CRM was once little more than a database of client interactions that a sales rep kept on their hard drive in various stages of decay. Full of cryptic notes and out-dated contacts, it was the epitome of the term GIGO (garbage in, garbage out). Today, CRM is at the core of a customer-centric world.
Earlier this year a story emerged from within the financial press that cloud-based CRM pioneer Salesforce was on the block. The asking price, according to reports, was $US44 billion. Among the rumoured suitors: Microsoft, Oracle, SAP, Google, IBM and Amazon.
For its part, Salesforce stayed mum and ultimately the story went nowhere. It did, however, illustrate the scale of the market and, more importantly, the centrality of CRM to new ways of doing business.
According to Tony Davis, Director, Quantium, “CRM is really a philosophy, synonymous with branding, trying to engender a relevant, meaningful value exchange between company and their customer.”
And Davis says it reaches across the whole marketing mix. “Customer relationships start with good understanding, traditionally supported by primary research, and nowadays by far more reliable data on what folks actually do rather than what they say. Applying that understanding across product design, pricing, distribution and promotional mix leads to greater stickiness and value.”
(Image: Tony Davis)
But in 2015 CRM is more than this, says Davis. “The philosophy is supported by data-enabled understanding we could only dream of even ten years ago. And what’s more, consumers expect relevance, penalising brands who treat them as a homogeneous mass, and rewarding brands who offer ideas tailored to them alone.”
Davis suggests that ‘segments of one’ is an expensive fallacy “compared to mass targeting, almost all — even basic — segmented thinking feels somewhat personalised, relevant and valuable.”
Customer relationship management is hardly a new concept. Its antecedents go back to the days of sales force automation — a market that was dominated by Siebel systems, which was itself ultimately bought by Oracle and deployed at the core of that company’s move into CRM.
SAP first started offering standalone CRM in 1999, and sales management – as part of SAP ERP – long before that.
Teradata’s principal consultant Umporn Tantipech says that despite a few name changes over the years, the essence of CRM remains unchanged – delivering consistent messages personalised for individual customers, at the right time regardless of contact channels. “The latest incarnation of CRM is customer engagement management or customer experience management,” he says.
But it was Salesforce.com, founded by former Oracle exec Mark Benioff, that really revolutionised the space with its emergence as the cloud-based super power of the sector. By 2018 Gartner predicts the company will have 15 million end users on its system.
And, with cloud-based CRM adoption set to grow to ten per cent of all billion-dollar organisations world wide, the outlook appears rosy for the market leader.
Yet for all of Salesforce’s success, its market share sits at only 18.4 per cent — ahead of SAP on 12.1, Oracle on 9.1, Microsoft on 6.2 and IBM on 3.8.
More than 50 per cent of the market is served by a mass of smaller providers. Analysis by Chuck Schaeffer for Customer Think suggests that rather than any consolidation, the biggest CRM vendors are actually giving up market share to the massive pack behind them.
“When I sum all CRM vendors other than the Big Four, this group grew its market share from 46 per cent in 2007 to 55 per cent in 2014,” says Schaeffer.
Within that trend, however, Salesforce is strengthening its grip. “There are increasing claims that Microsoft Dynamics CRM is the top challenger to Salesforce. If current trending continues this may be true. However, the data shows that Salesforce has more than three times Microsoft’s current market share and is growing its market approximately four-times faster than Microsoft. This suggests that Salesforce is widening its market share leadership.”
The picture that emerges is of a market similar to marketing automation, to which it is tightly bound, wherein a plethora of new entrants is growing the total market — not by selling better mouse traps than incumbents, but by extending the definition of what CRM really means and delivers.
Indeed, industry analyst Gartner tracks more than 1000 CRM application vendors. The research outfit breaks the bigger number into more manageable segments based around multichannel campaign management, sales force automation, customer service, cross-CRM, digital commerce and service providers.
Overall the market is worth $US23 billion and growing at a healthy 13 per cent clip. “New opportunities, such as a strong demand for marketing, commerce and customer engagement software, will sustain low double-digit growth over the next five years. An understanding of key drivers and CRM players will provide decision makers with the background necessary to make quality choices,” say Gartner’s Joanne Correia and Yanna Dharmasthira.
Their research suggests that North America and Western Europe still dominate CRM revenue, but that emerging markets are experiencing an acceleration of growth.
In its research note entitled “What’s Hot in CRM Applications in 2015”, Gartner analysts Ed Thompson, Kimberly Collins, David Kohler, Brian Manusama and Tad Travis note that, for the past five years, the main drivers behind the hot topics in CRM have aligned closely to the four big drivers of digital transformation: cloud, social, mobile and analytics/big data with smart devices and the IoT also emerging recently.
“Cloud is now seen as mainstream in all areas of CRM, not just sales. Gartner forecasts that SaaS or cloud-based deployments will reach 50 per cent of all CRM deployments by 2016. In 2015, the most common deployment model is a combination of cloud and on-premises CRM applications. We are now predicting that, by 2018, four per cent — and by 2020, ten per cent — of $US1 billion-plus organisations will run all their CRM applications on SaaS,” the authors note.
Cloud has become so mainstream in CRM that Gartner is ditching it from its CRM Hot Topic lists and social might be about the meet the same fate. “Social jumped to the top of the agenda in 2012 and 2013, but has started to decline. In marketing, it has dropped out of the top ten; in sales, it has peaked, but still appears fifth; and in customer service, it is now tenth in the form of peer-to-peer communities.”
The authors note that the use cases for social in CRM have been expanding and that like cloud it is going mainstream.
Even mobile may have past its CRM peak in terms of the interest it garners. It has retained a high level of interest, but it also may now have peaked although it’s likely to remain an area of high interest for a few years to come, according to the research.
Analytics and big data and how they intersect with CRM remain front and centre. Interest in these areas has not diminished, say the authors.
That’s a point not lost on market leader Salesforce.com, which announced a host of enhancements and partnerships earlier this year — in May and again in September at Dreamforce — which put analytics at the heart of its approach.
In a statement released mid-year to coincide with the launch of Salesforce Wave for Big Data, the company said “The digital universe is doubling in size every two years and will multiply ten-fold between 2013 and 2020 — from 4.4 trillion to 44 trillion gigabytes.
“This torrent of web searches, clicks, tweets, mobile app usage and connected sensors is creating new opportunities for companies to reinvent themselves through data analytics. However, legacy analytics software was never designed to manage the volume, variety or velocity of big data.”
It followed this up in September, announcing major initiatives around the Internet of Things. During his keynote, CEO Mark Benioff said “Everything is connected on the Internet of Things. I am more connected to the very people who are supporting me in my life — people who are building products and services for me — than ever before.”
And pulling it back to CRM, he described the Internet of Things revolution as a customer revolution — pointing out that behind every ‘thing’ sits a customer. “We are talking about major advances in technology. There are things that are going on at rates of change never before possible. We’ve gone from thousands of computers in the mainframe age, to millions of computers in the client/server age to now billions of connected things … It’s yielding this incredible connected customer.”
However, he foresaw problems ahead. “Even though we are creating all this data and all these interactions and doing all this amazing work there’s an unbelievable gap — it’s a bifurcation between our companies and our customers. And that’s the gap we are all here to fill.”
Teradata’s Tantipech (pictured below) says thanks to the Internet and social media, a vast majority of consumers nowadays already have a shortlist of potential providers in mind long before they get to the purchasing stage. “Many people conduct their background research anonymously, and more and more people are doing this via mobile devices. With this reality, getting a clearer view of each individual’s behaviour and preference is critical in order to reach prospective buyers faster and service them better than the competition.
“To realise this vision, businesses must be able to merge information gathered digitally from anonymous visitors together with the organisation’s own customer intelligence. In addition, businesses must also be able to act on the insight at those ‘golden customer moments’ and bridge the online-offline, inbound-outbound divides.
“Consumers care little for these internal constructs and would favour organisations that have successfully plugged the gaps and improved customer experience,” he says.
In its advice to clients, Gartner suggests IT leaders will need to make some major decisions relating to their portfolio of CRM applications over the next three years.
First, they need to decide if they will become one of the growing band of SaaS-only CRM users with no on-premises CRM. Second, they need to prepare for shorter replacement cycles for CRM applications. Third, they will need to decide whether or not Salesforce.com is a cornerstone of the CRM portfolio.
The option to be partially committed will disappear.
Sales and marketing
It is also worth noting that three of the top five CRM vendors — Salesforce, Oracle and IBM — are also dominant players in the marketing automation world, while Microsoft with Dynamics Marketing also plays strongly to the smaller end of that space.
That’s important because in recent years the relationship between CRM systems — which historically fell within the sales function — and marketing cloud has become central to the customer experience story.
It was a point not lost on Accenture interactive Managing Director Marek Rucinski. In an interview with B&T’s Almanac earlier this year he noted the importance of CRM in the context of significantly changed consumer expectations.
Having a clear and consistent view of all of a consumer’s interaction with a company is now table stakes for any organisation wanting to deliver fully integrated experiences, Rucinski said.
In particular, he said, their interactions with brands are increasingly information-rich, which makes it easier for them to make more informed choices quickly.
“Brand and service owners need to be able to cope with evolving and increasing consumer expectations,” said Rucinski.
He identified three key challenges around CRM systems as selection, scale and speed to offer. And, of course, the systems are only as good as the data being pumped into them.
With effective data and systems in place, Rucinski told the Almanac that brands would be able to predict what items and services would be most relevant to their customers.
And, he said, they need systems that offer these insights in real time and deliver them through the channels that the customers demand.
Rucinski also identified three big challenges facing the CRM market:
- Data enrichment is a key enabler, but this needs to be tempered with data privacy;
- Process orchestration to deliver relevant offers is increasingly more complex;
- Analysis of data to support decision making, offer generation and dissemination is increasingly complex and moving into the machine learning strata.
Over the horizon
In the world of digital marketing, and in the context of changing consumer attitudes and behaviour around digital services, getting a clear view of the customer has never been more important.
“These key marketing trends for 2016 all result in a common goal, which is that marketing messages are never anything less than appropriate, timely, highly targeted, and highly personalised for both the individual and the communications channel. This is the only way forward for marketers who want to cut through the noise,” says Teradata’s Tantipech.
Graham Jackson, Senior Vice President, SAP hybris, Asia Pacific, Japan and China, says “Customers today will not tolerate broken experiences. A clear, single view of the customer allows a business to be consistent across channels (web, mobile, phone, social and so on), anticipate behaviour and personalise experiences to the individual in a meaningful way.”
SAP sees its role as providing tools to simplify the front office, helping businesses get a single, contextual view of their customers while giving each customer a consistent, personalised experience across all channels.
For many companies, the first step is to provide a fully consistent view of the company across the enterprise — and often that is no small step.
Take, for instance, the explosion of new data sources such as social media. These new data sources have changed the way companies consider customer data and the benefits they can extract, and provided a new set of problems to consider.
“Companies can no longer rely on the costly, siloed systems of yesterday to engage with their customers, who are savvy, multi-device digital natives. They want their needs understood and met — right now and every time,” says Jackson.
He said the data explosion has highlighted the nature of CRM as a system of record and a platform for the automation of internal processes.
“The emergence of new channels — like social and the Internet of Things – and the demand for more engaging digital experiences has driven the need to go beyond CRM to think about how the customer is engaged and the way that systems of engagement are connected with the core CRM system of record.
“The abundance of new data can be used to not only optimise the customer experience in real time, but to create a data-driven digital value chain, which can be used to build new business models in the digital economy.”
According to Atul Tuli, APAC Senior Director, Sales, Social and Marketing Cloud Solutions, Oracle, “data disruption across the path-to-purchase means that operating within traditionally defined demographic segments, channels, products/services, or industries just doesn’t work.”
Today’s customers are more fluid, Tuli told the Almanac in an emailed response. “They’re consistently adapting to new experiences that quickly alter their perceptions of brands. As a result, customer journeys are now subjected to interruptions, diversions, impulses and delays. Moreover, when considering a purchase, consumers prefer to ‘pull’ information rather than having product or service information ‘pushed’ to them.”
Companies are rethinking customer engagement, he said. This extends beyond transactional CRM, to find new opportunities that influence the path to purchase. “Customers now expect inspiring interactions, not campaigns. From a marketing perspective, we’ve moved from planned media schedules to a focus on each ‘customer moment’ that offers value to customers with the ability to understand their full context.”
Tuli said the explosion of new data sources emphasises the fact that CRM or CX solutions are no longer just about recording interactions, or managing silos within a business. “Businesses can do more than ever to work smart with their customers — but only if they’re able to harness the universe of available data and use it consistently across their businesses.
“Therefore, the biggest challenge for most companies is connecting the dots across silo functions, processes and channels.”
He offers social media as a good example of the evolution of corporate thinking.
“While social media was evolving, many organisations purchased a small niche solution, or outsourced this channel to an agency. But now, social is a vital channel, particularly across marketing and service functions. It needs to have the same features – such as content management, authoring privileges, and workflow. How social is embedded across key functions and processes can be a significant brand differentiator.”
Tuli suggests that organisations that succeed at this will be able to excel in three ways:
- Rapidly, often in real time, identify customers’ desires, questions or concerns and proactively reach out to address them and fueling a positive customer relationship;
- Identify market trends as they develop in order to tweak operations or develop first-mover advantage;
- Predict customers’ intent and desires, in order to build productive, long-term relationships. Each customer expects to receive personalised, tailored information and services via their preferred communication channels.
And both Oracle and SAP still see their larger customers grappling with creating a single view across large disparate enterprises.
SAP, for instance, says that research it is preparing to release this month (December 2015) shows that, while 79 per cent of companies believe creating a single view of customer behaviour is key to improving the commercial performance for their business, only 25 per cent have an integrated view of customer data across marketing, sales, commerce and customer service.
“Challenges these companies face include disparate technologies across departmental point solutions (requiring complex integration), siloed channel ownership and the lack of technical infrastructure to support real-time assimilation and analysis of customer data from a wide variety of data sources (both inside and outside of the enterprise),” says Jackson.
For his part, Tuli says achieving a single view of the customer requires a combination of technology and a team that is committed to collaboration among organisational groups, and optimising business processes — rather than slavishly re-implementing the business practices of the past using new technology.
“The ‘single view of the customer’ is a traditional, transaction-based approach to CRM, where today something more sophisticated is needed.”
Customer data that exists in various marketing, sales and service silos should be integrated and synchronised to fuel effective collaboration across organisations and the greater enterprise. “Gaining customer insight to understand the customer context is the modern approach that can be uniquely applied to each business, based on the outcomes they want to drive.”
According to Tuli, the goal for most companies is delivering personalised experiences with an unprecedented level of responsiveness.
For this to happen, companies are increasingly recognising they need to reconfigure their operating models and better align resources. “Understanding the customer context should be then applied to business models that support customer-centricity.”
This article was produced for ADMA by the Which-50 Digital Intelligence Unit. ADMA is a corporate member of the Which-50 Digital Intelligence Unit where members contribute their expertise and insights to Which-50 for the benefit of our senior executive audience. Membership fees apply