Service With A Crm Smile
Sydney Morning Herald
Tuesday June 22, 1999
ONE of the fastest-growing areas in corporate computing in the past year has been a type of software known as customer relationship management, inevitably abbreviated to CRM. As its name suggests, it is software that helps organisations manage their relationship with their customers.
That sounds simple enough, but the current breed of software takes this capability to new levels of sophistication. To understand CRM, it helps to consider the evolution of the relationship between a typical organisation and its customers.
When an organisation is small, it is comparatively easy to keep track of clients and their idiosyncrasies. When organisations today anachronistically boast of their "old-fashioned service", what they invariably mean is that they attempt to take personal care of every customer.
But as the size of the customer base grows, it becomes increasingly difficult to maintain. Large customer lists are invariably computerised, and promotion becomes a large-scale task. There 's even a term for it: mass marketing.
Mass marketing has become a key feature of the modern age. The cost of promotion per customer is very small, and the marginal cost almost zero. But mass marketing is notoriously ineffective. As the old saying goes: "I know I waste half my advertising budget - I just don't know which half." And junk mail got its name for a very good reason.
Over the years techniques have evolved to give some of the appearance of personalised service while maintaining the economies of mass marketing. The best example of this is personalised mass mailing.
It is a comparatively easy task to extract someone's name and address from a computerised database and insert it into a form letter. It has the appearance of personalisation, but it is difficult to maintain this to any high degree. We have all experienced some of the inadequacies of this approach, with letters addressed in strange and amusing ways as the software fails to cope with unusual names and formats.
That has not been the only problem. In many organisations, multiple customer lists have evolved. Banks, for example, typically have the same clients' details recorded in a number of different internal applications. The same customer may have a savings account, a cheque account and a personal loan. Insurance companies and other large organisations with multiple applications often have similar problems.
CRM attempts to solve all these problems. The idea is not new, although the terminology might be. It became apparent many years ago that it would be an advantage to bring together all of an organisation's details about its customers into one system.
Some of the early attempts went under such names as database marketing, relationship marketing and target marketing, but CRM has taken it all a step further. It is about much more than marketing; it is about management.
The American market research company AMR Research estimates the total size of the worldwide CRM market at more than $2.5 billion in 1998, and growing at more than 50 per cent a year. This does not include software from vendors who include CRM functions in their core products.
Any way you look at it, CRM is one of the fastest-growing applications in the market. It is not hard to see why: it has obvious and substantial benefits for most organisations. The larger the organisation, the greater the benefit.
Most of the early adopters of the new breed of sophisticated CRM systems are large billion-dollar-plus organisations, such as financial institutions and telecommunications carriers. Have you noticed an increase in the number of mailings from your bank and your credit card company, or from Telstra or Optus? That is CRM at work.
CRM systems are optimised to allow an organisation to build a profile of their clients, to see what sort of products and services they have now, and by matching their demographics with others, achieving economies of scale in promotion and marketing.
When you call an airline or a bank, the customer support representative can now typically get your profile on a computer screen while you are talking, allowing them to suggest other products or to impress you with their knowledge of your past dealings with the organisation.
It's all about personalising service, about using technology to bring back (or at least simulate) the kind of close attention we expect from smaller and friendlier organisations. Your insurance company is not small and friendly, of course, and the stark reality is that you are just another customer, but it doesn't want you to feel that way.
The market leader in CRM is a company called Siebel Systems, represented in Australia by james martin + co. Founded only a few years ago, Siebel is the largest player in the market, a position it has achieved by focusing on global corporations. Siebel's deals are typically in the millions of dollars. Its closest competitor is Vantive; the two have about 25 per cent of the market.
But as is usually the case in an emerging market, there is a host of smaller players - many of whom specialise in providing CRM systems for small- to medium-sized businesses. These include SalesLogix, Onyx and Pivotal. CRM systems are increasingly cost-effective for smaller companies, where many have evolved from existing contact management systems.
The CRM market in Australia is still immature. Outside large corporations little has been done, and even there the market is scarcely beyond its infancy. But you can tell the market has reached that critical growth phase - the seminar companies have moved in.
Now, if only those seminar companies would practise what they preach and do something about their own mailing lists. GRAEME PHILIPSON geepee@ozemail.com.au
© 1999 Sydney Morning Herald