Opinion: Losing customers with CRM
16-Aug-2006
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Strip-mining is simple. You find a patch of earth and dig until you’ve used up what's there. Then you hope you can find somewhere else to dig.
Traditional CRM platforms encourage this same approach to customer, argues RightNow Technologies CEO Greg Gianforte. They're designed to help companies squeeze as much revenue out of their customers as possible. These platforms simply accelerate the process by which companies strip-mine and then lose their customers – forcing them to constantly find new victims.
In fact, while 76% of firms polled by a leading analyst firm indicate they have some type of CRM, 80% of customers stop doing business with companies because of a bad experience. So there are obviously lots of companies that have deployed traditional CRM and still treat customers badly enough to lose them.
The flaw in the strip-mining CRM mentality is obvious. 'Old Order' CRM vendors want you to believe that, with the right data and analytics, you can more effectively manage, control and sell to your customers. But customers don’t want to be managed, controlled or sold to. They want to be understood, have their needs met, and receive value. The back-office, sales-driven CRM platforms of the past don’t do that – because they’re designed for strip-mining customers, rather than pleasing them.
Strip-mining CRM may have worked in the last century, when markets were local and e-commerce was not yet pervasive. But it won’t work in today’s hyper-connected "flat earth" market as described by Thomas Friedman, where customers can take their business elsewhere with almost no effort. The balance of power has shifted from the company to the customer. The future therefore belongs to companies that can deliver a consistently pleasing customer experience – rather than those that continue to view their customers as commodities to be exploited to the maximum.
In other words, CRM is no longer about strip-mining. It’s about treating customers like the renewable resources they actually are.
The truth is that traditional CRM can’t meet the new challenges posed by today’s highly competitive global markets. In these markets, you have to make sure that every customer experience is a positive one. This kind of exceptional customer experience requires greater intelligence across the frontlines of your business – including service, marketing and sales. It requires the ability to respond in real time to your customers’ explicit requests and implicit behaviours. And it requires technology that empowers customers as much as it empowers back-office tacticians.
Experience-enhancing, relationship-sustaining technology isn’t something you can get from Old Order CRM vendors, because their goal is to sell you a big database and a lot of software. Instead, the industry is shifting to a new generation of vendors that enable a competitively differentiated customer experience and are actually accountable for delivering the business results they promise.
Ironically, Old Order CRM vendors have succumbed to their own flawed approach. Companies like Oracle and SAP have become notorious for strip-mining their corporate clients. So how can they possibly help any company build great long-term customer relationships?
That's why you should ask yourself one simple question before making a strategic CRM decision: "Do I want to strip-mine my customers, or do I want to foster loyal, long-term relationships?" If you want to do the former, then go ahead and buy software from an Old World CRM vendor whose business model is itself based on strip-mining. If you want to do the latter, look for a vendor that consistently fosters loyal, long-term customer relationships. There’s little chance you’ll buy anything from Oracle or SAP.
About the author
Greg Gianforte has led RightNow from its founding in 1997 to 34 consecutive quarters of revenue growth, 17 consecutive quarters of cash-flow positive performance and a successful IPO. Ernst & Young awarded Greg the Pacific Northwest 2003 Entrepreneur of the Year for the software category. Greg is also the author of Bootstrapping Your Business: Start And Grow a Successful Company With Almost No Money. Greg holds a BE in electrical engineering and an MS in computer science from Stevens Institute of Technology. www.rightnow.com
MyCustomer.com 16-Aug-2006
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by 5 user(s)
I don't agree with your view that the choice of CRM software is irrelevent.
Over the past 12 years, I have been closely involved with "CRM" in its various guises, and the one thing that's clear is that unless the vendor's technology supports a real-time flexible process-based approach, then the CRM project is unlikely to meet expectations.
All the vendors have to talk the same talk, yet their technology has lacked the ability to deliver on the vision. Why? Because if you were Siebel for instance (talking of strip-mining), you had to sell what you had, and lots of it to keep Tom happy. Yet it was an old hard-coded client/server application, and unless the client wanted what Siebel said they should have, would need to bend it out of all recognition to try to make it fit the need.
You can change the business thinking and strategy without technology, but cannot deliver the results, especially in large, complex corporates, without the right technology. In reality, the available technology to achieve the vision, has been commercially viable only over the past 2-3 years.
It follows that the vendors who have made the right bets on their technology platforms, will be the vendors most likely to be able to help clients deliver on on their visions... but in managed step changes, not all or nothing.
If you take a look at the the three best independent studies of success in CRM projects, (carried out by CRMGuru, Wharton & Insead), they all point to the fact that the choice of CRM vendor is not a critical success factor for CRM projects. Indeed, to the fact that providing a basic level of enabling CRM systems are available to the business, the implementation of CRM software is not even a critical success factor.
Reality is, whether you use SAP, Oracle, Right Now, Salesforce or any other CRM vendor's technology is utterly irrelevant. What matters is how you use the technology to deliver a customer-driven strategy, through the whole organisation, over the end-to-end customer experience.
Graham Hill
Independent CRM Consultant
Greg, I like your strip-mining analogy.One thing that has become very clear to me, in my recent interviews - especially the one with Lyell Strambi of Virgin Atlantic this week and Peter Simpson ex First Direct in June, is that the attitudes to customers makes the biggest difference, and that is led and encouraged from the top. If the 'top' has a strip-mining mentality, than even modern technology won't be of much use, other than to annoy customers more efficiently than before.
regards
Jeremy
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Bravo!
I look forward to your next article.
John Lavallée
Presales Manager - CRM