Why CRM needs to change

Page history last edited by Paul Greenberg 15 years, 6 months ago


Why CRM needs to change
One of the drivers of the CRM 20 effort is, as Paul Greenberg has said, to avoid having “15 million” different definitions of CRM like we had at the turn of the century and to a degree still have today. But if we are to avoid the error of the 15 million definitions, I think it would be wise to begin by discussing the drivers of CRM today. The fundamental reason so many people see a need to redefine CRM is that so many of us realize that the CRM we inherited from the go-go 1990s is no longer appropriate today.  But how is it not appropriate? After all we still perform the functions of marketing and selling, and we still service and support our customers.
It would be a significant error to say that CRM must change because customers have changed or because markets are different than they were, though that is certainly true. More fundamentally everything else has changed as well, right down to the types of innovation that are going on in many fields today.  The following few pages try to identify at least some of the drivers of change that lead inevitably to a conclusion that we more or less already feel in our collective gut.  In some ways this document mirrors the presentation found elsewhere in this wiki, but perhaps it provides more detail.
Maybe CRM even needs to be replaced
Here is an interesting - sad - real - classifying - story:

A multibillion dollar tech company is currently modernizing their CRM infrastructure, spending some 20 Million Dollar for an upgrade. Sounds good. BUT - and here is the sad part of the story: The customers of said company, formed in user groups, circulating documents with names of sales people they can talk to, because the company is simply unapproachable. Customers needed to create an initiative to help each other find a contact in a company they are already customers of.


Google Gadget error
If this video doesn't work here, that's the link - YOU WILL LOVE IT !!!!

Simply replace "advertiser" with CRM user and "consumer" with customer.  There is no love anymore!!!!


In the last 5-10 years buying behavior changed more  than in the 50 years before that. As we went from approximately 800 ad impressions per average adult per day  in 1980 to 4,000 in 2008, the only change was advertising cost, advertising distribution and the resistance level of advertising by our dear customers.  And when we went from too expensive call centers in the US to India based call centers, we finally killed cold calling too. Our "Market Interaction Model" is completely broken and customers want the divorce!



How can CRM 2.0 help?


I'm afraid to say that but no CRM system can help in any way or shape unless our behavior in the face of our customer is dramatically changing. Am I just a negative thinker and want to destroy the toys you love? No - not at all. I have high respect for this initiative because at its roots it is about a change our selling society needs. The question is: Do we need a new tool to fix a broken process or do we need a new process, meaning a new way to interact with customers, partners, alliances and our entire ecosystem? And if so we would need tools that accommodate those new behavioral changes and aspects not the ones we used before.



CRM 2.0 If we even want to keep that term, need to be a customer integrating, all parties involving, collaboration tool. It need to support an environment where sales people become moderators of a buying process rather than managers of a sales process. We know that 78% of all purchased decisions are made based on recommendations. NONE of those recommendations come from sales people anymore. In the eye of a customer: Sales people are the commission motivated enemies. So we need to create a platform where recommendations can happen, where prospects meet buyers, where partners meet experts, where an open information exchange is possible and the respective vendor turns out to be a guide and moderator in the process. This place can be called social network – and as such CRM 2.0 need to be a social network powered instrument to facilitate the dialogue, support all participating market constituencies and help all parties to better understand each other’s processes. This has almost nothing to do with the old CRM system most of you know. It is definitely not the old enterprise monster with yet another set of features. We need that new beginning and  few companies including my own is working on it.


The business challenge
Numerous business authors and gurus have written many books about the changing market and the changing customer. This section brings together several ideas that paint a picture of these changes.
What happened to the ‘New, New Thing’ ?
The high-tech era, which we date from the development of the CPU on a chip, or microprocessor, in the late 1960s, has ushered in one innovative product after another for decades. Microprocessors embedded in numerous products have made life easier and products more efficient. The introduction of cheap, fast, and reliable computing has caused whole industries to evolve at rapid rates. This evolution has been driven by Moore’s Law which states that computing power will double about every 18 months with parallel decreases in costs. That era may be now ending—or at least it is entering a new phase—as physical constraints on chip miniaturization threaten to flatten out the curve Moore’s Law describes and as product designers run out of new application areas for embedded chips.
At the same time that limits on chip size are becoming apparent, significant new product introductions are dwindling and the new products that are coming to market are more oriented toward single sales to consumers rather than multiple sales to corporations. The cell phone and the iPod are great examples—consumers need one, not many—so the market for these products saturates fairly quickly in comparison to the market for servers, PCs, and laptop computers. 
When companies are involved in introducing new products they are fundamentally engaged in market share wars. As Geoffrey Moore has observed, in Crossing the Chasm, Inside the Tornado, and recently, Dealing with Darwin, once the initial buying frenzy has subsided the winning vendors must adjust to new lives on “Main Street,” and a more predictable selling environment.  Margins are thinner on Main Street and competition revolves around incremental changes in, or additions to, core products that gained their niches in the early market.
In Moore’s vision, companies on Main Street must do two seemingly contradictory things at once—they must continuously bring down the cost of their products and they must continually find ways to add value. The two objectives need not work at cross purposes and smart companies find ways to meet both needs. But doing both requires far more attention to the customer than many formerly fast growing companies can muster for the simple reason that customer centricity was not baked into their DNA during their birth and growth years in the market share war.
On Main Street, the center of innovation shifts from the product to the customer. Early market companies were content to compete on features and functions but as markets mature, the surviving vendors reach product equivalence. Moreover, if companies expect to continue to innovate they have to find ways that will deliver innovations that customers find valuable and do it at stable prices.
The marketplace today has turned Main Street into a super highway in gridlock. In market after market formerly innovative companies have settled down to an indefinite period of incremental improvement—as well as the need to avoid commoditization and the ruinous price deflation that it brings.
The customer
The customer has changed over the last several decades in a slow process whose accumulated effects have resulted in a different demand profile that has been partially masked, until recently, by the continuous introduction of new products. 
According to Shoshana Zuboff in The Support Economy, today’s customers are the richest, best educated, and most time starved in history. This customer is also the most individualized, meaning that from an early age the customer has been taught to regard his or her needs as unique and requiring unique solutions.  These customer trends have sounded a death knell for mass marketing and mass consumption and one need only refer to the plethora of viewing options available on cable television to get a sense of the fragmentation this has wrought.
Where we are right now
In their 2005 book, Return on Customer, Don Peppers and Martha Rogers make the important point that customers are a company’s scarcest resource. That fact is obscured when markets are in early growth phases and everyone, it seems, wants the new product. But when initial demand cools, markets return to an equilibrium point where there is more balance between vendor supply and customer demand. Today the customer is in the ascent but it is a different customer than previously encountered.
The market and the customer have changed in fundamental ways. The customer movement to greater individuality happened over the course of a generation, but the market has changed almost over night. At one point new product generation was the only game in town and customers were almost afterthoughts as companies worked to gain supremacy through competition on features and functions. 
In more mature markets fundamental product functionality has been worked out, most vendors have very similar products and the competition must move to other areas.  For example, the PC architecture was standardized with the introduction of the IBM PC and competition has moved on to other areas including price, customer features, graphics and large screens, and usability.
In response, companies facing this kind of challenge re-discover the customer and customer centricity becomes a driving force. With the customer in the driver’s seat, vendors are forced onto an unfamiliar playing field where they must continue to innovate and improve their products while reducing overall costs. In addition, this is a more conservative market in which buyers expect standard functionality, good service, logical add-on products and migration paths, and, most importantly, stable prices.
It is also a dangerous time to be a vendor. Large expenditures in research and development—if they are made in areas customers find irrelevant—will not automatically provide the returns needed to cover their costs. 
In this environment the surest path to continued growth and profitability is to get close to the customer, to understand customer needs and to build products to meet those needs. Now, and for the foreseeable future, companies in markets such as consumer electronics, computer hardware, software, and financial services will work to keep their customers by keeping them happy and loyal. Doing so enables proactive vendors to capture greater wallet share and to continue growing. 
Growing customer share
When it is no longer enough for a vendor to offer a new product, and when the dominant customer type in the market moves from early adopter to the more conservative Main Street buyer, competition must move from product superiority to customer intimacy. How well a vendor knows a customer will determine how successful the vendor is in the market.
According to Geoffrey Moore’s Dealing with Darwin, there are four major types of innovation that vendors can use to keep their companies growing while on Main Street and each relies on becoming more intimate with the customer; they are:
1.      Product line extension
2.      Product enhancement
3.      Marketing
4.      Experiential—enhancing the customer experience
The lion’s share of discussion about what to do in the new market reality has been focused so far on the customer experience but as we see here, customer experience is just one of four areas that vendors need to consider. The unifying theme behind all of these ideas is customer intimacy. Without customer intimacy vendors are shooting in the dark when they make decisions about which product lines to extend; which products to enhance (and how); which marketing messages resonate; and how to improve a customer’s experience with the company and its products.
As a practical matter, customer intimacy quickly boils down to capturing information about the customer including problems, questions, needs, likes, dislikes, aspirations, and biases, and then using it before and during the customer interaction to craft products and messages, as well as experiences that customers resonate with. 
The reason we need a new approach to CRM is that what we make and sell has changed in subtle ways which both influence and are influenced by how markets behave.  Ultimately that means how customers act and react to vendors and their offers.
This document tries to identify some of the drivers for CRM 2.0.  As we have seen, everything about customers and markets is different today than when CRM first evolved.  Given this reality, it should be no surprise that CRM must adapt to keep up with the times.  If Geoffrey Moore is right that four major types of innovation will dominate the ways that companies grow and interact with customers then, clearly, the focus of CRM 2.0 must be on an orientation around customer intimacy.
Customer intimacy can not be an effective strategy if it is quickly reduced to a slogan or a catch phrase.  We have seen phrases like “the customer experience” quickly gain currency in CRM only to become meaningless through over use and lacking any motive force to make the phrase meaningful.  Just as quality needs to be built into products, customer intimacy must be built into vendor-customer relationships. A companion piece on customer intimacy will discuss at least one way to make this happen.

Comments (6)

Andrew Boyd said

at 4:22 pm on Jan 19, 2007

There are a few other changes happening as well. As Tapscott points out in Wikinomics, we now have a generation of consumers (born after 1977) that are not only expecting, but demanding a more collaborative experience. Whereas their parents consumed media (the cable TV you mentioned), these consumers create it (YouTude, MySpace, etc). Their interactions with companies are not going to be as passive receivers, but as collaborative 'interacters'. So, the same systems and linear (i.e. sequential) processes that we used to "manage" relationships with their parents is not going to work with this demanding group. We need to rethink the very notion of CRM. How do we handle and process valuable information that is outside the firewall? How do we create a seamless customer experience when we are co-creating products, content and services with end-users?

Brian Roberts said

at 2:17 pm on Jan 21, 2007

I'm confused. I think the original definition of CRM is fine. What isn't fine is the implementation of most CRM initiatives. It has evolved into the front-office automation, another IT efficiency and cost-cutting investment. Or in other guises CRM is the term used to describe a collection of direct marketing tactics. These situations have come about because of the penchant of managers to focus on the short term, Wall Street-driven quarterly target because that's what they are rewarded for. Most routine corporate IT initiatives are about cutting operational costs. So to me, all this adds up to a need for a change in how CRM is implemented. CRM for me has always been about learning about customer needs and preferences to create the experience a customer wants, or to give them the tools, etc., to create the experience they want. We just haven't delivered that consistently.

Paul Greenberg said

at 2:22 pm on Jan 21, 2007

While it might be how you viewed CRM, Brian my friend, because you're a smart and foresighted person, it isn't what was defined as CRM which was why we've all had so much trouble over the years just breaking it from its technological definition. Now that we've more or less (and there are plenty of problematic remnants to this) been able to at least shape shift it a bit, the old sales, marketing, support; operational, analytic, collaborative boxes its been sitting in since around 2000 are no longer either useful or valid. The idea is to come up with a community based contemporary definition that we can all buy into that can then be the gold standard for CRM 2.0 - which doesn't mean just providing great customer experiences but engages the customer to collaborate in the creation of the experiences that are meaningful to them and the company that is engaged.

Miro Slodki said

at 3:56 pm on Jul 16, 2007

I think that as much as we want the strategic aspects of CRM to dominate, the business of buisiness is tactically driven. What everyone here hopes to see change is the sence of developing a customer centric solutions focus - instead of a set of perfected algorithms that can impart surgical strikes on our wallets.
The posting by Andrew at the start of this is also very telling. The new customers will expect a collaborative environment.
Those that are able to listen and adapt will win.

Paul Greenberg said

at 8:09 am on Feb 18, 2008

We're now reaching a point about a year after this was first put up where CRM IS changing and there is an increasing recognition that the social and collaborative side of how customers interact with companies is beginning to become a pre-eminent feature along with the operational. That is something that is moving faster than expected and most of the major vendors are particularly keen on this. The key here is that we don't do a baby with the bathwater thing and drop the operational when we extend the collaborative and social. They are BOTH necessary. The difference is that in the past, it was operational only. Thank god that's no longer the case.

courtnay said

at 7:31 pm on Oct 22, 2008

no more comments here?
How about how the advent os SaaS had made new improvements on CRM implementations?

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