CRM Is the Next Critical Link in Building the Supply Chain

CRM Is the Next Critical Link in Building the Supply Chain.(customer relationship management)(Statistical Data Included)

Author/s: Patricia Van Arnum
Issue: Nov 20, 2000

Enabling technologies that offer customer relationship management functionality are the next critical link in the supply chain.

The emergence of customer relationship management (CRM) in the chemical industry reflects a fundamental shift in doing business from a traditional seller-centric approach to a customer-centric approach. As chemical companies evaluate how to implement CRM-based strategies, one consideration is simply how best to use existing technology and support tools in implementing a customer-focused approach.

CRM technologies are designed to enable the enterprise to more effectively manage customer relationships through every aspect of the customer's life cycle, according to the Aberdeen Group, a Boston-based computer and communications consulting and market-research firm, which recently published a report on the CRM market. The major components of CRM are marketing automation (MA), sales force automation (SFA) and customer contact center technologies and customer service.

The CRM market has seen dramatic growth over the past year, and this is expected to continue. The total CRM market grew to more that $8.07 billion in combined investments in CRM application software and related integration, hardware platforms and networking in 1999, according to the Aberdeen Group. This investment in CMR represents a growth of more than $2.4 billion from 1998 and a growth rate of more than 43 percent in combined CRM market expenditures. This year, the Aberdeen Group projects that the market will increase 35 percent to $10.9 billion and increase to $14.4 billion by 2001, $18.6 billion in 2002 and $24.0 billion in 2003.

The Aberdeen group breaks the CRM market into three major areas: marketing, sales and customer service and support. Marketing includes such issues as campaign management, lead management, lead tracking, marketing encyclopedias, content management, personalization, data analysis and CRM decision support. Sales includes sales force automation (SFA), contact and opportunity management, lead distribution and management, sales effectiveness tools, pricing and configuration engines, sales encyclopedias, Web briefing and sales methodology tools, partner-relationship management, MDF management and channel compensation and forecasting. Customer contact centers and call centers include integrated call/Web/e-mail management, call logging, tracking, resolution and sell service automation.

One key growth area in CMR is marketing automation (MA). "MA has evolved significantly as a segment from a year ago, when most of the category was defined by Internet-based campaign management tools and the latest evolution of data mining technology," according to the Aberdeen Group. The consultancy projects that MA solutions and services will be the fastest growing component of the CRM, with revenues in excess of $1.2 billion in supplier software and services by 2003.

MA includes tools that manage the development and distribution of collateral and unstructured information sources and makes this information available to users via Internet and intranet sources. MA also includes campaign management tools that incorporate multiple communications channels, including the Internet, e-mail, and telephony-based call centers as well as traditional print-based media.

E-mail marketing is a critical part of the projected growth for MA. "E-mail has emerged as the 'killer app' of Internet-based MA," concludes the Aberdeen report. The market research firm says that well-executed, permission-based e-mail marketing campaigns have been shown to generate 10 to 20 times the response rates of direct mail promotions at one-tenth the cost. Some of the issues in building an email marketing campaign include the degree of control the supplier assumes over the execution of the customer's e-mail marketing campaign.

MA also includes personalization tools that analyze user behavior on a Web page or purchasing and transaction histories online and then develop "offers" to the customer based on this personal history. The Aberdeen Group points out that in recent months there has been a high rate of merger and acquisition activity among personalization software vendors as campaign management and e-marketing tool suppliers integrate backward. Examples of this includes Annunico's acquisition of BrightInfo and Digital Impact's acquisition of Mineshare. On the personalization and data mining software front, some suppliers have used acquisitions or mergers to integrate forward, such as E.piphany's acquisitions of RightPoint, eClass Direct and Octane.

MA also includes the extension of lead management, lead aggregation and lead distribution capabilities that are closely integrated into the CRM suite of major suppliers.

Aside from MA, this past year has seen the mergers of several new or emerging CRM technologies and applications--solutions that are designed to address specific areas of functionality and that expand the role that CRM can play in the enterprise, according to the Aberdeen Group. Partner-relationship management (PRM), personalization and CRM-centric analytic tools are examples of technologies that expand the scope of CRM. Other technologies, including the enterprise personal digital assistant, mobile commerce (in-Commerce), wireless application protocol (WAP) devices and handheld devices, are becoming critical components of enterprise-wide CRM and e-business.

One issue for CRM technology is what role will application service providers (ASP) play in the CRM market. The Aberdeen report points out that for both large and mid-size companies, the ASP model helps to reduce the impact of a technical skills shortage and the high capital outlay associated with enterprise resource business applications (EBAs)

"Application service providers deliver access to hosted, turnkey CRM applications in exchange for a monthly fee," explains the Aberdeen report. "The ASP model is likely to expand the potential market for CMR applications by reducing up-front financial and human resource requirements. However, the market research firm also points to risks. "Because the ASP industry is so young, many of the best practices and skills required to effectively manage the technology are just being put into place," concludes the Aberdeen report. "Also, some ASPs may not have the depth and experience in implementing and training required in large-scale enterprise systems." Coordination and integration by both the ASP and customer of multiple internal and hosted applications may complicate the "simple to manage" picture presented by the ASP.

On the vendor side, Siebel is probably the most noteworthy company in the CRM market. "With its move into e-business, the company has signaled that its future lies in mediating transactions, customer service and marketing on the Web--using revitalized CRM applications in a new setting."

For the major ERP vendor, SAP AG, the Aberdeen Group points to SAP's continued expansion into CRM functionality while strengthening its integration with ERP, e-business and collaborative commerce. The consultancy classifies its step of making mySAP.com as the center of its product architecture as bold, and as "precisely the kind of aggressive move that may propel it to real prominence in the CRM market."