Gartner: CRM is in trouble – and it could be worse than we think

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Neil Davey
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CRM is in trouble! That’s the message from the analyst’s CRM Summit. But despite the doom and gloom it’s still “a great time to be in the CRM business”. Confused?

CEOs may view it as the number one technology to add strategic value to an organisation, but CRM is still in trouble - and attendees of this week’s Gartner CRM Summit were told it could be in even more trouble than we realise.
Kicking off the London Summit, Gartner VP Steve Prentice painted a daunting portrait of the sector, describing how issues relating to data, reputation, trust and customer empowerment are all undermining CRM efforts. In short, customer relationship management’s days may be numbered, he said, as a new age of ‘customer managed relationships’ begins.
But it’s not all doom and gloom. While it will inevitably spell the end for those organisations and vendors that fail to adapt, those that evolve could prosper in a new era for business and customer relationships.  And the Summit provided a platform for plenty of speculation about the types of new CRM technologies and processes that will emerge to help businesses thrive.
"Peter Drucker said that the purpose of business is to create a customer. On the basis of that, one would assume that everything regarding CRM should be wonderful," said Prentice.
"When we asked CEOs of all of the things that IT might deliver to you, what is the most important, the number one technology that CEOs see as adding strategic value is advanced CRM. This should be good news. So why would I take the view that CRM is actually in big trouble? If the business wants it, customers are important and the purpose of business is to create a customer how can anything be wrong with CRM? But it can. And the answer is that it is probably a lot worse than we think it is."
He added: "Drucker said that companies’ prime responsibility is to serve customers and build the products and services that they want. So how is it that CRM is starting to go so wrong?"
Prentice identified the following factors as pressure points:
  • Data proliferation – We are producing approximately 15 petabytes of data every day. In 2009 alone we produced more than existed in the entire history of mankind up to that date. And that will increase dramatically over the next few years. "We are drowning in a sea of data and one of the things that will feature largely in the story of CRM will be better analytics," said Prentice. "Analytics is going to be increasingly important. We need it so that we can see more clearly. We can understand what has been done and what needs to be done and when, and what is needed and where, and what is being wasted and where, and what needs to be achieved. But we are not yet used to the scale of data."
  • People have more choice than ever – "Drucker said that when we look back in 200 years, what we will see with the benefit of hindsight is not the sweeping changes in technology, but the fact that people had more choice than ever before and chose to execute those choices. It is that power – to choose my world, my way – that is at the root of the problem for CRM."
  • Your online reputation is in the hands of the "collective" – "Online reputation is incredibly important but you cannot control your online reputation because it is controlled by the "collective" – all the groups and communities, the YouTubes, the Facebooks, the Twitters. And it has a big impact on what people think… You cannot control the collective."
  • People don’t trust large enterprises any more – "Trust is a long-term problem. The story of the financial crisis was not the collapse of the economy, the real story was the collapse in trust. In the US, Edelman recorded the largest single drop in trust between individuals and enterprises that they have ever seen. Keeping trust levels high is critical because an Edelman  survey demonstrated that 7 out of 10 people say they are more likely to buy products and services from companies they trust. And they are just as likely to stop buying from companies they don’t trust. If you want to get more customers and retain existing customers and find new ones you have to have trust."
  • Social computing – the "consumerisation" of IT has meant that computers are no longer the preserve of governments and large organisations. And the big story now is the way that we use those devices. "This is not about devices. This is about relationships. This is about the way people communicate and talk – and they are talking about you and your products. This has changed the balance of power."
Prentice emphasised that businesses must now get used to the fact that they are no longer in control – the individual is.
"Organisations used to think they were in control of products and services and the way they were priced and the communications channels and channel strategy was under your control – get over it. You are no longer in control.
"Individuals are in control. Individuals are making the choices. That means that the push economy that we have built our businesses around – that we can push products out to consumers – is now changing towards a pull. People go out and decide what it is they want to buy, they then approach the suppliers and say are you willing to supply it on my terms. That is a complete reversal. The idea of customer relationship management that we grew up with has changed. It is no longer about customer relationship management, it is much more about customer managed relationships."
Exciting times
The good news is that while CRM as we know it may be in trouble, the industry is also undergoing rapid changes. Just as the vendor landscape looks dramatically different than it did 10-15 years ago, so it will look very different by 2015, and analyst Michael Maoz outlined the CRM trends and technologies that would be emerging to deal with the new pressures.
"More and more it is going to be customers who manage their own relationships and for a business this is pretty difficult. Social CRM is out there. But how do we get to a point where we allow the customer to take more responsibility for the organisation?" asked Maoz.
As a primer, he identified the ways in which we organise our personnel and interface with customers will change:
  • Relationships will no longer be company-controlled, but more company-guided – "Customers tell us which direction to take, we’re just going to guide it... more and more you’re going to give the customer the impression that they’re on their own, doing it themselves..."
  • Rather than focusing entirely on employee empowerment we’ll be empowering the customer – "They’re going to write their reviews they may even select the price that they are willing to pay – Procter and Gamble is a great example. You don’t like the toothpaste at this price point, what price point would you like it at? Perhaps you don’t like the size..."
  • Metrics are changing – Rather than how many times you answered the phone, how many orders you took, what were your gross margins, it will move to what was the experience.
  • Corporate data and information will be more accessible - "We’re going to have to give customers more and more access to what used to be the ‘private’ information. No you’re not going to give out price sheets or privacy information, but more and more of your corporate data is going to be transparent to the customer. They are going to know why you ran a test or waited six months to tell the general public."
  • The mode of ‘we tell you’ communications is changing to participation – "If you find your firm does not foster, encourage and manage participation with customers you’ll probably be out of business."
  • Customer insight is going to drive a lot of what we do.
"To get there we have to say that this is not our CRM of the past," emphasised Maoz. "The operational elements of sales, marketing and service are still there – we’re not going to chuck it out of the window – but it now has to be accompanied by two other major areas."
These areas are the aforementioned social CRM and analytical CRM/CEM. Technologies must allow businesses to focus on personalising marketing, engage customer communities and deliver insight into the hands of customer-facing employees. Operational CRM with overlap with social CRM to support collaboration tools; analytical CRM will overlap with social CRM to support real-time advice; and analytical CRM will work with operational CRM to support real-time agent decisions.
In the short term, Maoz predicted that CRM business application investments would focus on three areas – collaboration and social CRM; customer-enabling self-service technologies; and analytics baked into applications for sales and customer service. He also forecast that the dominant delivery model for these applications would be software as a service rather than on-premise.
But going forward, there will be greater integration between these areas – and this is already beginning to take shape in the vendor environment. "What’s changing is that rather than getting all of this stuff from different vendors and then acting in islands, our clients are starting to think carefully about tying analytics, operational and collaborative together as an integrated series of actions and activities," said Maoz.
"Most systems today cannot handle this process. It can be built manually but the systems that are coming on-line contain this within them – integrating business rules for products, and real-time decisioning products."
As an example Maoz said: "You detect changes in the status of the customer, you are always monitoring them proactively... you publish that change and apply a business rule... and have an outbound interaction/conversation with them... this idea of an end-to-end system is one that you will find lacking from the systems today but we are seeing new companies coming on-line who are thinking this way. Moving away from the clunkier systems to get to where you can sense, analyse, visualise and respond to customers."
Maoz also flagged up a variety of areas that had progressed along the Gartner hype-cycle and should be on organisations’ radar: marketing mix optimisation; global integrated MRM; social marketing; social networks for sales; video in the customer service space; emotion detection; using the social channel to identify and address service issues.
The result of all of this will be a vendor landscape looking significantly different than that of today. And while most of the vendors from 10 years ago "have become part of history" (with the exception of SAS and Kana), the number of vendors has remained fairly stable, and will continue to do so, driven by emergence of new technologies. "I could do a whole seminar just on the emerging vendors in the CRM space," said Maoz.
The problem for businesses is that as we move away from traditional sales, marketing and service, they will have to re-educate themselves about the emerging technologies. "The takeaway for this is the tremendous amount of work that we need to do as businesses to begin to bring in these concepts and work out which ones are most in line with what you’re trying to achieve." Start to prioritise, he suggested, and look for quick wins – perhaps such as in the mobile space, an area continually identified by Summit experts as a key area.
But if 80-90% of CRM vendors will be disappearing from 2010, what does that mean for businesses? Should they opt for large enterprise application vendors because they are the only ones that are stable? Maoz disagreed. "Let’s use the analogy of the cellphone of 1997 – you didn’t wait because it was an ugly brick, you rapidly iterated, you didn’t wait around until it was perfect. The same way here.
"Think of it as disposable applications. It means grab the business value, get it on board, use it, especially if it is SaaS anyway where it is not a lot of commitment to infrastructure. None of the companies I’ve seen in the last three years have been anything but SaaS, so the utility computing model is the way things are going."
And Maoz concluded by assuring attendees that while it may be a tough time to be in CRM – it’s an exciting ride. "This is probably the most exciting time in the last 20 years to be in the space of customer management. The customer is getting more tools in their hands, more devices, more functionality, they are looking for more inspiration," he concluded. "The level of trust is very low – but the bar is very low. People look at that as a negative. I look at the upside. All I can do is succeed! They don’t’ trust me anyway. Let’s show them why they should trust me. I can show them I’m working on their behalf. It is a great time to be in the customer area."

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17th Mar 2010 13:43

This analysis opens up a serious challenge: in a world where increasing numbers customers are becoming trusted commentators thanks to social media, whose job is it to converse with them? Nielsen Data shows that the opinions of strangers online has now overtaken editorial media as a source of trust when choosing a brand. A blogger with established clout is probably the domain of your PR function. But what about a customer with 500 Twitter followers? They are probably directly influencing as many if not more people than many journalists. Who talks to them and nurtures the relationship? Are in-bound customer contact centres with their reputation as sources of customer frustration the best places to find skill-sets normally associated with non-customer facing functions such as PR and marketing?

Nigel Sarbutts

www.brandalert.co.uk

 

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17th Mar 2010 16:53

Based on this summary I feel the diagnosis of the problem with CRM is correct but the suggested treatment in the form of new technologies doesn't necessarily provide a cure.  

All the new technology in the world will not make a difference unless the mindset changes.  The traditional CRM mindset focused on the benefits for the company - how operations could be made more efficient, how more value could be extracted from customers - not on improving the customer's experience.  And it is pretty clear that the same mindset is being applied to the new technologies coming on stream.  Certainly for all the talk of social CRM enabling conversations, the majority of pitches describing its benefits focus on the 'what is in it for the company' line.  If you can only articulate the benefits for one side of a conversation it will pretty quickly turn into a monologue.  Perhaps not surprising then that Gartner Predicts 2010 for CRM referred to the risk of customers being stalked on social networking sites and the likelihood of internet marketing being regulated by 2015.  

The same argument applies to predictive analytics.  If it is solely focused on the business interests such as identifying trigger points for purchases so appropriate messages can be sent, ultimately customers will be swamped.  If it is about trying to understand customers real underlying needs so they can be served better, then it will deliver value to both parties.  Again self-service can be a win for both sides, but if seen just as a means for the business to take out front end costs it won't be. 

Unless marketers and those responsible for CRM genuinely embrace the Drucker viewpoint, not simply parrot it, the same problems will exist.  In that regard I share Steve Prentice's view entirely.  I am just not sure that the new technologies coming on stream signify that shift has occurred or whether it will just be a case of more of the same. 

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By pkward
18th Mar 2010 13:30

These comments on the trouble CRM is in all fit into the five forces of customer experience that yours truly teaches globally. If Michael Porter's five forces is a comfortable sweater, my five forces of CEM is the sweater worn inside-out. Porter talks about creating economic value in the market, while the five forces of CEM have to do with the influences that affect creating economic value in the customer.

OK, end of plug. A couple of disturbing old-school perspectives in this article. 1. While it's good to proactively monitor customers (attitudes, behaviors), to then apply a business rule to a customer's state information to trigger an "outbound conversation" is very odd indeed. Does the customer desire a conversation? If not, you're interrupting them in a way that could potentially destroy economic value (unwelcome interactions are the new version of "used car sales"). 2. GIGO: Drucker's right when he says you have to give customers what they want. But customers don't often know what they want; they often don't think of themselves as customers; and even if you have what they "want", you have a lot of trust-building to do (or desire to create) to move something new off the shelves and into the lives of your customers. The devil's in the details, and it goes beyond the traditional utilitarian model of "value proposition". So what kind of information do you need to track to really answer the question, "What does my customer want?" If you don't collect that information you will have a classic case of garbage-in-garbage-out. (I'm overstating here. Good customer data is better than none, and it can help spot trends you can capitalize on.) 3. It's ridiculous to say that you can't deal with "the collective". Sure, you cannot MANAGE it, but you've got to drop the old-school paradigm. You're in an ecosystem, so behave appropriately: accept, process, and give out information; interact; create sub-ecosystems; don't hide; don't pretend. I use the acronym MIB (think "Men In Black" to remember it) to describe the new management culture. Manage what you can. Influence what you cannot directly manage. Balance negative results when they happen. This means that management MUST have new competences. Influence is done through constellation marketing, new partnership strategies, corporate social responsibility, social media strategies that are authentic, customer-driven innovation platforms, addictive customer behavior models, etc. And balance means that your corporate crisis communications tools must be adept and nimble in all the new channels, wherever your customers and potential customers dwell.

Just my .02! 
 

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18th Mar 2010 13:59

 The best CRM design factors customers needs and interests and the next generation system must factor customers as end users. ("Back off!" you self service vendors - that's not the solution)

Customers assemble their own customer experiences from need through shopping, payment, shipping, repair, disposal and community comments (15 customer life cycle stages, see "Customer Worthy" book), knowingly and unknowingly using a blend of vendors and channels. Clever marketing and product innovation mask the underlying complexity of new offers leaving customers and partial-view customer service resources responsible for unraveling bad experiences. The cost born by customers is unsustainable  (see Customer Worthy: Customer Payback formula, the numbers are staggering and becoming more public).

So CRM must evolve to incorporate the customer's perspective, yes, with customer assembled process and resources that are mutually viewable by a company, customer and all stakeholders. Many of the pieces exist in current technologies, IBM has all the pieces but does not assemble them off the shelf this way (yet - and they are not in the CRM stack - add  BPM, analytics, digital asset management, web services...), Oracle has many pieces, SAP has many pieces, MSFT - kind of, the Chordiant Pegasystems acquisition has some of the right ingredients - anyway the tools are around and some simply need to be repurposed to support the customer centric design (see CxC Matrix).

Customer centric design is not the same as the 360 degree view formerly touted by Gartner, data warehouse guru's and system integrators, it is a view built with customers viewed as collaborators at each stage of the customer process, across all channels, all departments  - this is the new reality of CRM and corporate IT in general.

Your thoughts? Michael R Hoffman

 

 

 

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By bearddd
19th Mar 2010 18:13

As technology turns over, so do the stories. And the noise to get them heard.

But, Jack, and the others, make sounds & succinct points. Ask why customers buy, how & where they do this, what are their expectations of the service wraparound, etc. Sounds like Business 101, right ? Focus on your customers and all that.

However, I still think the day-to-day reality is very different - people are trapped in old mindsets. This is way our business has always worked (internal mindset).

Time to remind everyone of the simple rules of engage, listen & understand. Then work out the right tools to deal with the rules - engage (analyse & learn from data), listen (social media & whatever else) and understand (put it into a CRM system)

-= David

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21st Mar 2010 22:11

Gartner: CRM is in trouble – and it could be worse than we think

FIRST - this dialogue is emerging as one of the best published, by anybody, to date.......thank-you to the few of the 2400 readers who have shared their opinions so openly.

SECOND - my  '0.02 worth', as one respondee so eloquently put it, is a DISSENTING OPINION!

I quote a comment that I made in 1986, published in Pharmacia News, Special Issue:

"Sales Managers in some companies still insist that sales representatives spend most of their time 'selling'.  They have not understood that interaction between the sales force and the market is the ideal opportunity to collect the 'cusomer need' information that enables the company to offer the right products to true potential customers at the right time to influence their purchase decisions. "

"The customer is not always right."

 

In his latest book, ‘Re-inspire’ Tom Peters states that it’s a mistake to simply be customer-driven. As Tom says “it’s the best way to destroy a company.”

 

"Good management is about giving our best customers what they want ... right?"

 

"Right.  And that's the problem."

 

Clayton Christensen in his book The Innovator’s Dilemma says: “The highest-performing companies have well developed systems for killing ideas that their customers don’t want. As a result, these companies find it very difficult to invest adequate resources in disruptive technologies—lower-margin opportunities that their customers don’t want—until those same customers decide that they want them.And by then it's too late."

 

The bottom line is that if vendors don't perceive customer =NEEDS= before the customer it's too late to be CUSTOMER-INSPIRING which surely would be an enviable POSITIONING (positioning has to be earned!) .  So while other respondees have stated that CRM interaction will be customer 'initiated in the future, that maybe is what customers say they WANT, but I'm sure that most customers would prefer to be INSPIRED with respect to NEEDS than to get competing offers for what they say they 'WANT'. Being customer-inspiring is to think INDUCTIVELY rather than DEDUCTIVELY.

 

So what about PFCN?  Profitable Fulfillment of Customer Need......or would you prefer PFCW?  Profitable Fulfillment of Customer Wants. Surely Customers will be pleased to allow inductive-thinking vendors to 'profitably fulfill their (customer) needs'.

 

Now, with respect to what CRM users will look for in CRM systems, I suggest that CRM system users really have only one NEED, and that is to conduct their processes EFFECTIVELY - where EFFECTIVENESS (E)  is defined as a function of QUALITY (Q) and PRODUCTIVITY (P) - where the latter is reciprical of cost of conducting the process, being such as 'selling' or ' delivering' which, by-the-way, are the processes conducted by two-thirds of all mobile workers. SaaS might marginally improve the 'Productivity' of these processes (by automating the old processes) but will certainly not increase the Quality of processes and will eliminate any hope of 'process' being a sustainable competitive advantage because all users will be constrained by the generic SaaS.

 

There is a fundamental problem with CRM design and that is that the Functional Requirements (FRs), defined by TOLERANCES on  QUALITY and PRODUCTIVITY of processes are COUPLED - and the only way to break out of this strong coupling is by process re-engineering. A little-known approach to this dilemma is AXIOMATIC DESIGN.

 

So the future is ORDER-BASED DESIGN of CRM systems that enable TRANSFORMED processes.

 

MOBILE PROCESS SERVICE, for example, will be an emerging service that will enable TRANSFORMED mobile processes - which, of course, includes Selling and Delivering of tangible products and such as field engineering services.

 

That's the DISSENTING 0.02 worth for today.

 

Respectfully

 

Brian

 

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