Elements - what
Definitions in the area of CRM are characterised by confusion, change and terminological pitfalls. The definition of CRM for the purposes of this report is as follows:
"The conceptual domain combines human and technical communications and knowledge/information processes aimed at maximising the value of exchanges for the mutual benefit of buyers, suppliers and other stakeholders by improving the quality of their relationships through a better understanding of, and responsiveness to, each party's behaviour and needs."
CRM predates the mass market. The term 'relationship marketing' has been in use since the early 1980s. However, the use of the term in academic and business articles has grown exponentially since the early 1990s, although the academic credentials of the subject are still being questioned.
Extract:
With luck and a following wind, a convergence between relationship marketing, CRM technology and the best information and knowledge-management techniques will be able to create and deliver new types of business success, just as the old model based on the mass media and the mass market loses its potency due to a combination of over supply and overly heavy consumer and corporate debt burdens.
Importance - why
Companies face a vicious combination of challenges that could precipitate a shift away from traditional ways of buying and selling products and services. The power of the mass media to sell goods and services is diminishing, while buyer attitudes are much more demanding and, at the same time, less trustful. One of the biggest drivers of all will be the need to eliminate muda (the Japanese word for economic waste) from ways of doing business in the face of increasingly competitive markets.
Extract:
Direct marketing, which generates new sales using targeted junk mail, and e-mail marketing are about to be significantly restricted, as governments in Europe and the US tighten up data-privacy legislation. The costs to business of marketing to targeted lists will therefore increase, while large numbers of businesses and consumers are liable to exercise their new right to remove their names from direct-marketing lists.
Most of the opportunities created by the over-supplied, stagnating markets of the US, Europe and Japan derive from a new, more collaborative understanding of the terms of trade, which emphasises transparency and mutual benefit.
Extract:
Of course, in a buyer-centric marketplace, buyers would have to ensure that their custom also provided enough incentive to make the relationship worthwhile for the supplier. Then, one of the goals of seller-centric CRM would immediately be fulfilled - long-term loyalty. Markets would also become more predictable, making the organisation of production and supply chains cheaper and easier, and saving money that would otherwise be wasted in ineffective marketing and oversupply.
Methods - how
Strategy
Collaboration and community
The cracking of hierarchies and the move towards more collaborative ways of working provide the conditions where buyer-directed modes of doing business can take root. Community-building strategies that enhance mutually beneficial commercial exchange will be highly prized.
Extract:
One of the oldest and most ubiquitous forms of community is the trading market or bazaar. Even in their ancient form, markets had to share practices, such as haggling, grading and bartering; traders had to co-operate in order to gain access to a shared locality, such as a market square; accepted currencies of exchange needed to be agreed; and, some kind of judicial process must have been required to deal with disputes. There would have been a good deal of gossip and discussion about the quality and choice of merchandise on offer, too.
Processes and techniques
Business-process management (BPM) is the latest software-based methodology that aims to improve productivity by gradually optimising, standardising and automating business processes. Although BPM has so far only been applied to the seller side of the equation, buyer-driven process-management techniques are in the development stage.
Extract:
Until recently, business-process design has been complex and expensive, requiring collaboration between managers, engineers and software writers. Now the best BPM software packages aim to enable new processes to be up and running within weeks, thereby producing an almost immediate return on investment. Process flows can be designed and amended by managers themselves, simply by drawing and redrawing them on the screen, inviting continuous process improvement and tweaking.
Message and image
National and international brands are increasingly seen as being under threat from technology-enabled local brands, which have the home-town advantage and much less negative sentiment deriving from lack of trust. Overcoming the trust deficit is becoming a major issue for brand handlers, which is why the latest brand values incorporate the values and ethics of the organisation as a whole.
Extract:
One of the great assets of buyer communities is that reputation is not based on sellers' messages, but on buyers' assessments of each transaction. The most powerful buying aid that exists is a fellow buyer's recommendation. Many virtual, business-to-business exchanges use this kind of transparency to build trust and community.
Media and touchpoints
As the evidence increases that television advertising is almost completely ignored by viewers and has no proven effect on sales, retailers have become the latest medium competing for buyers' attention. Early evidence suggests that in-store advertising is more effective because the message is presented at time when the attention of the buyer is on making a purchase. The other advantage of this new advertising medium is that results can be directly measured in a closed-loop process. The implication is that suppliers will have the opportunity to build direct relationships with buyers. Budgets will have to be adjusted to favour two-way direct-relationship technologies, including broadband videophone links, over the one-way mediated links of the traditional marketing campaign.
Extract:
Brand owners are already preparing to take the mass media out of the loop in their marketing and sales strategies, starting with media-neutral planning, where sellers are encouraged to look at the brand from the customer's point of view without favouring one medium over another.
Experience and value
There is a growing recognition that feelings count in the exchange between buyer and seller. Feelings include taste, presentation and, of course, the personal relationships (or lack of them) involved. Relationships based on the quantitative measure that dominates the mass market - more for less - have an adversarial feeling to them. Feelings of mutual benefit have yet to be counted in most trading relationships, although burgeoning barter-based trade communities measuring transactions in their own barter currencies could well be pointers to future trading values based on experience rather than quantity.
Extract:
People who shop in farmers' markets experience value in a very different way from people shopping in supermarkets. The feeling of authenticity, the lack of marketing hype, the small scale, being able to talk directly to producers, the social buzz; all are experienced as value, along with the natural quality of the food on sale. It is this feeling of extra value that enables producers to sell their produce at premium prices. For example, people will happily pay more than twice as much for a homemade loaf of bread in a farmer's market than they would pay in a supermarket, not just because of the superior taste and healthiness, but also for its handmade authenticity.
Technology
Capabilities
What started as suites of clever database applications has now been extended to include mobile, round-the-clock access and input, updated in real time. Needless to say, this kind of omnipresent functionality is not cheap, and there is debate about whether the expense is worth it, when money could be spent on other priorities (or not spent at all). The other capability being sold by software vendors is CRM analytics, which promises to predict future buyer behaviour by automatically analysing multiple forms of legacy buyer data using data-mining techniques. These applications have not been around long enough to prove whether their predictions come true.
Extract:
Can the functionality of CRM analytics be pressed into the service of the buyer, as well as the seller? If the technology really is useful, there is no reason why this kind of functionality could not be used to help buyers design and optimise their supply chains. It could also be useful for buyer groups to conduct needs-analysis and product/service-specification exercises on themselves.
Demand
After two years of profit battering and consolidation, analyst expectations are that the market for CRM software will start growing again significantly in 2004 and 2005, led by a take-off in the small-business market. Results from software company Siebel at the time of writing (July 2004) indicate that this optimism may be premature. There are, however, embryonic indications that this kind of relationship-management software will help individuals and groups of buyers to specify and source the best products and services from their supply chains.
Extract:
The market for analytic CRM software will, according to IDC's estimates, surpass $1.5bn by 2005, while AMR research predicts $4.4bn in sales by 2005 and Jupiter Media Metrix expects the market to grow to $8.7bn. In the immediate future, a Meta Group survey suggests that analytic CRM will be the most popular CRM application over the next 18 months.
Suppliers
Competition is intensifying as suppliers sign up to offer the ASP 'on demand' model of providing companies with standard CRM capabilities online at much cheaper prices. Analytics is also becoming a standard capability in a market that is potentially heading for commoditisation, as Microsoft introduces its first credible CRM suites and .NET services.
Extract:
Over the past three or four years, a new generation of suppliers has entered the CRM marketplace, led by Salesforce.com. These suppliers operate as applications service providers, providing CRM functionality over the internet as a service known as on-demand CRM. The number of major suppliers selling on-demand CRM is growing, with Microsoft entering as a serious player in late 2003, although demand among SMEs (small and medium-sized enterprises) has so far been limited.
Implementation
People and practices
A change towards a marketplace where buyers specify what they want, rather than choose between what suppliers want to offer, will create losers (principally in advertising, marketing and the mass media) and winners (potentially virtually everyone else). The first step towards improving buyer-seller relationships is to sort out internal politics and give customer-facing staff more authority. The second is to inspire teams of people to adopt the attitudes and practices of lean thinking, dedicated to the elimination of value-destroying waste, wherever and whenever it can be found.
Extract:
In more than five years of monitoring traditional CRM, there has been no shortage of talk about the importance of human factors in making projects a success. However, most of the money has been spent on acquiring software and technology for people to use in order to make them more productive and thereby contribute to the corporate bottom line. Comparatively speaking, very little has been spent on the human relationships involved.
Measurement and results
Non-financial quantitative measures of buyer-seller relationships, such as number of calls dealt with per hour in a call-centre, are increasingly seen as being almost Dickensian control tools that do not indicate anything useful about the quality or utility of the relationship. Nevertheless, the struggle to justify return on investment is leading to a proliferation of these kinds of quantitative standards. It is suggested that a more useful measure would be buyer value. However, non-financial measurement systems are often said to be flawed and misleading, because they try to combine different values in invalid ways.
Extract:
The problem remains that there is still no way of validating the value of intangible, non-financial assets such as collaborative commercial relationships, because there is no marketplace where these kinds of assets can be traded, in turn a consequence of the absence of a currency enabling traders to keep track of value. It is easy to imagine an informal barter exchange in, say, intangible knowledge assets. Indeed, it could be argued that people barter knowledge with each other all the time: you tell me this much, perhaps I'll give back a little more to keep the conversation going.
Action - when
Trends
Two of the most successful types of internet-enabled relationships - online communities and business exchanges - are converging to create the potential for a new source of business growth in secure, spam-free, high-trust business trading environments, oiled by the extension of interest-free mutual credit. In this section under the 'what the sources say' section, the reader will find 26 trends classified into 'strategy', 'measurement', 'technology' and 'implementation', which have been systematically monitored, in some cases, since 1999.
Cases
Cases in the chosen industries are all discussed under the common headings of 'requirements', 'solutions' and 'performance'. Examples are drawn from retail, banking, insurance, travel, energy, telecoms, buyer-support and private-exchange-community sectors.
Scenarios
Scenarios are plausible stories of the future based on the facts known today. Two scenarios have been constructed to help readers come to their own conclusions about future possibilities and to develop strategies for dealing with them. The 'Winners take all' scenario is based on a projection of the trend towards a few lean, globalised companies and brands taking over world trade as competition becomes fiercer and consolidation takes off. The 'Buyers take over' scenario illustrates an alternative consequence of difficult and insecure trading conditions, where private, trusted trading exchanges, technology-enabled local enterprise and mutual credit out compete global enterprises in their own markets. |
