November, 2005

  • November 30, 2005
  • It’s time to start thinking about what comes after CRM.

    I am not trying to be alarmist or to set a dire tone, I just think there’s a good amount of evidence that CRM has taken us as far as it’s going to and we need to think about something beyond it.

    That’s not to say that CRM is dead — far from it. There’s too much sunk cost in CRM systems to think that anyone would seriously contemplate a wholesale abandonment, and CRM has certainly done some very positive things for most companies. What comes next has to be evolutionary and based on the revolution that CRM brought.

    Once a Great Notion

    Sometimes we forget, but only about a dozen years ago, companies largely depended on their own resources for front office management. Sometimes that meant in-house developed sales systems and the like, but often it simply meant collecting data on paper or, in spreadsheets or contact managers. ACT! got distributed to millions of people who were tired of broken manual systems but who didn’t have the power or resources to build systems any more pervasive than contact management. And contact managers are still going strong, especially in small companies or departments that handle the rest of CRM differently. And although call centers and their applications are a major part of CRM today, much, but not all of, the software that supports them precedes CRM.

    Over the last ten years, CRM has helped companies of all sizes to capture and consolidate data about customers and when analytics are applied, to give companies insight into a customer’s hot buttons and strategy for selling more. But, unfortunately, as happens often with new tools, CRM got over used and rather than simply helping companies do a better job of servicing and suggesting, the tools of CRM became the enablers of annoying phone calls, too much mail and spam, and who knows what else.

    In the process of wearing out CRM’s welcome and its effectiveness, many farsighted people discovered the exact things CRM is good for as well as what it’s missing. And by discovering what’s missing, we’re beginning to understand what’s next.

    How to Lose a Customer in Ten Minutes

    As is frequently true in situations like this, it’s the academics who are pointing out some of the limitations and the next steps. One, for example, is Glen Urban — not exactly a household name but definitely someone with the credentials to point us in the right direction. Since 1966, Urban has been a faculty member and sometimes dean of the Sloan School at MIT. His latest book, Don’t Just Relate – Advocate, hints at a future where vendors spend a lot more time and effort getting into a customer’s head than simply trying to sell fries if the customer selects a burger.

    According to Urban: "For some companies CRM is merely a more efficient means of push/pull marketing, targeting customers in the sense of drawing accurate cross-hairs on their chests. Impertinence and aggressive cross-selling can make your customers treat your company as if it were a cheeky acquaintance — making the customer cross the street to avoid contact with you." Ouch! But it rings true doesn’t it?

    That last bit about crossing the street is especially worrisome because it implies that customers won’t simply ignore you and your CRM based outreach, they’ll actively avoid you. It has been said before, but the Internet really has leveled the playing field, customers have greater access to information than ever before and they use it to find the best products and prices regardless of how a vendor might try to arbitrage information.

    Sharing Information

    Another book, Democratizing Innovation, by Eric von Hippel (another MIT professor), shows how customers are today freely sharing information about vendors as well as tips and techniques — some of it intellectual property — that ultimately becomes public domain information shared for the common good. Leading edge companies in this space include eBay, Amazon and Amazon-like companies (such as that encourage customers to write reviews and share information about a vendor, product or experience.

    It should be no surprise that the Internet is now the first place that nearly two thirds (64 percent) of people go to begin shopping for a car or that used cars are big business on eBay — that’s right people trust eBay because the system has such a strong mechanism for verification and building trust. According to Urban: "On eBay, customers give positive and negative comments on sellers, and even a few negative comments can immobilize the seller’s auction by reducing the number of bidders." Thats the kind of thing that makes a seller raise the level of his or her game and that is ultimately good for everyone.

    Most interestingly, von Hippel points out that such free sharing has been going on at least since the invention of the steam engine. It is standard fare in scientific, medical, andacademic circles and it may be an important part of the wave that comes after CRM.

    Coming Full Circle

    So what comes after CRM is evolutionary. CRM has given us the ability to collect a lot of customer data as well as the means to analyze the daylights out of it. What we need now are systems, techniques, and business attitudes that will enable us to speak more frankly with our customers rather than at them. That’s a tall order but it is also very exciting. To those who think there’s no "new, new thing" out there, just wait a bit. The next wave won’t involve a stampede to some new product category; it will be a rush to what we thought we always knew.

    Published: 18 years ago

    I have been involved in some situations recently that have caused me to think a lot about the idea of the customer experience.  I made a presentation — by phone during a nor’easter — in October to an executive education seminar at Duke University’s business school.  Martha Rogers, whose work with Don Peppers I have previously written about and, I believe, is very important to the evolution of CRM, invited me.  I am also preparing for a webinar later in December sponsored by CRMA in Atlanta.  The webinar is loosely framed by the concept of customer loyalty — getting, keeping, and using it.  Other speakers will include Ginger Conlon and Paul Greenberg, two of my favorite people in CRM.

    One theme that unifies my participation in these events as well as much of the buzz in CRM today is managing the customer experience.  Customer Experience Management or CEM seems to be another wrinkle in the CRM movement that’s been gaining traction recently, but to me it seems like a distinction without a difference.

    Identifying What Makes a Customer Tick

    When it comes to CEM I think we’re looking through the wrong end of the telescope.  I can fully buy into the idea and the importance of treating the customer well and being attentive to the signals a customer gives off by virtue of his or her existence and background.  But most CEM "solutions" that I have experience with have a reading-the-tea-leaves quality to them.  How much can you confidently infer from a click stream?

    Forrester Research published a white paper in March, "Identifying the Emotive Customer" by Fiona McDonnell, that identifies three levels of data collection — extraction, exchange, and engagement — that correspond with increasingly useful and important customer information on which one can hope to understand what makes the customer "tick."  Most of what I have seen in the CEM space works off the ideas of "extracting" and "exchanging" a lot of data about the customer and then applying high powered software to slice and dice it.  But it falls short of getting to the emotional heart of a relationship that leads to engagement which will bond the customer to a vendor and keep him or her coming back.

    Technologies involved in the CEM process can include analytics, rules processing, workflow, and a common repository of customer information.  And while each of these can make valuable contributions to understanding the customer during a transaction, I think we run the risk of over reliance to the point of being blinded to their limitations.  While all of these (and other) tools do a wonderful job of helping us understand the customer in the situation immediately before us, they do nothing, or very little, to help us find out about what the customer might want or need later.

    Wants and Needs

    Why is that important?  Well, it takes time and effort to develop the products, messages, and programs of tomorrow and if you aren’t doing your best to collect the raw material of customer need today, when tomorrow comes you will be automatically behind the curve.

    In The Support Economy, an important book analyzing this situation, Harvard Business School professor Shoshana Zuboff discusses the ideas of "vendor space" and "customer space."  The names connote the primary places where each group works and feels most comfortable.  According to Zuboff, too often vendors live in a world of their own, thinking up what to make and then figuring out how to sell it.  Meanwhile, customers live in their own spaces knowing about their wants and needs and rarely communicating these ideas to the people who can fulfill them.

    My issue with CEM, is that it is a solution for managing transactions in vendor space.  All of the click-stream data, collected demographics, records of past purchases and currently installed or in use products and services that make up a customer’s background are great for helping a vendor within the current transaction.  But none of these technologies does much to help us understand the customer’s future requirements and the reasons they will come back for another purchase.

    Satisfaction Doesn’t Mean Loyalty

    Thus, at the end of a transaction or at another time opportune to the denizens of vendor space, we measure customer satisfaction.  Customer sat answers the question, "How do you like us so far?" but sheds little light on the questions, "Will you come back?", "Why?", and "When?"  Those are issues of loyalty not pure satisfaction.  And as we’ve seen from loyalty studies by companies like Walker Information, customer loyalty is measurable and the results can be a humbling experience because if you are a vendor chances are good that your loyalty numbers are far below your satisfaction numbers.

    Peppers and Rogers as well as others tell us that we’re in an era of organic growth, one in which new customers are scarce and repeat business is the key to future success in numerous markets.  As it is used today, CEM might get you a cross sell or an up sell, but it won’t do much to emotionally engage your customer and entice him or her to share his or her thoughts about what to build next.

    Keep it Simple

    When all else fails you can simply ask the customer.  It is a blindingly simple concept — truly a ‘duh’ moment — and there are solutions coming to market now that take much of the labor and cost out of the asking process.  Labor, cost, and tradition are the three main reasons that vendors have historically avoided venturing into customer space.  But with requirements for labor and cost receding like the polar ice caps, can we any longer afford avoiding that outreach?

    Published: 18 years ago

    Think about this:

    When I was at Aberdeen Group, I  launched the What Works report and award as a way to identify the best CRM implementations of the prior year.  It was a pretty successful concept and we uncovered a lot of what was right with CRM at a time when every other analyst firm was playing a version of chicken little.  A year later Gartner came out with the CRM Excellence award. 

    Just a coincidence.

    Last year Beagle Research Group came out with the CRM WizKids report and award for innovation in CRM.  Just a few days ago, Gartner came out with their inaugural Gartner CRM Innovator Award. 

    What a small world.

    Published: 18 years ago

    Yesterday, Microsoft announced its embrace of the Web and software as a service (SaaS) but there might be less there than meets the eye. Rather than a bold strategy to move the company and the industry ahead, I see it as more of a hedging strategy to help the company hold on. Microsoft founder and chairman, Bill Gates tried to position this move as one of the company’s periodic shifts, and it is, but Microsoft is not the first into the space by a long shot.

    The move is an attempt to focus Microsoft’s competitive drive on companies as disparate as, Google, and Yahoo and I question its wisdom. There have been numerous moves by software giants like Microsoft and Oracle and to a lesser extent SAP recently to protect their hegemony in the market by attempting to be all things to all people – the one stop software/services utility. But there is so much innovation happening in the software industry today that I doubt any one company – even Microsoft or Oracle or SAP can straddle all areas as was possible as recently as fifteen years ago, "BI", before the Internet.

    Nevertheless, Microsoft chairman, Bill Gates, ventured to San Francisco – ground zero in the SaaS world and home to the likes of, and near by NetSuite, Google Yahoo, and a raft of other innovative young companies delivering software over the Internet – to announce that his company would make its flagship solutions available on-line and rebadge them with the suffix "live".
    In a rendition of a sophomoric game where boys of a certain age add "in-bed" to any statement, CEO and founder, Marc Benioff, suggested Microsoft’s current product line names all be appended instead with the word "dead" to signify that time has by passed the conventional business model of selling shrink wrapped software. Benioff may have a point but the significance of the Microsoft announcement goes beyond sophomoric sloganeering.

    Is ‘Free’ Too Expensive?

    One of the drivers of all this is Google’s success at offering services that are paid for through advertising. Google’s current numbers and future prospects look awfully good and make executives drool at the prospect of tapping into that business model. But the reason that the Google model works is their uniqueness. Imagine a world where advertising toll booths are set up everywhere on the information super highway. What then?

    Microsoft counters with the idea that customers can opt to pay something and avoid the commercials – a good idea – but how long before TiVo hits the tiny screen? Moreover, there’s a limit to the advertising dollars – or pennies in this case – available. This is like trying to run a data center on solar power – even on a perfectly sunny day there is a limited amount of sunlight that falls on your roof and that’s your limiting factor.

    An even bigger issue is immediacy. Microsoft sees a big future in small devices that use its software and which are more or less embedded in our lives. But for that future to materialize the devices and our lives will need to be seamless, how will the advertising paradigm square with that? "These driving directions are brought to you by… and you just missed your exit." Then there is the whole idea of mobility, gadgets and screen real estate. How do you get your ads to play in a meaningful way on a two-inch screen?

    Ok, maybe I am just a bit of a skeptic or worse – after all I was born in the analog age. But there’s a lot of social engineering to be done here in addition to all the technical hurdles. Consider this: while many of us have done a tolerable job of adopting cell phones and PDAs can the case be made, as Microsoft asserts, that we need to be connected 24/7? Would we even like it?

    I understand what vendors and platform suppliers like Microsoft might get out of the deal, but what does the customer get? And at the end of the day isn’t it supposed to be about the customer?

    Published: 18 years ago