META Group Report: Five CRM Trends for 2001 - '02

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META Group analysts and consultants are frequently asked about the major trends in customer relationship management (CRM). Below are the top five trends in CRM execution that we have witnessed among Global 2000 enterprises:

1. Transform Customer Relationships via Management of Lifetime Value.We are seeing the beginning of the end of pure-play “e.” A pure e-tailer may reach part of the population but will never commandeer the long-term relationships and sales volume of industry leaders that master all customer interaction channels. That’s especially true of businesses that focus on integrating customer processes from the customer’s point of view while focusing on “customer lifetime value.” The “new relationship economy” dictates that we turn the company inside out and redesign around the customer. By 2003/04, industry leaders in their respective markets (top 10% of Global 2000 enterprises) will have effected this radical redesign of their enterprise business processes:

Capitalizing on the changing nature of e-business to uphold the customer as the design point
Combining the management sophistication of a large enterprise with the entrepreneurialism of a nimble high-tech company by emphasizing compensation plans tied to holistic measures such as customer satisfaction and retention rates (versus sales growth and stock share price)
Applying new CRM roles, customer models, and economics to the customer experience — especially by providing value to the customer

2. Mastermind an Enterprise CRM Strategy.Because no enterprise in pursuit of market leadership can excel simultaneously in product superiority, operational efficiencies, and customer intimacy unless it has unlimited resources and no time constraints, tradeoffs must be made. Indeed, G2000 organizations will base their CRM strategies on a multi-year adoption cycle wherein the final step is to converge on a panoramic view of the customer (based on enhancing product and brand management with customer segment management). During 2001/02, savvy enterprises will begin expanding the definition of “customer” to include more than traditional customers — i.e., households, individuals, business entities, prospects, former customers, brokers/distributors, etc. While dot-coms do this in six months (or become “dot-bombs”), other enterprises must scale the adoption cycle and map their organization’s journey. Enterprise CRM strategies will continue to challenge most large enterprises through 2004/05 due to the scale and complexity of inter-related business processes:

Establishing the business value of CRM by collaborating with line-of-business and senior executive management on the business vision
Renovating channels and points of interaction into a unified and streamlined go-to-market system — necessarily “nuking” fossilized business processes in favor of new customer-centric ones
Masterminding the rate of introduction for e-B2B and many-to-many Net market models to take advantage of rapidly opening and closing market windows

3. Develop a Customer Relationship Technology Infrastructure.As customers assimilate technology into their expectations of how they want to be sold to and served, enterprises not oriented around customer-focused processes and not leading (or, at minimum, mainstream) in their use of technology will find themselves at a competitive (and career-challenging) disadvantage. Critical technologies abound — services-based architectures, adaptable foundations, internal and external integration middleware, and B2B Net markets, to name a few. While in the past CRM technologies focused on stovepiped sales, marketing, and service applications, business survival during 2001/02 demands cross-functional solutions that integrate a wide range of applications into a unified CRM ecosystem designed around the customer. By 2003/04, IT organizations will begin focusing on customer data management and analysis as corporate information assets:

Crafting the necessary CRM journeyman’s toolkit and technology foundation to support operational, collaborative, and analytical CRM
Extending the capability of packaged CRM applications by leveraging proven application extension, integration, and management strategies
Creating a seamless customer experience by exploiting inter- and intra-enterprise integration to establish collaborative real-time relationships with individual customers

4. Create the “New” Customer-Centric Organization.Executive management must manage CRM initiatives by understanding how compensation and customer satisfaction are increasingly aligned. During 2001/02, market-leading businesses must recognize the customer as a critical stakeholder in their future success, and internal compensation strategies must address issues such as customer retention, cross-selling of product lines, team account management, and customer satisfaction metrics to take on a “customer lifetime value” focus. By 2003/04, most G2000 market leaders will have adopted these customer-centric structures:

Creating new channel compensation models as organizations evolve from product/brand-centric to customer-centric
Understanding and leveraging best practices from leading-edge CRM implementations for organizational renovation — e.g., chief customer officer, program management office — and pre-empting the pitfalls that many have encountered
Aligning the new IT and business roles to focus on “getting CRM right”

5. Future-Proof the CRM Ecosystem.Mega- as well as micro-business and technology strategies will conflict and challenge an otherwise eager enterprise to address fast-moving market windows. The market-leading executive profile of 2001/02 will require vision that melds business knowledge, acumen, and influence, along with a significant dose of techno-savvy. Sophisticated relationship models will increasingly call for a team of enterprise and customer members to be matched up virtually (often even physically) to collaborate on better relationships. Concurrently, advanced CRM transformation initiatives will call for compensation and other forms of employee/customer personal value creation to be focused on the management and growth of customer lifetime value. By 2004/05, most G2000 enterprises will have in place suitable CRM ecosystems capable of addressing the nuances of channels yet to be conceived:

Masterminding the future of many-to-many customer interaction
Capitalizing on the changes in customer relationships brought about by the new relationship economy
Future-proofing the CRM technology ecosystem for maximum technology longevity

Business Impact: It is critical to corporate agility (even survivability) that IT management work with line-of-business management to educate executives on how CRM can improve profitability (and be measured). Furthermore, CRM must be extended into a set of enterprisewide business processes for handling partners, employees, and suppliers.

Bottom Line: Successful CRM strategies require enterprises to manage and measure lifetime customer value while inextricably tying such measures to organizational structure and compensation strategies — and focusing on customer data management and analysis as corporate information assets.

Copyright 2001 META Group Inc. 208 Harbor Drive, P.O. Box 1200061, Stamford, CT 06912-0061. Web: http://www.metagroup.com. Telephone: (203) 973-6700. Fax: (203) 359-8066. This publication may not be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval systems, without prior written permission. All rights reserved. Reprints are available.