With Bob Thompson, President, Front Line Solutions Thanks to CRMGuru.com .
This is an interview of Bob Thompson by Xander De Bruine, Editor of Telebusiness Magazine
The attention that CRM attracts at this moment leads to an equal amount of questions and answers in the service industry. In the US the market responds with Internet sites and communities with a focus on knowledge sharing regarding CRM. Bob Thompson, also member of the board of directors of the Northern Californian CRM Association, is one of them. He initiated an Internet site with news discussions and success stories.
Xander De Bruine: Can you explain the exact definition of, and difference between, CRM and Extended Enterprise CRM. And what is their current status of implementation in the market?
Bob Thompson: CRM is the process of targeting and acquiring new customers, convincing customers to buy your products or services, and then taking care of them after the sale so they come back again and again! Traditionally these functions are called marketing, sales, and service. Together they form a lifecycle of Customer Relationship Management. Note that none of the above necessarily has to include technology. CRM is a process with a goal to have the most profitable relationships possible. To reach this goal, marketing, sales and service must work more as a team and share information. Computerized CRM applications help make this possible.
Extended Enterprise CRM, usually called Partner Relationship Management, simply means including your indirect sales and service channels in this CRM process. Although the CRM software industry is quite large nowestimated to reach $2Billion in 1999and is growing about 50% per year, partners have generally not been included. Why? Until Internet-based systems became more common, it simply wasn’t practical to include resellers, agents, integrators, and other partners. Client/Server technology is a poor fit in the extended enterprise due to complexity and cost. Now with Web-based applications, many designed specifically for indirect sales channels, it’s practical to include partners in CRM systems. This PRM market is emerging in 1999, and is poised for very rapid growth, fueled by venture capital investments and real needs in the market.
XDB: What do managers often forget in aligning business and IT environment?
BT: Business managers sometimes forget they must clearly define the business problems to be solved before installing IT systems. IT managers can contribute to this by focusing just on getting the application up and running, thinking that success is defined as “on time, on budget.” Business goals and strategies should drive IT investments. Ideally success should be defined up as meeting business goalssuch as revenue productivity, customer satisfaction and loyalty, high profitability per customer, etc.
XDB: What are important factors for Customer Facing Applications and communication technologies that interact?
BT: The most important communications technology is of course the Internetno surprise there! A low-cost, universal communications platform solves a lot of problems. I think wireless will become increasingly important as the technology improves and the workforce becomes more and more mobile.
XDB: What are important factors for Datawarehouse architecture?
BT: I’m not a data warehouse expert, so I can’t comment on architectures. I do feel that data warehouses, data marts, and analysis tools are critical to CRMespecially in the marketing process. After all, if you don’t target the right customers with the right products, offers, etc., you can end up with a lot of unprofitable sales. Many of the larger CRM vendors are building data marts into their Marketing Automation modules for just this reason. And Marketing Automation is a hot new segment.
XDB: What do customers expect from CRM software and how are their expectations changing?
BT: I think expectations are slowly changing from “CRM is sales automation” to a more complex and realistic view. It’s not enough just to sell faster. You have to smarter about the customers to find and keep, and build “raving fans” that will be loyal to you even when your performance slips a little.
XDB: What problems could be solved by CRM and what are the main added values for customers/partners?
BT: In marketingtargeting the right prospects, customers, and partners and then effectively developing and running marketing campaigns. This has enormous leverage and I think is overlooked by many companies that think CRM is just about selling faster.
In salesreduce sales cycle time, higher sales productivity per rep, faster new rep ramp up time, and improved account management are typical goals. Sales Automation can help, but you’d better apply it to the prospects and customers with the best potential!
In servicelower cost, higher customer satisfaction, faster response. Good service is strategic because it can lead to loyal customers that tend to be more profitable over the long term. Unfortunately many businesses still see it as a cost center”yes, we know service is important, but how can we save money?” Web-based self-service applications are all the rage now because they reduces costs and free up skilled service personnel (which are always in short supply) to work on more complex issues.
XDB: What does it take to get an organizational change and cultural mindset for CRM, or what are important learning factors for potential CRM-companies?
BT: I think it has to start with the CEO setting the tone that “we are a customer-focused company.” This is easy and popular to say, and hard to do in practice. Focusing on service excellence is one tangible way of showing that a company really believes it.
XDB: Could you give a reaction on Customer lifetime value and the importance for investment in CRM?
BT: CLV is a great idea. Some industries, most notably financial services, have done a lot of work to determine customer acquisition cost and profitability over time. The key point is that you have to keep customers to make money! It seems obvious, but most companies have no idea what it costs to acquire a new customer, and don’t worry much when they leave. “Let’s go get another new account,” is the usual reaction, and sales people are unwitting accomplices because they are usually paid on new sales, not on profitable long-term relationships. Calculating CLV can raise awareness of the critical importance of customer retention. I see it as an important pre-cursor to implementing a CRM system, or perhaps as part of the marketing process when decisions are made to target certain customer or prospects.
XDB: Can you tell us about some CRM failures and their learning aspects?
BT: The CRM failure rate has been widely reported and debated the past few years. Results are improving from a failure rate of up to 80% about 3 years ago. Still, about 50% of CRM projects have significant problems today. Some of the big issues are:
Failure to identify and focus on specific business problems
Lack of active senior management (non-IT) sponsorship
Poor user acceptance, which can occur for a variety of reasons such as unclear benefits (i.e. CRM is a tool for management, but doesn’t help a rep sell more effectively) and usability issues
Trying to automate a poorly defined process
XDB: Could you describe the top- and mid-market of CRM vendors?
BT: The CRM market is large, diverse and dynamic. It’s hard to keep up with all of the established companies, much less the new firms! That said, the companies that consistently stand out in the large enterprise market are Siebel Systems, Vantive, Clarify, and Baan. IBM also has great potential. Oracle and SAP have ambitious goals but haven’t executed very well yet.
In the mid-market, it’s getting very interesting. Some of the top companies include Pivotal, ONYX, and SalesLogix. However there are a host of other excellent companies, many offering new web-based solutions. Some of the large enterprise companies (including Siebel) are targeting the mid-market, but I’m skeptical that they will have much success.
There are plenty of other exciting companies focused on niches, such as Epiphany for marketing analysis, Silknet for web-based self service, Wisdomware for knowledge-enabled selling, Trilogy for configuration tools, etc. And new Partner Relationship Management solutions from startups like Webridge and ChannelWave.
XDB: Could you say something about the Web based Collaboration and renting vs. buying applications (the possibility of Application Service Providers)?
BT: Web-based collaboration and broadcasting is a huge opportunity. Although not usually thought of as a CRM application, I say it is! Why? Because it helps companies market to, sell to, and support their customers more effectively and at lower cost. The technology is improving rapidly and I believe should be in the plans of every company planning a CRM project. I think we’ll see web collaboration technology increasingly integrated into CRM systems.
ASPs are “catching fire” here in the U.S., with new announcements seemingly every day. I am very enthusiastic about the prospects for ASP-based CRM systems, especially for smaller to mid-market customers. Why install something when you can plug in and start using it immediately? CRM skills are in short supply, and time to deployment (and benefits) is paramount. ASPs make good business sense and will grow rapidly as customers get comfortable entrusting customer information to a third-party service provider.
XDB: How big is the importance of standards between CRM vendors and market potential of exchanging sales, marketing and service data with third parties?
BT: I think standards will become more important in the next year or two as partners get involved in CRM processes. Just like email must span multiple systems, CRM data should flow easily between different companies. For example, standards are needed for the exchange of customer contact info, leads, forecasts, service incidents, etc. If large manufacturer chooses to use Siebel, and a channel partner is using GoldMine, why should either party have to rekey information?
Third parties could fill this need in the interim, serving as clearing houses to translate CRM information from one company and deliver it to another. Before email standards emerged, a few services helped bridge the gap between proprietary email systems. But when standards developed, these services because unnecessary. I think we’ll see a similar evolution in the CRM industry, and it will be driven by the growth of Partner Relationship Management systems. RosettaNet is one organization working on some of these issues in the computer industry.
XDB: You mentioned in a newsletter the risk of Microsoft Outlook Encroachment. Can you explain the risk?
BT: Microsoft Outlook is a great low-end contact manager. For a few hundred contacts it does a fine job and integrates well with Microsoft’s email and browser products. It doesn’t seem too great a leap to me for Microsoft to extend Outlook into a more full-featured contact manager, which would threaten products like ACT!, GoldMine, and Maximizer. However I dont know of any plans in this area. I do see GoldMine and Maximizer increasing being positioned for workgroups and even mid-sized CRM projects, which should keep them out of the Microsoft “crosshairs.”
XDB: Could you give a short reaction on other CRM vendors?
BT: HP is an interesting one. It remains to be seen how successful companies like HP (and IBM/Corepoint) will be with CRM applications. I like IBM’s chances a little better because of its strong focus on E-business and services. Note that both companies have large, loyal customer bases and could do quite well by adding CRM capabilities to existing products and bringing new CRM solutions to current accounts.
About Bob Thompson
Front Line Solutions is a Silicon Valley-based independent consulting firm specializing in Partner Relationship Management (PRM). As the industry’s leading consultant and evangelist for PRM, Bob Thompson is frequently quoted in industry publications, speaks regularly at industry conferences, and writes extensively for channel- and CRM-related publications. Bob is the editor and publisher of the popular PRM newsletter ePartner Insights, and is the founder of CRMGuru.com, the largest and fastest-growing interactive CRM web site in the world, with over 25,000 members as of November 2000. For more information, please visit www.frontlinehq.com and www.crmguru.com.
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