This guest article was kindly provided by Denis Pombriant, Beagle Research managing principal.
Maybe I’ve just been staring at it too long, but I’ve noticed a definite back and forth movement in the CRM market over the years.
Initially, the vendors had all the initiative and momentum and they quickly established the customer relationship management niche and the integrated CRM suite. Then as the bubble burst and the economy went into the deep freeze, customers said "enough!" (at least for a while) and they adapted the suite to their need to save on expenses by automating front office processes, especially service. Hosted applications also became popular and the combination of service applications delivered through hosting became a powerful combination.
Over the last few years service automation has become remarkably good at helping companies reduce the need for service personnel while replacing their function with knowledge bases, Web sites, automated e-mail, and other technologies. But now the pendulum is swinging back. One of the strengths of automating service is also its Achilles heel. If you automate the interaction with a customer, you also automate away the opportunity to probe and sell.
The growing importance of using service as a sales tool has been highlighted over the last several years in several books by influential authors and it is worth tracing their line of reasoning to understand what the next move might be in CRM.
The first book to consider is The Support Economy, by Shoshana Zuboff of Harvard Business School, and her CEO husband James Maxmin. The Support Economy is about changing the business paradigm from an early 20th century mass production model to a customer-centric approach more suitable to the new economy. Zuboff and Maxmin coin a new term, "deep support", to describe their vision. According to them, today’s customer is richer, better educated and more time starved than any consumer in history. (Zuboff and Maxmin delve into a discussion of "deep support" on their website. – JC)
Today’s customers (you and I) have been conditioned to think of ourselves and our needs as unique and we expect to be serviced and supported uniquely. If a vendor cannot or will not treat us in the manner we expect, we simply take our trade elsewhere. And with so much competition, there are plenty of other places to take our business—except for the fact that we are time starved and would like it if the vendors we select live up to their promises so that we can use our precious time in better ways than in searching for their replacements.
That brings us to book number two, Return on Customer: Creating Maximum Value From Your Scarcest Resource by Don Peppers and Martha Rogers (coming in June.) Peppers and Rogers have spent more than ten years preaching an expanding gospel of one-to-one selling, marketing, and customer centricity. My impression of the new book is based on Martha Rogers’ talk at the recent Insights 2005, the channel meeting of Sage Software.
In her talk, Rogers made the point that in many cases where market share battles have been fought to a standstill, it is the care and feeding of the customer base that needs the most attention. We all know the stories about how new customers are so expensive to win that they might not even be profitable in their first year; that selling additional products to existing customers drives increasing profitability and growth.
Peppers and Rogers seem to be echoing Zuboff and Maxmin’s call for "deep support" and they extend the thesis by suggesting new metrics that prove their point. To a degree, the idea of using service to sell has always had the squishy feel of a social science; you could measure total cost of ownership on everything, but return on investment was easiest to come by for sales applications because they brought in new business. So despite all the talk about the customer and some good intentions, when it came time to spend money on technology, sales systems got the nod for generating revenue, and service applications received funding primarily if they could demonstrate some savings.
The result has been service systems and metrics that measure how fast call center agents get on and off the phone rather than how well they might service customers and possibly generate the occasional cross-sell or up-sell. Not surprisingly, marketers and service professionals seeking funding for their vision of customer centricity have looked longingly at the precision the back office applied to sales and developed what you might call “accounting envy”.
No matter. While it is harder to take a long view of the life-cycle and come up with relevant ways of measuring the importance of customer centricity, it is not impossible. Peppers and Rogers show how this is done with the precision any back office pro might resonate with.
That brings us to the third book under consideration, Daniel Pink’s A Whole New Mind: Moving from the Information Age to the Conceptual Age. Pink has bad news for some of the back office crowd: if your job is very left-brained, like accounting and programming, anyone can do it or it can be automated away. Does that mean right-brained creative types will now inherit the earth? (If they do, abandon all hope of trains and planes that run on time.)
The right answer, of course, is balance. Which for one thing means that we might all be freer to explore the implications of developing businesses that provide deep support without teeing up the false choice dilemma of sales vs. service that sometimes accompanies a suggestion to serve customers better.
The creativity embodied by deep support may be the one irreducible factor that cannot be automated away or outsourced and increasingly, it will represent the true competitive edge every business seeks. And if Peppers and Rogers have their way, the value of the customer base might someday be reported on balance sheets as another corporate asset as tangible as the bricks and mortar.
So if you are wondering what CRM’s next act might be, don’t get confused by discussions of hosting vs. on premise, or direct and indirect sales—after all, those are simply delivery models. Pay attention to what you’ll do with CRM next year and five years after that. Chances are good that if you’re successful with it, CRM will be helping you manage and farm your customer base.
Denis Pombriant is Managing Principal of Beagle Research. Of the entities mentioned in this article, Sage Software has been a client of Beagle Research within the past six months. Denis says he's just a fan of the others.