Six Changes in CRM

Technology does not exist in a vacuum. World-shaking political and economic events, like 9/11 and the recession of 2001–2002, must inevitably impact the ways vendors sell technology and the ways enterprises incorporate that technology into their business processes. Customer Relationship Management (CRM) is no exception to that rule, so Selling Power asked a group of CRM analysts and experts (see sidebar) to describe how things have changed for CRM technology over the past two years.

Comments from our experts revealed that the events of the past two years have created six important impacts on the sales process inside enterprises and on the way that CRM systems are purchased, sold, installed and used. The economic downturn has not only resulted in slower sales of CRM systems, but also has put additional pressure on sales professionals to make existing systems function more effectively. In order to accomplish this, the CRM industry (both vendors and customers) have moved toward a back-to-basics approach in which return on investment (ROI) is king. CRM vendors are rapidly adapting their marketing and sales activities to help companies achieve these goals. Finally, the 9/11 disasters have made enterprises aware that their CRM systems may be vulnerable to terrorist attack.

Impact #1: Sales of CRM systems are generally lower than in previous years.

Joe Galvin, Gartner Inc.: Research indicates that such point-of-need solutions as incentive compensation management applications and partner relationship management technologies are gaining traction in this ‘tangible ROI’ environment. This has had a dramatic effect on the growth of U.S. CRM software sales, with overall spending down 6.4 percent in 2001. Still, in excess of $3.7 billion was spent in 2001, and projections of similar spending remain for 2002. This supports the fact that the core CRM premise of building business strategies enabled with technology to increase customer loyalty and satisfaction remains a powerful strategic driver of revenue.

Cheryl L. McCarthy, Surado Solutions: Although the recession has resulted in industry-wide lower-than-projected CRM sales, Surado’s CRM sales have increased by approximately 40 percent for the first six months of 2002 when compared to the same period in the preceding year. CRM is one of the market segments most likely to recover the soonest because it makes the most bottom-line sense, so we are looking forward to growing our market share even more when the market picks up. The companies that have the best all-around solutions (price, performance and service) will be best positioned to win.

Debbie Qaqish, Firstwave Technologies: The recession and events of 9/11, combined with a much more educated customer, have created a client perspective that is different from what many vendors are purporting. Just as CRM as an industry has matured, so has the knowledge of the CRM buyer. CRM-savvy clients are not willing to accept failed implementations, unmet promises, or too-costly and time-consuming implementations. They want technology that will work for them, not require them to redo all of their systems and legacy to fit CRM. They want a solution that will suit their needs today and grow with them into the future. And they want to buy only what they need, when they need it.

Impact #2: Sales professionals are under the gun to make CRM work effectively.

Erin Kinikin, Giga Information Group: In my view, the downturn marks the end of the “elephant season,” requiring sales to sell more smaller deals and prove value at each step. Telesales and partners will play a bigger role in smaller sales, and demand-chain cooperation will move to the forefront for CRM initiatives in industries like insurance. Also, in a slower economy the customer base is a critical asset. Sales incentives will include customer satisfaction or retention pay, and account management will mean more than just maintaining contact information. I expect that a new marketing focus on retention and cross-selling will raise lead quality and improve marketing and sales cooperation.

Galvin: I feel that the long-term implication of this recession for sales is the increased demand for visibility, accuracy and accountability. The days of being able to “sell through” mistakes in the opportunity life cycle are gone, as salespeople face a reduced set of potential opportunities. The pressure to execute on the opportunities that do exist and the intense competition for each deal leave little room for error. This will force sales organizations to adopt a more disciplined approach to selling that will be focused on execution of a prescribed sales process and methodology.

Steven Sherkanowski, Pragmatech Software: Most indications point to the fact that 9/11 has brought many companies to realizize that added emphasis must be given to the sales process itself. Customers are considerably more demanding in terms of satisfaction of their needs, and it becomes very important that all sales personnel recognize this and react accordingly. In the foreseeable future, operating managers will be far more responsible to senior management when requesting the needed dollars involved in reaching company goals. They will be in the more demanding position of having to show that they considered all of the options available to them for each and every expenditure.

Impact #3: CRM is now focusing on “back-to-basics” business issues.

Kinikin: I think that the recent worldwide recession and events of 9/11 are driving a back-to-basics movement in CRM in general and in the sales profession in particular. “People, results and customers” is the new mantra for sales success. The sales profession is also gaining strength as companies realize that p(eople)-business, not e-business is the key to customer success. CRM systems will evolve to put the salesperson back in control, augmenting data-entry style contact management to allow sales to sign off on customer communications, monitor electronic transactions such as repeat orders, and match leads with the right potential solution and sales tools.

Adam Honig, Akibia Consulting: I would say that CRM grew up post-9/11 and during the recession. Prior to then, projects were justified on hunches; the cost of capital was so low that it didn’t make sense to spend time analyzing the ROI of a CRM engagement. We were all in a Nike commercial. In the pre-9/11 world, every idea had merit; in the post-9/11 world, only the fittest ideas would survive – and only when scrubbed back and forth. And you know what happened? Turns out that, unlike 99 percent of the initiatives launched 1996–2000, CRM had a clear business value and paved the way to higher sales, lower costs and increased intangibles like “customer experience.” CRM grew up because it was forced to justify itself.

Impact #4: CRM must now fulfill return on investment (ROI) expectations.

McCarthy: Sales and advertising messages for CRM vendors are shifting to a more back-to-basics focus. The approach will be simpler; implementation will be scaled back to more manageable bites and streamlined – allowing top companies to better focus on ROI. I suspect that the bigger CRM companies will be the hardest hit due to their sheer size and their overhead support requirements. Those with the biggest cash positions will have the most flexibility and will continue looking for opportunities for consolidation. Smaller companies emerging from the shakeout who are nimble, innovative and responsive will be well positioned to provide more focused product delivery with lower overhead. The clear CRM winners, large or small, will be the ones who can clearly articulate the value of their products and services – and back them up with results.

Galvin: The recession of 2001–2002, combined with the intense financial focus on earnings, has forced the postponement of many enterprises’ plans for expansion or investment in CRM technologies. As enterprises seek to reduce costs, many CRM initiatives have been delayed or halted entirely. At a minimum, enterprises are looking much harder at when and where ROI will occur. CRM investments have become focused on solving specific business challenges, with reasonable deployment time frames and measurable ROI. When corporate spending normalizes, it will be within the established client base where opportunities will first be present. Failure to meet and exceed client expectations during the recession will be penalized when spending resumes, again reinforcing the criticality of a CRM strategy and the ability to execute against it.

Qaqish: CRM customers want technology that will work for them, not require them to redo all of their systems and legacy to fit CRM. They want a solution that will suit their needs today and grow with them into the future. And they want to buy only what they need. The dichotomy between how vendors want to sell and how clients want to buy will require CRM vendors to offer a more à la carte genre of CRM which will include a framework approach with relevant features and will leverage customer legacy, including systems, people and processes. The end result is that the clients can buy what they need, when they need it.

Impact #5: CRM vendors are changing their own marketing and sales activities.

Qaqish: The current recession and market nervousness created by the events of 9/11 have exacerbated what we see as a dichotomy in the CRM market today – how vendors want to sell versus how clients want to buy. From a CRM vendor’s point of view, features are king. The more feature rich the CRM product, the better. Many CRM companies have made their fortunes in this lucrative market by touting features, features and more features. They have built their companies, infrastructures and technologies on this premise. And as long as there was an up market, there was lots of money to spend, and the promise of CRM was still new, this was a successful strategy.

Honig: The sales professional is facing the same kind of issues that CRM vendors are facing; there’s a real emphasis on substance over style. How can they get a deep enough understanding of their client to propose a solution that will make the customer more money? We will all be selling two or three levels deeper than before. It will be harder, but we will all be the better for it.

Impact #6: Companies are concerned about disaster readiness of CRM.

McCarthy: The events of 9/11 were tragic, but they underlined even more the importance of having a good CRM system at the core of any company’s infrastructure. By enabling the entire organization to have a comprehensive view of each customer and work as a team, members can pick up where others left off – even in emergency situations.

Mike Doyle, Salesnet Inc.: I think that the combined events of September 11 and the downturn of the economy have significantly sped up the paradigm shift from client/server applications to Web-based deployments. After 9/11, remote data hosting became a requirement for any business that stores critical business information, because having only one central location where information is stored is no longer a smart way to manage your company’s data. If you look at the history of software development, you’ll see that mainframe computers held their prime for nearly 20 years and then were replaced over a span of 12 years by client/server applications. In the late 1990s, Web-based business applications surfaced, and thus a new paradigm for CRM deployments has appeared. The long-term implication for the sales profession is that the client-server model of CRM will become extinct and will be replaced with Web-based applications.