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Vendor relationship management: CRM threat or opportunity?

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26th May 2008
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With vendor relationship management now on the agenda of large public and private organisations, could VRM be set to change market dynamics? Graham Sadd explores VRM and its potential.

By Graham Sadd, PAOGA

Nearly two years ago, MyCustomer.com published Opinion: Click my EULA! in which I proposed the benefits of not just individual-centric but individual-driven databases of personal information. My thoughts included:

“Flipping CRM! I want supplier relationship management (SRM) with my EULA (end user licence agreement) stating clearly that a supplier will comply with the Data Protection Act and only use the relevant information provided in order to provide the product or service I am interested in and will amend or delete it when I no longer wish to do business with them.”

Since that time there has been a dramatic increase in the awareness and concern of consumers in the value of their personal information as well as the risks of identity loss and abuse. At the other end of the supply chain, organisations (public and private) are questioning the ROI of collecting, storing, maintaining, cleansing and protecting individuals' personal information against the risks of reputational damage or even up to two year prison sentences for abuse.

Back in 2005, Doc Searls reported on CoRM (company relationship management). But this year 'VRM' (vendor relationship management) has become the accepted acronym in the UK and the US, with a growing number of Web 2.0 businesses, large and small, attending regular discussion groups to define the proposition. These are likely to be substantially in line with the Open Social Web ‘Bill of Rights’.

Buy-side benefits of VRM:

  • My identity, multiple persona and personal data and documents, stored in my personal, secure ‘digital safe deposit boxes’ accessible only by me.
  • The ability to ‘share’ relevant data or documents, on demand or persistently, with specific suppliers with whom I want a relationship.
  • The convenience of ‘write once, use many’.
  • An audit trail of organisations that have, with my permission, viewed or copied information.
  • The ability to have specific data and documents ‘authenticated and certified’ by appropriate trusted third parties and agencies to increase trust/value.
  • Revenue potential for me to ‘market’ my personal information (eg anonymous medical records).

Sell-side benefits of VRM:

    • Reduced costs of collection, storage, maintenance.
    • Increased accuracy and granularity of data (what I want rather than what I have bought).
    • Reduced risks, financial and criminal, of data abuse/loss.
    • Improved relationship with respect for my information.

    VRM issues:

  • Drivers – victims of identity/information abuse; convenience of ‘write once, use many’; income from personal data marketing.
  • Laziness – many individuals will baulk at the prospect of entering sufficient data to enjoy the benefits of VRM. They are, and will continue to be, content with being ‘managed’ until abused.
  • Resistance – defence of suppliers legacy systems/process/investment.
  • Trust – verification, authentication and certification of identity and data by trusted third parties will be a growing service, as will independent key server providers for security.

     

Significantly, VRM is now on the agenda of large public and private organisations that are recognising the benefits of providing their customers with the tools to complement and contribute to their CRM data ‘with their consent, for their benefit’.

CRM was developed, in the enterprise-centric world, with the commendable ambition of organisations being able to understand their customers better and therefore ‘push’ ‘relevant’ information. Organisations have invested considerable capital and ongoing costs in CRM for competitive advantage but, with the penetration of broadband and Web 2.0, we are now in the individual-centric world who want to ‘pull’ relevant information.

A good example of this is spam. Spam filters apply algorithms to ‘block’ their definition of spam. If an individual is interested in Viagra then it is, by definition, not spam as far as they are concerned but relevant information.

 

"I don’t see VRM as a threat to CRM but as an opportunity to justify the word ‘relationship’ by facilitating a two-way conversation between buyer and seller."

Therefore, VRM compliant email services will provide the individual with control over their inbox including ‘invitations’ for specific products or services with the facility to use multiple temporary, anonymous email addresses which can be discontinued when an appropriate supplier is identified.

Suppliers (registered and verified) will be able to ‘publish’ campaigns (insurance, holidays, cars, double glazing, wine merchants, gardening services, etc) which will be guaranteed delivery to interested individuals – hot leads. The supplier will be able to query the database, without compromising an individual’s identity, to see exactly how many ‘hot leads’ are interested in their product/service and therefore know exactly how much a campaign will cost. Query variables could include profile matching individuals demographic and geographic data.

This cost could be shared with the hot leads that open the email. Given that it costs the insurance sector c£80 (in marketing costs and list buying) to identify a hot lead, paying £10 to the individual for their attention would seem to be a win:win and considerably more measurable than the declining classified ads channel or even online directories both of which require more effort from the customer than the supplier.

One ‘invitation’ from an individual expressing interest in, say, double glazing could deliver 10 campaign emails (complying with their stated criteria, say, less than £1,000) into their temporary anonymous inbox through which a ‘conversation’ can take place (request for quote) with the identity of the individual only revealed when they decide to establish a relationship with the supplier. The individual can then ‘kill’ the temporary email address so they have no risk of spam from the other nine companies or of their contact email being shared or sold.

This is only one example of how VRM changes market dynamics, flipping B2C to C2B, between buyer and seller and, of course can be employed at any point in the B2B supply chain.

In my opinion, there is no doubt that VRM is coming because there is a real and growing problem and the technology promises to deliver a solution. The ‘when?’ depends upon effective marketing.

I don’t see VRM as a threat to CRM but as an opportunity to justify the word ‘relationship’ by facilitating a two-way conversation between buyer and seller. Go to any street market to see discovery, conversation, comparison, transaction and exchange take place without either party needing to know each others name, address and inside leg measurement before they begin.

Graham Sadd is founder of PAOGA, developer of PAOGAperson, a Personal Information Management Service (PIMS) for the safe storage and maintenance of critical information and documents by an individual.

 

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By Buster
21st Jan 2009 18:45

Back in 2003 I led the development of an Enterprise Vendor Relationship Management solution which attempted, from a corporate perspective, to invert the CRM relationship. The product created ways to aggregate all the different vendor touch points within the company, track commitments and key contract terms and dates, and change the playing field from largely savvy sales people selling to unsophisticated buyers who have little to no information.

It has continued to seem as though there is something there in this idea, and perhaps it's time is really coming?

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