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Customer relationship management (CRM) is a term that refers to practices, strategies

and technologies that companies use to manage and analyze customer interactions and
data throughout the customer lifecycle, with the goal of improving business relationships
with customers, assisting in customer retention and driving sales growth. CRM systems
are designed to compile information on customers across different channels -- or points
of contact between the customer and the company -- which could include the company's
website, telephone, live chat, direct mail, marketing materials and social media. CRM
systems can also give customer-facing staff detailed information on customers' personal
information, purchase history, buying preferences and concerns.

WHY CRM NEEDS TO CHANGE

One of the drivers of the CRM effort is, as Paul Greenberg has said, to avoid having “15
million” different definitions of CRM like we had at the turn of the century and to a
degree still have today. But if we are to avoid the error of the 15 million definitions, I
think it would be wise to begin by discussing the drivers of CRM today. The fundamental
reason so many people see a need to redefine CRM is that so many of us realize that
the CRM we inherited from the go 1990s is no longer appropriate today. But how is it
not appropriate? After all we still perform the functions of marketing and selling, and we
still service and support our customers.

It would be a significant error to say that CRM must change because customers have
changed or because markets are different than they were, though that is certainly
true. More fundamentally everything else has changed as well.
In the last 5-10 years buying behavior changed more than in the 50 years before that.
As we went from approximately 800 and impressions per average adult per day in 1980
to 4,000 in 2008, the only change was advertising cost, advertising distribution and the
resistance level of advertising by our dear customers. And when we went from too
expensive call centers in the US to India based call centers, we finally killed cold calling
too. Our "Market Interaction Model" is completely broken and customers want the
divorce.
How can CRM help?
I'm afraid to say that but no CRM system can help in any way or shape unless our
behavior in the face of our customer is dramatically changing. Am I just a negative
thinker and want to destroy the toys you love? No - not at all. I have high respect for this
initiative because at its roots it is about a change our selling society needs. The
question is: Do we need a new tool to fix a broken process or do we need a new
process, meaning a new way to interact with customers, partners, alliances and our
entire ecosystem? And if so we would need tools that accommodate those new
behavioral changes and aspects not the ones we used before.

We know that 78% of all purchased decisions are made based on recommendations. It need to support an environment where sales people become moderators of a buying process rather than managers of a sales process. It is definitely not the old enterprise monster with yet another set of features. and laptop computers. where an open information exchange is possible and the respective vendor turns out to be a guide and moderator in the process. . This has almost nothing to do with the old CRM system most of you know. The cell phone and the iPod are great examples—consumers need one. What happened to the new thing? The high-tech era. At the same time that limits on chip size are becoming apparent. or additions to. not many—so the market for these products saturates fairly quickly in comparison to the market for servers. once the initial buying frenzy has subsided the winning vendors must adjust to new lives on “Main Street. in Crossing the Chasm. So we need to create a platform where recommendations can happen. where prospects meet buyers. collaboration tool. fast. This evolution has been driven by Moore’s Law which states that computing power will double about every 18 months with parallel decreases in costs. support all participating market constituencies and help all parties to better understand each other’s processes. which we date from the development of the CPU on a chip. in the late 1960s. and reliable computing has caused whole industries to evolve at rapid rates. Inside the Tornado. all parties involving. This place can be called social network – and as such CRM 2. need to be a customer integrating. has ushered in one innovative product after another for decades. PCs. core products that gained their niches in the early market. Margins are thinner on Main Street and competition revolves around incremental changes in. and recently. That era may be now ending—or at least it is entering a new phase—as physical constraints on chip miniaturization threaten to flatten out the curve Moore’s Law describes and as product designers run out of new application areas for embedded chips. where partners meet experts. NONE of those recommendations come from sales people anymore. Microprocessors embedded in numerous products have made life easier and products more efficient. MARKETS When companies are involved in introducing new products they are fundamentally engaged in market share wars. or microprocessor.” and a more predictable selling environment. Dealing with Darwin. In the eye of a customer: Sales people are the commission motivated enemies.If we even want to keep that term. significant new product introductions are dwindling and the new products that are coming to market are more oriented toward single sales to consumers rather than multiple sales to corporations. The introduction of cheap.0 need to be a social network powered instrument to facilitate the dialogue. As Geoffrey Moore has observed.

These customer trends have sounded a death knell for mass marketing and mass consumption and one need only refer to the plethora of viewing options available on cable television to get a sense of the fragmentation this has wrought. companies on Main Street must do two seemingly contradictory things at once—they must continuously bring down the cost of their products and they must continually find ways to add value. Moreover. The marketplace today has turned Main Street into a super highway in gridlock. With the customer in the driver’s seat. meaning that from an early age the customer has been taught to regard his or her needs as unique and requiring unique solutions. At one point new product generation was the only game in town and customers were almost afterthoughts as companies worked to gain supremacy through competition on features and functions. and usability. the center of innovation shifts from the product to the customer. In response. For example. Where we are right now The market and the customer have changed in fundamental ways. best educated. the surviving vendors reach product equivalence.In Moore’s vision. customer features. vendors are forced onto an unfamiliar playing field where they must continue to innovate and improve their products while reducing overall costs. the PC architecture was standardized with the introduction of the IBM PC and competition has moved on to other areas including price. In market after market formerly innovative companies have settled down to an indefinite period of incremental improvement—as well as the need to avoid commoditization and the ruinous price deflation that it brings. This customer is also the most individualized. until recently. On Main Street. The customer movement to greater individuality happened over the course of a generation. The two objectives need not work at cross purposes and smart companies find ways to meet both needs. if companies expect to continue to innovate they have to find ways that will deliver innovations that customers find valuable and do it at stable prices. companies facing this kind of challenge re-discover the customer and customer centricity becomes a driving force. According to Shoshana Zuboff in The Support Economy. graphics and large screens. and most time starved in history. today’s customers are the richest. but the market has changed almost over night. The Customer The customer has changed over the last several decades in a slow process whose accumulated effects have resulted in a different demand profile that has been partially masked. this is a more . In addition. Early market companies were content to compete on features and functions but as markets mature. But doing both requires far more attention to the customer than many formerly fast growing companies can muster for the simple reason that customer centricity was not baked into their DNA during their birth and growth years in the market share war. most vendors have very similar products and the competition must move to other areas. In more mature markets fundamental product functionality has been worked out. by the continuous introduction of new products.

Without customer intimacy vendors are shooting in the dark when they make decisions about which product lines to extend. Large expenditures in research and development—if they are made in areas customers find irrelevant—will not automatically provide the returns needed to cover their costs. computer hardware. and how to improve a customer’s experience with the company and its products. logical add-on products and migration paths. which products to enhance (and how). . Now. which marketing messages resonate. competition must move from product superiority to customer intimacy. likes. and then using it before and during the customer interaction to craft products and messages. The unifying theme behind all of these ideas is customer intimacy. dislikes. Experiential—enhancing the customer experience The lion’s share of discussion about what to do in the new market reality has been focused so far on the customer experience but as we see here. customer experience is just one of four areas that vendors need to consider. Conclusion The reason we need a new approach to CRM is that what we make and sell has changed in subtle ways which both influence and are influenced by how markets behave. Ultimately that means how customers act and react to vendors and their offers. conservative market in which buyers expect standard functionality. Product enhancement 3. As a practical matter. and financial services will work to keep their customers by keeping them happy and loyal. needs. and biases. to understand customer needs and to build products to meet those needs. stable prices. In this environment the surest path to continued growth and profitability is to get close to the customer. questions. there are four major types of innovation that vendors can use to keep their companies growing while on Main Street and each relies on becoming more intimate with the customer. and when the dominant customer type in the market moves from early adopter to the more conservative Main Street buyer. as well as experiences that customers resonate with. software. It is also a dangerous time to be a vendor. and for the foreseeable future. customer intimacy quickly boils down to capturing information about the customer including problems. Doing so enables proactive vendors to capture greater wallet share and to continue growing. most importantly. they are: 1. Marketing 4. good service. How well a vendor knows a customer will determine how successful the vendor is in the market. companies in markets such as consumer electronics. aspirations. According to Geoffrey Moore’s Dealing with Darwin. Product line extension 2. Growing customer share When it is no longer enough for a vendor to offer a new product. and.

Customer intimacy cannot be an effective strategy if it is quickly reduced to a slogan or a catch phrase. If Geoffrey Moore is right that four major types of innovation will dominate the ways that companies grow and interact with customers then.This document tries to identify some of the drivers for CRM. everything about customers and markets is different today than when CRM first evolved. As we have seen. customer intimacy must be built into vendor-customer relationships. the focus of CRM must be on an orientation around customer intimacy. clearly. it should be no surprise that CRM must adapt to keep up with the times. A companion piece on customer intimacy will discuss at least one way to make this happen. We have seen phrases like “the customer experience” quickly gain currency in CRM only to become meaningless through over use and lacking any motive force to make the phrase meaningful. Given this reality. Just as quality needs to be built into products. .