Misunderstanding CRM and Big Data

Listening to @peter_w_ryan, @markhillary and Alexey Minkevich talking about #CRM and #BigData at the Institute of Directors, sponsored by IBA Group.

Peter cites an Ovum survey showing that Customer Satisfaction is now the number one concern of management, and argues for what Ovum calls Intelligent CRM. (CA announced something under this label back in October 2000. Other products are available.)

Mark says that CRM and Big Data are widely misunderstood, which is certainly true. My own opinion is the first misunderstanding is to think CRM is about managing THE relationship with THE customer, and I completely agree with Clayton Christensen (via Sloan) that this isn't enough. What we really need to focus on is the job the customers are trying to get done when they use your product or service.

Who is good at CRM? Peter cites an example of a professor of marketing who got a personalized service at a certain chain of hotels and has been talking about it ever since. (That's a pretty good coup for the hotel, if we take the story at face value.) Mark cites the video game market, where both the console manufacturers and the large game publishers are able to collect and analyse huge quantities of consumer behaviour.

Is CRM with Big Data merely a new way of taking advantage of customers? Although most people seem oblivious to the privacy and trust risks, the Wall Street Journal this week suggested that the consumer is becoming more savvy and less susceptible to exploitative loyalty schemes and promotions. This might help to explain why Tesco, once a master of the science of retail, now seems to be faltering.

If there is a sustainable business model based on CRM and Big Data, it must surely involve using these technologies to engage intelligently, authentically and ethically with customers, rather than imagining that these technologies can provide a quick fix for stupid organizations to take advantage of compliant customers.

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Related Blogs

Customer Orientation (May 2009)

The Science of Retail (April 2012)

Other Articles

Martha Mangelsdorf, Understanding your customer isn't enough (Sloan Review May 2009)

Shelly Banjo and Sara Germano, The End of the Impulse Shopper (Wall Street Journal 25 November 2014)

Intelligent CRM

AI-CRM "An intelligent CRM system with atuo-learning-tunning engine (sic), Aichain offers the most widely used open source business intelligence software in the world." Last updated March 2013

CA rolling out customer relationship management software (ComputerWorld October 2000)

IBA Group "maintains its focus on IT outsourcing that has become a strategy for many organizations seeking to improve their business processes"

SalesForce adoption

Howard Smith (CTO of CSC) has done an analysis of SalesForce.com, provocatively called SalesForce Dot Bomb, in which he uses what he calls Dilution Ratio (the average number of users per customer) as an adoption metric. He suggests that the dilution ratio is a reasonable measure of whether Salesforce is penetrating larger firms. 

I think this means individual users per user organization (although I'm not sure whether this is what his figures actually represent). I think it would make more sense to call this a concentration ratio - the more individuals using SalesForce within a given organization, the higher the concentration. To my ears, the word dilution suggests the exact opposite - spreading a given number of users more thinly across a larger population of non-users. 

Howard's figures show a fairly slow increase of concentration, and he interprets this as problematic for the commercial success of SalesForce in providing services to large enterprise. I am not convinced by this interpretation. User volumes are increasing and concentration is increasing. Isn't this a good thing? 

Technology adoption can be mapped against two axes - individual adoption and collective adoption. Traditional enterprise software vendors have always tried to increase concentration, because this reduces the cost of sales. You don't make money selling one copy of your product to Megacorp Enterprises Inc for a pilot project that requires loads of unpaid customer support. You start to make serious money when Megacorp integrates your product/service into its architecture/standards, and buys a thousand copies for distribution around the organization. That's when the salesman takes a well-earned cruise around the world. Clearly a thousand copies to Megacorp, even at a significant discount, is going to be more profitable (at least in the short term) than a thousand sales to a thousand separate pilot projects.

But traditional software vendors have also paid a lot of attention to "new name" business. You cannot sustain growth indefinitely by increasing the concentration (penetration) within existing customer organizations. Thus in very crude terms, significant growth comes ultimately from new name customers, while profit comes from better concentration in existing customers. In some sectors of the software industry, the vendors with the best concentration are the ones with mature products and trapped customers. (Sometimes it seems as if it's not the products that are treated as cash cows but the customers.) 

Howard is now raising a very interesting question - to what extent is this business model relevant to the new breed of software-as-a-service vendors such as Salesforce? Given that the economics of scale are different in the SaaS world, does this mean that concentration/dilution no longer has such a significant impact on a software company's profitability and commercial viability? Or perhaps concentration/dilution are still relevant, but these concepts now need to be understood differently, against a different kind of reference model? 

Remember that we are talking here about a CRM solution. Let's say that Megacorp Enterprises Inc adopts the Salesforce.com solution for all its customer data. Let's say that Megacorp has 1,500,000 customers, with 250,000 new customers per year. That seems like a much more interesting adoption metric than the number of Megacorp employees who are registered users of the Salesforce service - particularly if some of the "users" of the Salesforce services are lumps of software rather than human beings.  

 

via Barry Briggs

The Pitfalls of Tactical CRM

• CRM as a sales tool. I see you bought this, would you like this - NO GO AWAY. 
  

• CRM fails to hide the organizational mess that hides behind the call centre. 
  

• Anything not in their script they are unable to handle. 
  

• Call centre rarely seems empowered. Staff bear the brunt of complaints they can do nothing about.
  

• Large companies and virtual enterprises have multiple unconnected call centres. (Only adds to the problem rather than solving it.) 
  

• CRM as customer surveillance - fosters the illusion that the database contains the Whole Truth about customers 
  

• Thus instead of promoting better relationships with the customer, CRM becomes a bureaucratic obsession with the content of the customer database.

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Originally posted at http://www.veryard.com/business/crm.htm

With input from Lawrence Wilkes

For more on CRM see https://rvsoapbox.blogspot.com/search/label/CRM