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How to Gain an Edge in Growing CRM Market
A few years ago, the enterprise-wide application market shifted about every six months. Today it's shifting once a quarter. That's twice as fast, with enormous implications for the management of companies.
A shift can be recognized as a new way of doing business, such as the formation of a new channel model, vendor consolidation or the creation of a new market. Most often a shift is the result of a growing pattern of associated occurrences such as the development of new technology, customer adoption and/or changes in business models. Clearly, the ability to detect shifts early can be a competitive edge.
Throughout this series we'll focus on the components of the enterprise-wide application software market such as horizontal applications, industry-specific applications, business intelligence, knowledge management and groupware/collaboration. Within the horizontal applications component is the customer relationship management market, which we'll discuss here.
Customer relationship management is estimated to be a $7-billion to $9-billion market in 2005 and goes by as many names as there are analysts. It is comprised of:
The customer relationship management (CRM) market is changing and growing as companies focus more attention on retaining customers and getting them to buy more. Accordingly, managing the top line is becoming a higher priority because companies believe they have the cost side of the business management equation under control with their implementation of back office systems such as financials, manufacturing and distribution. Businesses spend an estimated 20 percent of its their IT budgets on CRM. The trend to automate and streamline the touch points between the customer and the company is a key driver. By bringing these points together into a technology-enabled, customer-facing solution, companies are leveraging CRM to give their customers personalized service and products.
Within CRM, sales force automation is a young market that is consolidating and redefining itself as a result of a 75+ percent implementation failure rate. The marketing automation systems market is a nascent market that came on the scene in the last two years. The interactive selling systems market has been stable for a number of years but is now rapidly shifting with new players and solutions. The customer service/support market has also been relatively stable for a number of years, having not undergone radical changes other than continued functionality depth and breadth enhancements. Help desk and field service management applications are increasingly being absorbed into, and considered part of, customer service/support solutions.
Unfortunately, companies seeking holistic, customer-centric and relationship-management solutions are faced with an array of disparate offerings in the CRM market that do not work well together, are often incomplete, have questionable benefits and lack well-defined business process models.
In response, the CRM market is undergoing a number of profound shifts as it tries to evolve into "anytime, anywhere, anymedium" customer-facing solutions. Most significant is the rapid absorption of marketing automation systems into sales force automation to form a more comprehensive selling application. Concurrently, the marketing automation systems market will continue to consolidate itself as sales force automation and other vendors acquire players.
Even the relatively stable customer service/support market is undergoing dramatic consolidation as it attempts to evolve into a customer-centric contact center model, diversify outside its initial core competence, and develop broader product lines and distribution channels. That will result in up to 50 percent of today's customer service/support vendors not being around by 2001.
For CRM vendors and their marketing departments, staying on top of this rapidly moving market is a challenge. The winners will be those who are first in detecting shifts and who are able to respond quickly with competitive strategies to ensure their place in the market. Many CRM vendors are increasing their value and differentiation by looking acquisitively to the sales force automation/marketing automation systems markets as logical extensions because they enable CRM vendors to realize a place in the value chain-comprehensive customer-facing applications.
To this end, the CRM market is expected to continue in a mergers-and-acquisition mode, absorbing sales force automation and marketing automation systems vendors as well as incorporating business intelligence and Web technologies. The consolidation is driven by vendors trying to bring all the key components together and be first to deliver truly integrated CRM that realizes the solution mantra of "helping companies understand and better serve their customers and trading partners."
Not surprisingly, the Internet is the catalyst deciding the fate of many CRM, sales force automation, marketing automation systems and other vendors. The Internet is a market channel that must be integrated, rationalized and managed just like direct sales, inside sales and indirect channels.
The implication for CRM market players is that the Web must be supported as effectively and efficiently as traditional telephone, fax, snail mail and in-person interactions. That's because customers are demanding the ability to interact with their vendors via multiple communication modes throughout their buying cycles. And that's hard to do. At the other end, the jury is still out as to whether current CRM players will be able to deliver integrated one-to-one marketing-a.k.a. personalization, segments of one, etc. For the astute CRM vendors, this spells opportunity.
Currently there is no leader in the CRM space, but many contenders. Expect the CRM market to continue to consolidate as vendors piece together technologies, processes and functionality to meet market demands for personalized, holistic customer relationship management. Expect more shifts in the CRM market as electronic commerce is adopted-but that's the topic for our next article.
Christine Crandell is president and co-founder of NBS/New Business Strategies, a market strategy firm.
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