In little more than a decade, CRM technology has undergone a rapid transformation. When first generation applications were introduced in the early 1990's, they were better known as sales force automation (SFA) applications because they were geared exclusively toward automating the activities associated with field sales, including contact management, opportunity management, and revenue forecasting. SFA technology was functionally trivial, and the hardware it ran on was not user-friendly.
“Automated” salespeople had to rely on bulky, portable computers, barely legible visual displays, and capricious modem connections to use the software. In addition, software vendors of the time rarely consulted end users when developing applications. As a result, end user acceptance of the solutions was often poor. Many salespeople viewed SFA software as an “electronic leash” or, even worse, as a surveillance tool.
In this early period, IT solutions were sold as discrete, departmental packages, each one serving no more than 100 users. In a fragmented market, companies bought separate solutions for the field force and the call center, and the applications did not communicate with one another. SFA applications both exacerbated and were victimized by the notorious “silo effect”-different departments operating in isolation and maintaining separate information stores.
By the mid-1990s, leading CRM software vendors began to offer their customers integrated information systems. Applications for sales and service converged, the software became far more scalable, and applications for marketing were introduced. And as CRM software vendors sought more input from end users, the applications became far more user-friendly, leading to much higher rates of user acceptance.
Around 1998, CRM technologies took another quantum leap in response to the rise of global ecosystems-networks of customers, partners, suppliers, and employees all connected by the internet. To allow all of these players to participate in an organization's information flow, CRM developers added massive new levels of functionality to existing products while developing suites of new products to serve the emerging model of the internet-enabled organization.
CRM software vendors then developed software that would allow companies to provide their customers access to the organization across multiple channels. This development addressed an old technological challenge: How does one coordinate the information gathered in sequential customer interactions when some of it may come in over the Web, some into a call center, and yet more in a face-to-face conversation? The capability of CRM technology to solve this cross-channel synchronization problem propelled it into the next stage of market evolution.
Today's best CRM solutions have come to address specific vertical industry requirements while integrating unwritten business processes that historically have varied from division to division. The result is a higher degree of consistency, leading to improvements in efficiency as well as the integrity of customer-related information. Most recently, CRM vendors have extended the flexibility of their systems to allow organizations to deliver solutions via hosted or on-premise versions, or in any combination. In addition, they have integrated business intelligence to empower every member of an organization with relevant and up-to-the-moment customer and business data. Ultimately, these CRM solutions are critical enablers of the seamless, high-quality experience that customers now demand.
The Business Benefits of CRM
When executed appropriately, a CRM strategy can deliver significant quantitative and qualitative business benefits. The quantitative benefits are driven by two main factors: reduced costs and increased revenues. Looking at these two factors more closely, CRM solutions let organizations reduce the cost of acquiring, selling to, and serving customers, and they help organizations enhance revenue by increasing sales per representative, sales per customer, average order size, and other revenue-driving metrics.
Cost Reduction Benefits
By streamlining and integrating customer-facing processes and providing richer customer data to sales, marketing, and service personnel, CRM can produce significant cost reduction benefits in a few key areas: cost to acquire customers, cost of sales, and cost to retain and serve customers.
Decreased Customer Acquisition Costs
Effective CRM strategies help organizations better understand a customer's preferences, buying behavior, revenue, profitability, and purchasing frequency. Having this knowledge can reduce customer acquisition costs significantly. For example, within one high-tech company, the implementation of a Siebel CRM system helped the telemarketing group to dramatically lower the number of calls required to generate leads. The company's vice president of sales and marketing explains:
Under our old sales information system, our telemarketing people were deluged with irrelevant information-free-form, unstructured information that had been recorded by agents during previous calls. This random information often impeded their call productivity. With our account-focused CRM system, they see just the information they need to converse intelligently-service records, for example, or the fact that an account falls into a certain vertical market.
As a result, our telemarketing personnel can now make approximately 80 calls per day versus 60 before the CRM implementation, and the value of those calls has gone up. Our people's hit ratio-that is, the proportion of calls that translate into qualified leads-has gone from 1 lead for every 52 calls to 1 in 33. Most impressive of all, telemarketings success as a profit center-what we calculate as its "contribution margin" toward closing deals-has roughly doubled since we rolled out the CRM system.
