Put customers at the heart of your business

Customers had more options than ever before as increasing globalization and improved communications made it just as easy to buy from a vendor halfway around the globe as it was to buy from the vendor down the street. Companies immediately understood the new reality--that with quality, price, and on-time delivery as givens, the only way to differentiate them from competitors was by making it easier for customers to do business with them than with the competition.

A whole generation of supposedly customer-centric software applications evolved from this simple idea, and the term customer relationship management (CRM) was born. But a funny thing happened on the way to CRM--we forgot to leave the customer in the center. CRM suddenly became about increasing sales through better targeting of marketing campaigns or about increasing operational efficiency through moving less-profitable customers to less-expensive service channels. Even the much-vaunted "360° view" of the customer became more about making sure the time was right to up-sell and cross-sell than about making things convenient for the customer. We forgot about the goal--making it easier for customers to do business with one company over its competition.

And so we come to the broken promises of CRM. By jumping right to "increase sales" or "be more efficient," we missed the part about putting the customer in the center of the business. Customers noticed and they rebelled, leaving many companies with investments that didn't pay off. This led to the publicity over "CRM failures," which were not software failures as much as they were failures to understand the goal.

Don't misunderstand. I'm not an advocate of CRM just for its own sake. Servicing customers well is futile if they don't buy products and services as a result. I don't believe in making IT investments unless the investments either increase sales or improve operational efficiency, and it's preferable if they do both. For example, providing competitive differentiation by making product information readily available to the customer is a way to increase sales. Providing self-service options for help or order entry is a way to decrease costs and improve operational efficiency while simultaneously making life easier for the customer. Finding faster and better ways to inundate the customer with offers is not likely to increase sales in the long run, although we can annoy them more efficiently than ever before. The increase in the usage of spam-stopping software is an indication that we're doing just that.This isn't a knock against marketing automation, much of which I think is terrific. It's just one example of an approach that misses the boat. Truly putting the customer in the center of our business means that we need to be as good at shipping an order as we are at taking it. We need to be as ready with shipment, invoice, receivables, service, and repair information as we are with product information and our ubiquitous up-selling and cross-selling offers. We need to resolve customer problems quickly, not just make reporting them faster. In order to provide this real 360° view of the customer, we need information systems that are seamless. We need systems that are really customer centric, not a hodge-podge of niche applications or segregated front- and back-office applications.

The software industry may have been a little slow to realize this truth, but companies, especially mid-market companies, were not slow at all. They understood instinctively that they couldn't segregate customers from day-to-day operations if there was to be any hope of servicing customers effectively. The result has been a reluctance to invest further in systems that couldn't deliver on the CRM promise. In turn, that has resulted in an inexorable consolidation of the CRM market.

Today, there are many fewer stand-alone applications than there were even just a year ago. Many that remain are struggling for survival. We don't see as many niche applications as we saw a year ago, many of which were really just "features" masquerading as complete applications. We do see more and more blurring of the lines between CRM, supply chain management (SCM), and enterprise resource planning (ERP) as software companies strive to cover complete business processes.

Recent Hurwitz Group research shows that companies do know they need CRM to be successful. They want CRM to improve efficiency and to increase sales and customer satisfaction, just as one would expect.

However, in our survey of over 500 companies, three of the four most frequently named CRM vendors are really ERP vendors that have incorporated CRM functionality into their ERP systems. The number-one named CRM vendor was not the big CRM gorilla one might expect, but an ERP company known for its strong customer orientation. Surprised? Not if you're part of the growing minority that understands that CRM means putting the customer in the heart of the business.

Putting the Customer at the Heart of Business
By Sharon Ward
First published by Hurwitz Group August 16, 2002

How can the software industry put the "C" back in CRM? TalkBack below or e-mail us with your thoughts.