The History of CRM

Customer relationship management is a concept that

became very popular during the 1990s. It offered long
term changes and benefits to businesses that chose to
use it. The reason for this is because it allowed
companies to interact with their customers on a whole
new level. While CRM is excellent in the long term, those
who are looking for short term results may not see much
progress.
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One of the reasons for this is because it was difficult to
effectively track customers and their purchases. It is also
important to realize that large companies were
responsible for processing tremendous amounts of data.
This data needed to be updated on a consistent basis. 

In the last few years, a number of changes have been

made to Customer relationship managementthat has
allowed it to advance. These capabilities have allowed
CRM to become the system that was once envisioned by
those who created it. However, the biggest problem with
these newer systems is the price. A number of
personalized Internet tools have been introduced to the
market, and this have driven down the cost of
competition. While this may be a bane for vendors who
are selling expensive systems, it is a bonanza for small
companies that would otherwise not be able to afford
CRM programs. The foundation for CRM was laid during
the 1980s. 

During this time, it was referred to as being database

marketing. The term "database marketing" was used to
refer to the procedure of creating customer focus groups
that could be used to speak to some of the customers of
the company. The clients who were extremely valued
were pivotal in communicating with the firm, but the
process became quite repetitive, and the information that
was collected via surveys did not give the company a
great of information. Even though the company could
collect data through surveys, they did not have efficient
methods of processing and analyzing the information. As
time went on, companies begin to realize that all they
really needed was basic information. They needed to
know what their customer purchased, how much they
spent, and what did with the products they purchased. 

The 1990s saw the introduction of a number of advances

in this system. It was during this time that
term Customer relationship management was introduced.
Unlike previous customer relationship systems, CRM was
a dual system. Instead of merely gathering information
for the purpose of using for their own benefit, companies
started giving back to the customers they served. Many
companies would begin giving their customers gifts in the
form of discounts, perks, or even money. The companies
believed that doing this would allow them to build a
sense of loyalty in those who brought their products. 

Customer relationship management is the system that is

responsible for introducing things such as frequent flyer
gifts and credit card points. Before CRM, this was rarely
done. Customers would simply by from the company, and
little was done to maintain their relationship. Before the
introduction of CRM, many companies, especially those
that were in the Fortune 500 category, didn't feel the
need to cater to the company. In the minds of the
executives, they have tremendous resources and could
replaces customers whenever it became necessary. While
this may have worked prior to the 1980s, the
introduction of the Information Age allowed people to
make better decisions about which companies they would
buy from, and global competition made it easier for them
to switch if they were not happy with the service they
were getting.
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Today, CRM is being used to achieve the best of both
worlds. Companies want to maintain strong relationships
with their clients while simultaneouslyincreasing their
profits. The CRM systems of today could be called "true"
CRM systems. They have become the systems that were
originally envisioned by the pioneers of this paradigm.
Software companies have continued to release advanced
software programs that can be customized to suit the
needs of companies that compete in a variety of different
industries. Instead of being static, the information
processed within modern CRM systems is dynamic. This
is important, because we live in a world that is constantly
changing, and an organization that wants to succeed
must constantly be ready to adapt to these changes.

Read Next: Technical Aspects of CRM

What is CRM?
Customer Relationship Management is an information industry
term for methodologies, software, and, usually, Internet
capabilities that help an enterprise manage customer
relationships in an organized way. For example, an enterprise
 might build a database about its customers that described
relationships in sufficient detail. Therefore, management,
salespeople, people providing services, and perhaps the
customers could directly access information, match customer
needs with product plans and offerings, remind customers of
service requirements, and know what other products a customer
had purchased. According to one industry view, CRM consists of:
 Helping an enterprise to enable its marketing departments to
identify and target their best customers, manage marketing
campaigns with clear goals and objectives, and generate quality
leads for the sales team.
 Assisting the organization to improve telesales, account, and
sales management by optimizing information shared by multiple
employees, and streamlining existing processes (for example,
taking orders using mobile devices).
 Allowing the formation of individualized relationships with
customers, with the aim of improving customer satisfaction and
maximizing profits; identifying the most profitable customers and
providing them the highest level of service.
 Providing employees with the information and processes
necessary to know their customers, understand their needs, and
effectively build relationships between the company, its customer
base, and distribution partners.
Brief history of CRM
With the advent of e-commerce comes the e-customer. According
to Vantive, a customer relationship management solutions
provider, the e-customer expects constant access to a company;
through e- mails, call centers, faxes and websites. They demand
immediate response and a personalized touch. Meeting their
needs places new demands on the enterprise. Since traditional
enterprise resource planning applications did not include a
customer management aspect, CRM was the logical next step.
Vantive, for example, has been developing and implementing
customer-facing applications since 1992.
 Two trends have brought CRM to the forefront, explains Boston
University professor Tom Davenport, who directs Andersen
Consulting’s Institute for Strategic Change. First, as global
competition has increased and products have become harder to
differentiate, “companies have begun moving from a product-
centric view of the world to a customer-centric one,” says
Davenport.
Second, technology has ripened to the point where it is possible
to put customer information from all over the enterprise into a
single system. “Until recently, we didn’t have the ability to manage
the complex information about customers, because information
was stored in 20 different systems,” says Davenport. But as
network and Internet technology has matured, CRM software has
found its place in the world.
Why is it necessary?
Many companies are turning to customer-relationship
management systems to better understand customer wants and
needs. CRM applications, often used in combination with data
warehousing, E-commerce applications, and call centers, allow
companies to gather and access information about customers’
buying histories, preferences, complaints, and other data so they
can better anticipate what customers will want. The goal is to
instill greater customer loyalty.
Other benefits include:
 Provide faster response to customer inquiries.
 Increasing efficiency through automation.
 Having a deeper knowledge of customers.
 Getting more marketing or cross-selling opportunities.
 Identifying the most profitable customers.
 Receiving customer feedback that leads to new and
improved products or services.
 Doing more one-to-one marketing.
 Obtaining information that can be shared with the company’s
business partners.
Market leaders
The top vendors of CRM software include Siebel, Vantive, and
Clarify along with ERP vendors Baan Co. and Oracle Corp. These
top five vendors contributed 40 percent of overall CRM revenue,
with the market leaders growing a hardy 90 percent combined in
1998.

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In the growing segment of CRM professional services, market

leaders include Andersen Consulting, Cambridge Technology
Partners, CSC, Deloitte Consulting, EDS/Centrobe, eLoyalty,
Ernst & Young, IBM Global Services, KPMG, and
PriceWaterhouseCoopers.
The future of CRM
AMR Research expects the CRM market to change dramatically,
reaching $16.8 billion by the year 2003. The CRM segment is
expected to witness 60% revenue growth this year, with
compound annual growth of 49% by 2003. Companies are
developing business plans with CRM strategies as the driving
element, as customer service is a top priority.
Read more: http://articlesThe Evolution Of Relationship
Management
CRM must start with a business strategy, which drives changes in
the organization and work processes, which are in turn enabled
by Information Technology. The reverse does not work. Have you
ever seen a company automate its way to a new business
strategy? 

The seeds of modern-day CRM were sown in the 1960s.

Academic researchers found that the "4 Ps" marketing
framework--product, price, place and promotion was less valuable
for industrial or service-centric businesses where ongoing
relationships were critical. By the 1980s, "Relationship Marketing"
was used to describe this new focus on understanding customer
segments, delivering ongoing quality service, and achieving high
customer satisfaction. 

Relationship marketing was about "putting the customer in the

middle of the business circle," in the words of Dick Lee, principal
of St. Paul-based Hi-Yield Marketing. "As part of that early
relationship marketing movement, we had untold frustration
because we didn't have the technology to support what we were
doing," Lee says. "It really wasn't until mid-90s that we had the
technology we needed." 

In the 1990s, computer systems were deployed to support sales

and service processes. Sales Force Automation systems quickly
evolved from simple contact managers, while Customer Service
and Support systems became the backbone of automated call
centers. 

By the mid-1990s, "CRM" became the umbrella term as it became

clear that sales and service systems should share information.
More recently, Enterprise Marketing Automation (EMA)
applications joined the CRM fold, including systems for customer
analysis and marketing campaign management.

By the late-1990s, the real action was outside the corporate

firewall. Explosive growth in Internet usage spawned a
proliferation of e-business applications to manage online
customer and partner relationships, often called "e-CRM" and
"Partner Relationship Management," respectively. Now, "multi-
channel CRM" systems were available to, theoretically, support
direct, Internet, and partner channels, while allowing users to use
whatever mode of communication they pleased.

Left Hand, Meet Right Hand

Much of what satisfies customers, of course, is a company's
ability to preserve the "single face" of a customer. Some
companies are semantically confused and think the customer
wants to see the company's "single face." Customers don't care
about that. What they want is for the company to always see
their--the customers'--full faces.

To see how it works, go to Amazon.com and click on "Your

Account." The record of all your transactions, your credit cards,
your shipping and billing addresses, the status of all your orders
from last year to five minutes ago is there. It's like looking in a
mirror. Talk to anybody from Amazon at any time, and they can
swiftly deal with your concerns because they see your total
dealings with their company. This is what is meant by "single
face," and there's no better example of it than Amazon.com. You
want every company you deal with to be able to do this.

Unfortunately, that's rarely the case. "With the Internet,

companies in the present are still pretty bad about presenting a
single face to the customer," says Jeet Singh, CEO of
Cambridge-based ATG, Inc. "The Internet has blown the multiple
touch point issue to the forefront, and in many firms, the left hand
doesn't know what the right hand is doing." Customers might start
researching product information on a Web site, then pick up the
phone to get a crucial question answered, then do the actual
buying with a local distributor or retail outlet. The challenge now is
for companies to present that single face in all these real-world
scenarios.

Why is this so difficult? The root of the problem is simply the

fossilized ways that companies treat information--dump it in a
"silo" (otherwise known as a department, division, or business
unit) and then defend it from the rest of the organization. If you
figure out how to redesign workflow to make 
for happier customers, you're taking a jackhammer to functional
silos, creating a lot of stress in an organization that will probably
resist such changes. You also have to bend and reshape your
internal technologies to support customer-centric, rather than silo-
centric, business processes.

"This situation is driving interest to new CRM approaches with

environments that can offer greater central control or
management," says Karen Smith, senior analyst with Boston-
based Aberdeen Group. "Organizations are demanding CRM
solutions that provide greater visibility into asset management,
forecasting and inventory management, product development,
procurement, and order and transaction management." 

It's clear that the Web is making the inefficiencies and

inconsistencies of big companies transparent to customers and
partners. To win the battle for customer loyalty in the future,
companies must shift from stand-alone business technology
approaches to systems that support the total customer experience
and work across multiple enterprises.

The Next Evolutionary Step

If your relationships with customers are getting more important, so
are your relationships with your partners. "The common
assumption is that the Internet helps companies find partners. Our
experience is that it helps less with finding new partners than
allowing companies with complex supply chains to maximize
inter-enterprise relationships," says Michael Levin, founder and
CEO of e-Steel. "This is not like a cruise line for singles to meet,
it's a cruise line for couples to have a great time." 

And, of course, it's the Internet that makes it all possible. "Part of
the evolution of CRM from a focus on internal efficiency to more
effective external relationships is the ability to move information
around about a customer which has become viable recently,"
says Scott Sims, partner with Chicago-based Andersen Business
Consulting. "The Internet also has the ability to make alliances
stronger. If you build a site that shows how your partnership
benefits the consumer, you also can benefit greatly."

"Everything needs to tie into your overall CRM strategy," says

Scott Creighton, general manager of Siebel Systems' eChannel
Applications Dallas office. "However, you've got companies with
homegrown silo systems, their own internal tools for managing
marketing incentive funds, and partners have to use a call center
which then places the order. What companies are trying to do
now, under increased pressure to perform, is to consolidate all
these tools into an Internet-based system so that channel
managers and their partners have the tools to drive revenue."

Bear in mind that while customers expect to have their needs met,
the character of the relationship isn't top 
of mind for a customer in the same way it must be for a vendor--at
least until the relationship turns sour. It's incumbent upon the
vendor, not the customer, to do whatever it takes to keep the
relationship in good working order. 

Earlier ideas about customer satisfaction dealt with keeping the

customer happy after a purchase transaction took place. In this
Customer Economy, however, waiting for the PO to provide good 
service may be waiting too long. 
And let's not forget, good collaboration starts close to home, in
your company. "In the early days, says Keith Raffel, chairman and
founder of Mountain View-based UpShot Corporation, you'd ask a
sales rep if he did collaborative sales, and he'd say he didn't.
Then you'd walk him through all the steps internally that his sale
has to hit, and he'd realize it's a very collaborative process."
Collaboration is just as essential inside the enterprise as it is for
channel partners, system integrators, agents and so on. 

Partner Relationship Management has made great strides helping

companies get used to the idea that their partners and channels
are as crucial to their success as their customers or internal
operations. Now, with business hurtling towards a collaborative
future, managing integrated relationship networks will be
essential. These C-Webs must provide the structural frameworks
to keep a single face not only for all your customers, but business
partners as well. 

Instead of just automating individual channels, a collaborative e-

business environment has to support complex many-to-many
relationships, whether they're partner-to-partner, partner-to-
customer, or whatever. If you think this means your job just got
tougher, you're right. But with that challenge comes a new
opportunity to gain, or lose competitive advantage.

.bplans.com/growing-a-businesCustomer relationship
management (CRM) is a combination of organizational strategy,
information systems, and technology that is focused on providing
better customer service. CRM uses emerging technology that
allows organizations to provide fast and effective customer service
by developing a relationship with each customer through the
effective use of customer database information systems. The
objectives of CRM are to acquire new customers, retain the right
current customers, and grow the relationship with an
organization's existing customers. An integrated business model
that ties together technology, information systems, and business
processes along the entire value chain of an organization is critical
to the success of CRM.

CRM can also be considered a corporate strategy because it is a

fundamental approach to doing business. The goal is to be
customer-focused and customer-driven, running all aspects of the
business to satisfy the customers by addressing their
requirements for products and by providing high-quality,
responsive customer service. Companies that adopt this approach
are called customer-centric, rather than product-centric.

To be customer-centric, companies need to collect and store

meaningful information in a comprehensive customer database. A
customer database is an organized collection of information about
individual customers or prospects. The database must be current,
accessible, and actionable in order to support the generation of
leads for new customers while supporting sales and the
maintenance of current customer relationships. Smart
organizations are collecting information every time a customer
comes into contact with the organization. Based on what they
know about the individual customer, organizations can customize
market offerings, services, programs, messages, and choice of
media. A customer database ideally would contain the customer's
history of past purchases, demographics,
activities/interests/opinions, preferred media, and other useful
information. Also, this database should be available to any
organizational units that have contact with the customer.

CRM has also grown in scope. CRM initially referred to

technological initiatives to make call centers less expensive and
more efficient. Now, a lot of organizations are looking at more
macro organizational changes. Organizations are now asking how
they can change their business processes to use the customer data
that they have gathered. CRM is changing into a business process
instead of just a technology process.

EVOLUTION OF CRM

Although there are now many software suppliers for CRM, it

began back in 1993 when Tom Siebel founded Siebel Systems Inc.
Use of the term CRM is traced back to that period. In the mid-
1990s CRM was originally sold as a guaranteed way to turn
customer data into increased sales performance and higher profits
by delivering new insights into customer behaviors and
identifying hidden buying patterns buried in customer databases.
Instead, CRM was one of the biggest disappointments of the
1990s. Some estimates have put CRM failure rates as high as 75
percent. But more than a decade later, more firms in the United
States and Europe are appearing willing to give CRM another try.
A 2005 study by the Gartner Group, found 60 percent of midsize
businesses intended to adopt or expand their CRM usage over the
next two years. Why the interest? Partially the renewed interest is
due to a large number of CRM vendors that are offering more
targeted solutions with a wider range of prices and more
accountability.

Even though CRM started in the mid-1990s, it has already gone

through several overlapping stages. Originally focused on
automation of existing marketing processes, CRM has made a
major leap forward to a customer-driven, business process
management orientation.

The first stage began when firms purchased and implemented

single-function client/server systems to support a particular
group of employees such as the sales force, the call center
representatives, or the marketing department. CRM initially
meant applying automation to existing marketing activities and
processes. However, automating poorly performing activities or
processes did little to improve the quality of the return on
investment.

In the second stage, organizations demanded more cross-

functional integration to create a holistic view of their customers'
relationships. Also, the integrated system's goal was to provide a
single-face to the customer by enabling employees to work from a
common set of customer information gathered from
demographics, Web hits, product inquiries, sales calls, etc. Cross-
functional integration allowed the whole organization to take
responsibility for customer satisfaction and allowed for better
predictive models to improve cross-selling and improved products
and delivery options.

The third stage of CRM was heavily influenced by the Internet.

Customer self-service and Internet-based systems became the
next big thing in CRM. However, there were obstacles caused by a
lack of seamless integration into the organization's operational
systems and a lack of integration across customer touch points
such as call centers, web transactions, and other various
interactions. By rethinking the quality and effectiveness of
customer-related processes, many organizations began to
eliminate unnecessary activities, improve out-dated processes,
and redesign systems that had failed to deliver the desired
outcomes. In this stage, the big CRM vendors used new Internet-
based systems to extend the reach of CRM to thousands of
employees, distribution partners, and even the customers
themselves. Also, most organizations at this stage tie together
their CRM systems with their ERP (Enterprise Resource
Planning) system and other organizational operational systems.

The next stage of CRM will be when systems are designed based
on what matters most to the customer and customers will have
direct access to all of the information they need in order to do
business with an organization. Customer driven CRM means that
organizations first understand the customer, and then move
inward to operations. The next generation of CRM will also focus
more on financial results. Not all customer relationships are
profitable and very few companies can afford to deliver an equal
level of services to all customers. Organizations must identify
existing profitable customer segments and develop the business
requirements to support sustained relationships with these
profitable segments. However, organizations also need to find cost
effective alternatives for current non-buyers or low-margin
customers.

PROBLEMS WITH CRM

One of the major problems with CRM is the large investment to

build and maintain a customer database which requires computer
hardware, database software, analytical programs,
communication links, and skilled personnel. Also, there is the
difficulty of getting everyone in the organization to be customer
oriented and to get everyone to actually use the customer
information that is available. Providing adequate training so that
personnel feel comfortable using a new system is critical. Also, not
all customers want a relationship with the company and some
may resent the organization collecting information about them
and storing it in a database. Another problem is the long wait for a
return on investment. A three-year wait for ROI is still common.
Research conducted by Helms in 2001 suggests that 45 percent of
companies are unable to even compute ROI from their CRM
investments and research conducted by Cap Gemini Ernst and
Young (CGEY) found that two-thirds of companies could not
provide any estimate of their ROI on CRM investments.
HOW TO SUCCEED WITH CRM

CRM projects require careful planning and implementation. To be

successful, CRM involves major cultural and organizational
changes that will meet with a lot of resistance. CRM should be
enterprise-wide in scale and scope. However, it is usually better to
take an incremental approach starting with a CRM pilot. Once the
pilot succeeds, then introducing one CRM application at a time is
recommended. Also, it is important to be skeptical of vendor
claims and to know that user expectations for CRM are often
unreasonable.

SEE ALSO:Marketing Communication;Strategy Implementation

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