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.
If we even want to keep that term, need to be a customer integrating, all parties
involving, collaboration tool. It need to support an environment where sales people
become moderators of a buying process rather than managers of a sales process. We
know that 78% of all purchased decisions are made based on recommendations. NONE
of those recommendations come from sales people anymore. In the eye of a customer:
Sales people are the commission motivated enemies. So we need to create a platform
where recommendations can happen, where prospects meet buyers, where partners
meet experts, where an open information exchange is possible and the respective
vendor turns out to be a guide and moderator in the process. This place can be called
social network and as such CRM 2.0 need to be a social network powered instrument
to facilitate the dialogue, support all participating market constituencies and help all
parties to better understand each others processes. This has almost nothing to do with
the old CRM system most of you know. It is definitely not the old enterprise monster with
yet another set of features.

What happened to the new thing?

The high-tech era, which we date from the development of the CPU on a chip, or
microprocessor, in the late 1960s, has ushered in one innovative product after another
for decades. Microprocessors embedded in numerous products have made life easier
and products more efficient. The introduction of cheap, fast, and reliable computing has
caused whole industries to evolve at rapid rates. This evolution has been driven by
Moores Law which states that computing power will double about every 18 months with
parallel decreases in costs. That era may be now endingor at least it is entering a
new phaseas physical constraints on chip miniaturization threaten to flatten out the
curve Moores Law describes and as product designers run out of new application areas
for embedded chips.
At the same time that limits on chip size are becoming apparent, 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 cell phone and the iPod are great examplesconsumers need one,
not manyso the market for these products saturates fairly quickly in comparison to the
market for servers, PCs, and laptop computers.
MARKETS
When companies are involved in introducing new products they are fundamentally
engaged in market share wars. As Geoffrey Moore has observed, in Crossing the
Chasm, Inside the Tornado, and recently, Dealing with Darwin, once the initial buying
frenzy has subsided the winning vendors must adjust to new lives on Main Street, and
a more predictable selling environment. Margins are thinner on Main Street and
competition revolves around incremental changes in, or additions to, core products that
gained their niches in the early market.
In Moores vision, companies on Main Street must do two seemingly contradictory
things at oncethey must continuously bring down the cost of their products and they
must continually find ways to add value. The two objectives need not work at cross
purposes and smart companies find ways to meet both needs. 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.
On Main Street, the center of innovation shifts from the product to the customer. Early
market companies were content to compete on features and functions but as markets
mature, the surviving vendors reach product equivalence. Moreover, 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.
The marketplace today has turned Main Street into a super highway in gridlock. In
market after market formerly innovative companies have settled down to an indefinite
period of incremental improvementas well as the need to avoid commoditization and
the ruinous price deflation that it brings.
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, until recently, by the continuous introduction of new products.
According to Shoshana Zuboff in The Support Economy, todays customers are the
richest, best educated, and most time starved in history. This customer is also the most
individualized, meaning that from an early age the customer has been taught to regard
his or her needs as unique and requiring unique solutions. 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.
Where we are right now
The market and the customer have changed in fundamental ways. The customer
movement to greater individuality happened over the course of a generation, but the
market has changed almost over night. 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.
In more mature markets fundamental product functionality has been worked out, most
vendors have very similar products and the competition must move to other areas. For
example, the PC architecture was standardized with the introduction of the IBM PC and
competition has moved on to other areas including price, customer features, graphics
and large screens, and usability.
In response, companies facing this kind of challenge re-discover the customer and
customer centricity becomes a driving force. With the customer in the drivers seat,
vendors are forced onto an unfamiliar playing field where they must continue to innovate
and improve their products while reducing overall costs. In addition, this is a more
 conservative market in which buyers expect standard functionality, good service, logical
add-on products and migration paths, and, most importantly, stable prices.
It is also a dangerous time to be a vendor. Large expenditures in research and
developmentif they are made in areas customers find irrelevantwill not
automatically provide the returns needed to cover their costs.
In this environment the surest path to continued growth and profitability is to get close to
the customer, to understand customer needs and to build products to meet those
needs. Now, and for the foreseeable future, companies in markets such as consumer
electronics, computer hardware, software, and financial services will work to keep their
customers by keeping them happy and loyal. Doing so enables proactive vendors to
capture greater wallet share and to continue growing.
Growing customer share
When it is no longer enough for a vendor to offer a new product, and when the dominant
customer type in the market moves from early adopter to the more conservative Main
Street buyer, competition must move from product superiority to customer intimacy. How
well a vendor knows a customer will determine how successful the vendor is in the
market.
According to Geoffrey Moores Dealing with Darwin, 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; they are:
1. Product line extension
2. Product enhancement
3. Marketing
4. Experientialenhancing the customer experience
The lions 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. The unifying theme behind all of
these ideas is customer intimacy. Without customer intimacy vendors are shooting in
the dark when they make decisions about which product lines to extend; which products
to enhance (and how); which marketing messages resonate; and how to improve a
customers experience with the company and its products.
As a practical matter, customer intimacy quickly boils down to capturing information
about the customer including problems, questions, needs, likes, dislikes, aspirations,
and biases, and then using it before and during the customer interaction to craft
products and messages, as well as experiences that customers resonate with.
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.
This document tries to identify some of the drivers for CRM. As we have seen,
everything about customers and markets is different today than when CRM first
evolved. Given this reality, it should be no surprise that CRM must adapt to keep up with
the times. If Geoffrey Moore is right that four major types of innovation will dominate the
ways that companies grow and interact with customers then, clearly, the focus of CRM
must be on an orientation around customer intimacy.
Customer intimacy cannot be an effective strategy if it is quickly reduced to a slogan or
a catch phrase. 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. Just as quality needs to be built into products,
customer intimacy must be built into vendor-customer relationships. A companion piece
on customer intimacy will discuss at least one way to make this happen.