Likewise, Internet service provider GTE Internetworking handles 10,000 service calls a day at a per-call rate ranging from $6 to $31, depending on the complexity of the problem. The company's online help system, which went live in June 1998, now allows customers to diagnose and troubleshoot problems themselves without having to make a call. GTE Internetworking estimates it can lower the number of support calls by 10 percent and save millions. Today, the average cost of support has dropped to $3 per subscriber.
From Product-Centric to Customer-Centric
With promised returns like these, it's no wonder analysts see CRM as the hottest thing since ERP. According to Boston-based AMR Research Inc., total revenue for the CRM software market will grow from $1.2 billion in 1997 to $11.5 billion in 2002, a 58 percent compound annual growth rate.
The odd thing about the current love-affair with CRM is that the customer was supposed to have been Number One all along. Certainly, companies renowned for velvet-gloved service — retailers like Nordstrom spring to mind — weren't born yesterday. And companies have always stored customer information such as names and addresses in databases.
But two trends have brought CRM to the forefront, explains Boston University professor Tom Davenport, who directs Andersen Consulting's Institute for Strategic Change. First, as global competition has increased and products have become harder to differentiate, "companies have begun moving from a product-centric view of the world to a customer-centric one," says Davenport.
Second, technology has ripened to the point where it's possible to put customer information from all over the enterprise into a single system. "Until recently, we didn't have the ability to manage the complex information about customers, because information was stored in 20 different systems," says Davenport. But as network and Internet technology has matured, CRM software has found its place in the world.
Essentially, there are four different types of CRM software, each designed to tackle CRM from either the sales, customer support, marketing, or enterprise point of view (though products are increasingly converging to offer combinations of these). So-called front-office technology, available from such vendors as Siebel, Vantive, Clarify, Corepoint, and Onyx enables system users to mine customer databases and provides sales reps with productivity tools. While these packages can function on top of enterprise systems from the likes of Baan, Oracle, and SAP, the enterprise players are making their own claims as one-stop CRM-ers. And a plethora of smaller companies, including SalesLogix, Chordiant Software, and Motive Communications, offer subclasses of CRM, catering to specific areas such as sales or customer support.
In fact, there are now hundreds of products on the market, ranging from the smallest contact-management packages to multimillion-dollar enterprise systems — and all claiming to belong to the CRM space. Finding the appropriate application can be an awful task. In a survey of 580 participants at the Fall 1998 DCI Customer Relationship Management Conference in Chicago, 59 percent of respondents indicated that choosing the right software was their main concern with CRM.
A Change Will Do You Good
But sorting out the software isn't the hardest part for nontechnology executives. Instead, they have to grapple with the notion of spending millions to chase intangibles like "customer satisfaction" and "lifetime value." And in choosing an enterprise CRM system, they must also contemplate the prospect of organizational change — arguably as radical as the change wrought by ERP implementations.
Like ERP, customer relationship management is a discipline supported by a technology, not the other way around. For this reason, an organization should resist the temptation to hunt for technology until it supports CRM as a culture, warns Boston University's Davenport. "People justify these systems thinking they can make money off customers, but implementing a CRM strategy can be much harder than many organizations imagine."
Indeed, without careful analysis and project management, CRM initiatives can flop as expensively as ERP. Davenport cites an example of one North Carolina bank that spent more than $100 million on CRM technology for naught, all because internal politics got in the way. Departments continued to operate as fiefdoms that squirreled away customer information, and no one championed the effort. The bank even had problems at the definitional level. "They couldn't decide whether a customer was an individual or an organization," says Davenport.
On the other hand, CRM can shine in a customer-as-God culture. Carter Lusher, a director of research for IT advisory firm GartnerGroup, says the companies that have been most successful with CRM initiatives share key characteristics. Citing such "category killers" as Charles Schwab & Co., Cisco Systems Inc., and Amazon.com, Lusher ticks off common qualities: "a command of their product, great up- and cross-sale potential, and the ability to break down internal barriers and processes quickly."
At Pitney Bowes, success of the CRM initiative depended on two factors key to any major IT undertaking: setting forth a clear business case and involving senior management every step of the way. Before the company thought about software, it looked at goals and processes, says Green, the finance vice president. "We made sure we designed and reviewed the process from end to end," he says.
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