DPRO-90679 Rochelle Shaw, Jim Davies

Technology Overview 11 October 2001

Customer Relationship Management (CRM): Overview

Summary Customer Relationship Management (CRM) is a business strategy comprising segments for sales, marketing, and service with outcomes optimizing profitability, revenue, and customer satisfaction. Table of Contents Technology Basics Technology Analysis Business Use Benefits and Risks Standards Selection Guidelines Technology Leaders Insight

Gartner Entire contents © 2001 Gartner, Inc. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

Customer Relationship Management (CRM): Overview

Technology Basics Gartner defines Customer Relationship Management (CRM) as a business strategy, the outcomes of which optimize profitability, revenue, and customer satisfaction by organizing around customer segments, fostering customer-satisfying behaviors, and implementing customer-centric processes. By definition, then, CRM technologies enable greater customer insight, increased customer access, more effective interactions, and integration throughout all customer channels and back-office enterprise functions. Enterprises no longer view their customer base as a homogeneous collection of revenue-generating units. Instead, they want to get up close and personal with clients. As an enterprise grows, however, it becomes increasingly difficult to provide personalized levels of service. CRM projects focus on integrating and leveraging all of a company’s outward-facing actions to acquire new customers; retain existing ones; and, most importantly, identify the most profitable prospects so that their value can be maximized over time. Acting on the notion that effectively managing the customer relationship from initial contact through the sale and follow-up service(s) yields the greatest chance of keeping their best customers satisfied, companies are deploying CRM-enabling technologies, such as call center software and self-service Web sites, to please the “never-satisfied customer.” In CRM, customer data is captured in several different areas of the enterprise, stored in a central database, analyzed, and distributed to key points (called touch points). Touch points can include a mobile sales force, inbound and outbound call centers, Web sites, point-of-sale, direct marketing channels, and any other parts of an enterprise that interact with the customer. The distributed data is intended to help foster effective, individual experiences between the company and the customer. The first CRM projects were focused on unifying the spheres of sales and customer service, but in the last few years, a marketing function was added, as enterprises recognized both a need to tie marketing campaigns to sales and the significant impact service interactions have on sales lead generation. Now, CRM projects strive to provide data to every enterprise department that touches the customer. Generally, CRM comprises three major entities: technology-enabled selling (TES), technology-enabled marketing (TEM), and customer service and support (CSS). These three segments, however, each can be further drilled down. While the primary sales application is Sales Force Automation (SFA), other sales applications include contact management, account management, opportunity management, and the newest segment to emerge, partner relationship management (PRM). Marketing applications include campaign management, marketing resource management (MRM), Web measurement tools, advertising, and personalization. And service solutions include call management, Internet-based service (e-service), field service and dispatch (FS/D), and a multichannel contact center capability. TES Basics

Sales force automation, also known as mobile sales or field sales technology, consists of applications for sales and marketing representatives that mainly work outside of their enterprises. Typical SFA tools provide contact management, database replicators, business intelligence and forecasting, marketing encyclopedias, collaborative environment links, configurators, and proposal generators. SFA tools fall into two categories: PC-based sales productivity tools and network-centric enterprise systems. PC-based tools are implemented primarily at the client level and help improve individual productivity by helping to track leads and manage accounts. A high-end class of tools, implemented at the enterprise level, links back-end systems and databases to provide a common view of customer accounts and profiles across a range of functions. In recent years, PC-based tools have been expanding in Copyright 2001

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Customer Relationship Management (CRM): Overview functionality to link to data in workgroups or central databases, while enterprise-class packages have increasingly been accessible by sales representatives both inside and outside the company. Partner relationship management (PRM) applications are those which improve an enterprise’s ability to market, sell, and service end customers through channel partners. PRM is sometimes seen as a subset of CRM itself, since its functionality frequently overlaps with that of CRM; other times it is viewed as both a subset of TES and TEM. Gartner views it as one of many building blocks for sales applications. TEM Basics

Automated campaign management solutions are generally offered in three ways: enterprise solution software licenses; Web-hosted solutions; and outside services. Enterprise software requires information system programmers on the end-user side to install, test, and generally support the end-user marketer in system integration and maintenance. Web-hosted solutions can be used by an enterprise’s end-user marketer, with little or no IT staff intervention, because the software is installed and serviced at the vendor’s end. In Web-hosted situations, the end user logs on to a Web site to design and launch campaigns; make changes to business rules for personalization and offers; and run evaluation reports derived from analytics engine applications. Outside service providers generate contact lists, launch campaigns, and run reports for the enterprise, without any effort on the part of the marketer. Marketing resource management (MRM) applications improve enterprises’ ability to strategically plan, coordinate, and measure the impact of their enterprisewide marketing efforts. These applications help manage the development of marketing-related content, automate workflow related to associated approvals and project management, and offer some integration with front- and back-office applications. Web measurement tools pull data from the Web server’s log files and then convert the information into readable reports. It is then up to a company’s key decision makers to use this data to reevaluate a Webbased business strategy, redesign the Web site’s layout, revise its content, make product-line adjustments, increase and/or improve certain product promotions, modify advertising strategies, and adjust pricing schemes. If the traffic data reveals a certain site to be a top-referring site, the company may choose to pursue a business relationship or partnership with that site. If the traffic data points to certain key search words bringing in a large number of visitors, the Webmaster can choose to increase the number of times that word appears on the site. If the traffic analysis reports reveal that a given site’s visitors are usually on a certain page or pages just before they make a purchase, the Webmaster can examine the layout and content of those specific areas and choose to apply the same look and language to other areas of the site. Personalization—that is, addressing the preferences of end users by modifying an underlying system— has become a buzzword, although in reality the concept has been around for many years. Now that it has come to mean the tailoring of Web sites to the user, it has become accepted as an effective e-marketing strategy. Web merchants find that personalization solutions increase customer retention, satisfaction, and sales by targeting products and services to specific customers. In the context of CRM, personalization can help merchants turn browsers into buyers, generate repeat business and, as a result, develop lasting relationships with their customers. Several related segments combine to form the Internet advertising industry. Interactive agencies, the ad agencies of the Web, are responsible for creating Web marketing programs. Advertising networks are devoted to the placement of online advertising and, increasingly, to profile-enabled ad targeting and control of ad exposure, acting as brokers to bring together Web advertisers and Web publishers. Ad management companies sell technology designed to centrally schedule, target, deliver, and track online

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Customer Relationship Management (CRM): Overview ads and, in general, to automate online ad sales efforts. Finally, ad measurement and analysis firms measure Web site audiences in terms of demographics and report on Web users’ surfing habits. CSS Basics

CSS solutions contain a broad range of enabling technologies and related application software, combining both assisted (i.e., requires human interaction) and unassisted (self) service capabilities. The four main components of a CSS solution are call management, Internet-based service (e-service), field service and dispatch (FS/D), and a multichannel contact center capability. Call centers provide a traditional voice-based (assisted) customer service capability, which is rapidly evolving to include new communication channels (e.g., e-mail). The Internet boom has driven the demand for Web-based customer service solutions. Call centers, for example, can deploy browser-based agent interfaces, and corporate Web sites can provide a powerful customer self-service capability. These selfservice sites allow customers to interact with the enterprise without human interaction. Customers can resolve inquiries, check the status of an order, view product information, check and edit account details, and perform a broad range of other tasks. These sites vary dramatically in their sophistication but generally are a valuable customer service tool. A few large vendors’ CSS suites include specialized field service automation (FSA) systems (previously known as field service and dispatch [FS/D] systems), which include a range of capabilities for managing the service delivery chain. These systems provide a broad range of capabilities, including workforce forecasting and scheduling, contract management, warranties, entitlements, depot repair/overhaul, technician dispatch, service parts planning and management, infrastructure maintenance, inventory, and defect tracking. Technology Analysis CRM is designed to empower the entire enterprise when managing customer relationships. Enterprises want their customers to see one, friendly, corporate face, as opposed to a collection of disconnected departments trying to work together. Ideally, an effective CRM strategy will enable the enterprise to utilize all of its resources when interfacing with a customer, including marketing, sales, finance, and manufacturing, as well as post-sales services. When carefully and strategically employed, econometric, demographic, lifestyle, and psychographic data; decision-support systems; the Internet; and customer access techniques and technologies can help promote effective CRM, despite the size of enterprise, the size of enterprise’s customer base, or the size of relative market. The ability to gain value from CRM projects is contingent on the enterprise’s capability to leverage and integrate all of these functions, technologies, and consolidated data in a way that promotes departmental synergy, as well as competitive advantage. IT professionals can assume that a typical CRM project will include substantial investment in technology infrastructure, especially in areas such as data warehousing, OLAP, and data mining (for sorting through the volumes of data required to extract meaningful customer data); the Web; and sophisticated call center applications. CRM projects will also typically call for the resources necessary to integrate an array of disparate, isolated systems. The synergy created by these technologies, if achieved, has the potential to provide huge economies of scale to enterprises. The data warehouse is often the critical hinge upon which CRM architectures are built. The warehouse becomes the nucleus for all the data required to perform prospect assessment and grading and from which all information is disseminated to call centers, SFA, and marketing components. Unfortunately, if an enterprise does a poor job of defining and using available and acquired data, then the process, no matter how well constructed, will reap inaccurate and error-prone results. Conversely, if business processes and Copyright 2001

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Customer Relationship Management (CRM): Overview workflow are not rational and well thought out, CRM may actually cause more problems and customer dissatisfaction than it solves. Unless the work performed by sales and service representatives and marketers is well understood, it will be impossible to develop data models that adequately support them. Business Use CRM-enabling technologies help enterprises: •

Understand key customer groups

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Define what customers need and value

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Target customer groups

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Tailor products and services for customers

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Refine channel strategies

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Measure customer activity in relation to marketing campaigns, new product introductions, etc.

Essentially, CRM initiatives are designed to promote the effective acquisition and utilization of knowledge about customers, empowering a company to sell more of its products or services more efficiently. A corporation’s customer base can be made more profitable by acquiring more customers, increasing the value of current customers, or keeping customers longer. CRM strategies seek to achieve all these benefits with lower costs. CRM strategies typically start with an analysis of customers’ behavior to achieve in-depth knowledge of their habits and requirements. That knowledge is then used in the development of marketing strategies and customer account plans. By defining, managing, and controlling customer interactions at critical “touch points” (e.g., interactions), companies hope to maintain long-lasting, satisfied customer relationships. Ideally, CRM should become a repeatable process ensuring consistent, continually improving results. This process includes not only the maintenance of quality customer interactions, but also securing knowledge about the customer each time an interaction occurs. The results of interactions must also be tracked and analyzed to refine and improve future actions. Completeness and accuracy of data gathered and analyzed are vital to the success of CRM. By unifying and creating visibility around the information gathered, all the resources of the company can be utilized to help satisfy the customer. This provides one consistent, friendly, intelligent company face to the customer, as opposed to a collection of loosely organized departments. Customers should be able to get the same information about a company and its products or services from the Web, from the sales force, or from the call center. When CRM strategies are planned and implemented properly, the confusion that ensues when customers receive multiple, uncoordinated messages from various company representatives can be minimized, if not eliminated all together. Benefits and Risks Benefits Single View of Customer Data

Customers get consistent, predictable information no matter what touch point they use. Redundancy and duplication can also be reduced. CRM solutions keep customer information in a central database (as opposed to disparate systems), reducing the possibility of inconsistencies and errors. Shared information helps companies provide better service. Immediate, Real-Time Information Availability Copyright 2001

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Customer Relationship Management (CRM): Overview Sales and service reps can provide customers with product availability information on a line-by-line basis. The inventory management system is typically accessed through a secure Web site to check on the product availability, the status of orders, locations, ship dates, and estimated delivery times. Better Knowledge and Understanding of Customers

Because the company “knows” who its customers are at a higher level of granularity, it can more efficiently tailor services to those customers’ needs and spending levels. The company can also target priority accounts. Knowledge Retention

Information loss due to staff turnover can be reduced. This is especially beneficial to sales, where staff turnover can be fairly high. As representatives head out the door, customer information and interactive history are safely retained in the secure, central database. Reduction of Lost Leads

Lost leads equal lost sales. In a CRM strategy and technology implementation, sales leads are stored and processed in a predefined, consistent manner. Leads can be channeled into the organization by salespeople, trade show attendance scans, or forms-based applications. Forecasting modules allow sales leads to be tracked back to marketing campaigns. Standardized, Best Business Practice Enforcement

Best-practice methodologies and processes providing and enforcing uniformity across the enterprise can be put in place. Automation of Time-Consuming Tasks

The automation of time-consuming tasks emancipates sales and service personnel, allowing them to focus on direct customer activity and keeping them in front of the customers. Literature requests can be fulfilled automatically. Sales call logs can be automatically updated and kept current. Product and Competitive Information at Fingertips

Online marketing encyclopedias ensure that up-to-date product and competitive information is available at the point of sale. Additionally, sales configuration engines ensure that representatives accurately configure products and produce accurate quotes. Risks Difficult to Implement

Enterprise-level CRM solutions have a reputation for being difficult to implement. Such difficulty is influenced by the following factors: •

The CRM initiative was not carefully thought out and planned.

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Data is inaccurate, not available, or widely distributed across different formats.

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Business processes and workflow are not properly defined and then aligned across required system inputs.

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Efforts become bogged down in getting required systems integrated.

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Customer Relationship Management (CRM): Overview •

Technology infrastructure requirements were underestimated. Phased approaches are highly recommended, concentrating on priority requirements first.

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Inner office politics and the existing organizational structure can make implementation difficult. CRM and other enterprise initiatives require cooperation and participation across business units that, historically, have not worked together and may have competed against each other for resources and recognition.

Expense

There is no doubt that CRM deserves its reputation for being expensive to implement and to maintain. Whether an organization develops its own solutions in-house, purchases what it considers to be best-ofbreed applications from various vendors, or invests in a suite of complementary products from a single vendor, costs can easily climb to many hundreds of thousands of dollars (US). Much preparation in the form of research and planning can help reduce costs, and the ultimate desired result of customer satisfaction is, of course, priceless. Still, facing such large costs, especially in the face of today’s economics, can be daunting. Web Dependency

When relying on the Web, scalability must be considered. A company should make sure it has a technology infrastructure in place that will support the Web site. Is a substantial investment required to deliver the expected capability? Traditional applications may have served a thousand or more internal users. Commercial Web applications may be required to support hundreds of thousands of transactions per day. If a company becomes too dependent on the Web and the system or network goes down, significant revenues may be lost. Customer satisfaction can spiral down rapidly. Companies should strike a proper balance in leveraging Web technology in a CRM initiative and invest wisely to minimize risk. Over-Automation

Self-service Web sites, voice response systems, and other innovative technologies are great advances, but the goal of CRM is to bring companies closer to their customers, not to alienate them. At times, dialing a phone number and speaking to the warm, friendly voice of a sales or service representative are all a customer needs to purchase a product. Companies implementing CRM strategies and enabling technology should be wary of driving technology to the point where it reaches diminishing returns. No Guarantees on Effectiveness

There is no concrete evidence proving that CRM works. Although it is true that CRM may not attract customers that are less than desirable for a company, investments in CRM do not guarantee the attraction of desirable customers, either. Companies that reap success from CRM initiatives will be the ones that can use it to better understand how a customer wants to be related to the company. This is achieved using accurate data and analysis, and then promptly acting on that analysis by carrying out a strategy designed specifically for that individual customer relationship—a process known as Customer Relationship Planning or CRP. Standards As with other emerging technology segments, CRM began with disparate applications from a variety of vendors, with little thought given to interconnectivity. Today’s products, however, boast adherence to myriad standards in order to support integration with external applications, whether legacy or third-party systems. Most CRM product offerings from the major vendors now offer support for the following standards: Copyright 2001

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Customer Relationship Management (CRM): Overview •

COM. Now frequently eclipsed by newer technologies, Microsoft’s Component Object Model has been a widely implemented architecture for component-based application development. COM allows components, which typically implement a single function, to be written in different languages and then combined to produce a complete application.

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CORBA. Object Management Group’s Common Object Request Broker Architecture is a vendorindependent technology for defining an open, distributed, object-oriented computing infrastructure. CORBA provides a structure for “brokering” objects; that is, registering, locating, calling, and deactivating objects that reside on different computers. It also handles object requests, error handling, parameters, and dispatching.

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EJB. Along with JavaBeans, Sun’s Enterprise JavaBeans are the industry’s premiere object-oriented component models. These components foster code reuse, let developers create platformindependent, scalable applications by assembling and linking them into a unified whole, and help ease integration with legacy systems.

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J2EE. Sun’s Java 2 Platform, Enterprise Edition includes eight technologies and interfaces for corporate computing environments. These are Enterprise JavaBeans (EJB), Java Naming and Directory Interface (JNDI), Java Database Connectivity (JDBC), Java Message Service (JMS), Java Transaction API (JTA), Java Server Pages (JSP), Java Servlet API, and JavaMail. These application programming interfaces (APIs) distribute Java objects across multiple servers, transfer data to and from databases, and support complex Web applications.

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MSMQ. Microsoft Message Queuing is a stand-alone unembedded communication middleware technology that enables applications running at different times to communicate across heterogeneous networks and systems that may be temporarily offline. It can be used to implement solutions for both asynchronous and synchronous scenarios requiring high performance.

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XML. EXtensible Markup Language is a system for defining, validating, and sharing document formats. A subset of the Standard Generalized Markup Language (SGML) optimized for delivery over the Web, XML maintains the separation of the user interface from structured data, allowing the seamless integration of data from diverse sources.

Selection Guidelines CRM is not a technology nor does it constitute a well-defined market of vendors or products. There are, however, a number of CRM-enabling technologies that exist, as well as vendors and systems integrators offering services that promote CRM. Before a company decides what CRM-based products and services it should invest in, a self-examination is required. The first step in a CRM strategy development process should be an assessment by IT professionals of the condition of the organization. Goals should be defined early, so that the company knows exactly what it wants to achieve; what physical parts of the business (departments) will be affected; and what technological pieces (infrastructure, architecture, etc.) need to be updated, modified, and integrated to reach the goals. The definition of these goals early in the CRM implementation project is particularly critical to proper and effective CRM-based vendor(s), product(s), integrator(s), and/or service provider(s) selection. The scope and complexity level of the CRM project will also govern the evaluation and ultimate selection of the aforementioned pieces (vendors, products, etc.). Some vendors and system integrators offer packaged CRM-enabling technologies that would suit pointed, focused CRM initiatives, but more complex CRM projects will require the acquisition of different best-of-breed products, as well as the employment of Copyright 2001

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Customer Relationship Management (CRM): Overview external service providers and/or systems integrators. The following questions should also be answered during CRM project planning phases: •

What kinds and how many processors will be required to perform the tasks?

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How will assorted applications be integrated?

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How do you create a common definition of the term “customer”?

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How will data be stored and distributed?

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If you are going to utilize the Web, what kind of traffic will be expected on the network infrastructure, and is enough bandwidth available to accommodate this load?

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What security considerations need to be made?

Other considerations should be made when evaluating CRM-enabling technologies and services for purchase, such as: •

Use a customer-centric, as opposed to a product-focused, approach.

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Retain business focus—do not get distracted by the technology.

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Make sure vendors understand the problems that you are trying to solve.

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Scrutinize each vendor’s integration capabilities.

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Insist on checking references in your vertical space.

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Be wary of “extras” that cost money but may not be needed.

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Ensure that marketing applications can adequately capture and track promotional history and customer responses to campaigns.

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Obtain everything in writing, including time frames and all responsible parties.

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Evaluate each vendor’s financial viability in the face of a consolidating market.

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Ensure that the applications are flexible and can be modified later when the system needs to adapt to future changes.

Technology Leaders For the past several years, the industry has been awaiting release of true CRM application suites, allowing companies to fulfill most, if not all, of their CRM needs with the products of a single vendor. Now that these suites have become a reality, it comes as no surprise that the vendors who have succeeded in their development are the leading vendors in CRM technology: •

Amdocs Limited. On 2 October 2001, Amdocs—a provider of CRM, billing, and order management systems—announced the acquisition of Nortel Networks’ Clarify CRM Solutions. Nortel had previously acquired Clarify, a supplier of customer service and support software primarily for the call center market, in 1999. The line comprises modules for sales, marketing, and service. While the core CRM architecture remained acceptable under Nortel’s auspices, CRM functionality was not expanding, and this acquisition was not unexpected. The acquisition is expected to finalize in 4Q01.

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E.piphany Inc. E.piphany’s E.5, comprises sales, marketing, and service applications by combining the company’s own technologies with those gleaned in various acquisitions. In spite of its expansion

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Customer Relationship Management (CRM): Overview into a full-service CRM offering, E.piphany’s strong suit is its marketing capabilities. E.piphany’s marketing applications offer strong campaign management capabilities along with personalization technology to drive personalized marketing campaigns across multiple communication channels and to report on findings. •

Oracle Corp. Prior releases of Oracle’s CRM products, now in v.11i, had problems that the company has been working to correct, and now Oracle is considered one of the leading CRM vendors. With modules in sales, marketing, service, and other e-business applications, the company attempts to provide a seamless solution that extends from the front office to the back office. Current and planned product releases are increasing functionality as they fill former functionality gaps.

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PeopleSoft Inc. PeopleSoft 8 CRM is a suite of customer relationship management (CRM) applications built to run on the same underlying Internet-based architecture as the company’s existing enterprise resource planning (ERP) solutions. The CRM suite consists of Interaction Management, Support, FieldService, Marketing, Sales, and HelpDesk applications. PeopleSoft relies on multiple partnerships to bolster the applications’ functionality. Until the company invests heavily in development or acquires and integrates a leading marketing vendor’s solution, the application will have limited appeal as a best-of-breed product.

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SAP. mySAP CRM has modules for sales, marketing, service, and analysis. Until recently, it required SAP’s R/3, but the latest versions now run independently. While that expands its possibilities and functionality, key users remain SAP R/3 shops. Although the products are separate, they still run within the same overall integrated architecture and provide for integrated processes. SAP made significant improvements in functionality in the first half of 2001, primarily in the opportunity management system and analytics; campaign management and sales incentive and compensation remain the weakest areas.

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Siebel Systems. Siebel could be considered the granddaddy of CRM. Formed in 1993 to offer sales automation software, Siebel has garnered a large share of the CRM suite market. Siebel 2000 offers applications for field sales and service, marketing, “dot com” capabilities, partner relationship management, and vertical markets. Siebel 2000 addresses the growing demand for empowered mobile professionals through the release of Siebel Sync, Siebel Wireless, and Siebel Handheld. The field sales and service suite now includes additional modules and enhanced functionality. Integration with Siebel Call Center applications provides a significantly functional solution with a range of mobile capabilities.

Insight Today’s economy intensifies the fight to acquire and keep customers, while at the same time, customers are capturing mind share and are becoming more shopping savvy. The cost of acquiring new customers also continues to be extremely expensive, with costs estimated to be five to ten times greater to acquire a new customer than to retain an existing one. Angry customers are also much more likely to tell others about their problems than a satisfied customer. Hence, maintaining customer loyalty has never been so important. Studies show that loyal, satisfied customers buy more over their lifetime and are willing to pay more to do business with a vendor that delivers and is trustworthy. CRM strategies and enabling technologies are designed to capitalize on these insights by providing a holistic approach that balances the targeting of prospects with satisfying current customers.

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