Customer Relationship Management (CRM) is an approach to business that uses continuously refined information about current and potential customers to anticipate and respond to their needs. Advances in information and communication technology enable companies to capture and conduct thorough analysis on customer data, as well as communicate with customers through many channels in an increasingly personalised way.
A successful CRM strategy will result in more accurate calculation of customer value, predictions of customer behaviour, a single view of the customer regardless of what channel of communication or transaction they use, and better product and service tailoring.
Companies are increasingly interested in the benefits a successful CRM strategy can bring because of competitive pressure stemming from two macroeconomic events - globalization and the internet.
“In almost every sector of the economy 20 years ago there were more customers than products. Now in almost every sector of the economy there’s not enough customers,” says Andrew Zoldan, vice president internet applications at Siebel Systems.
This isn’t totally true for the CRM software industry itself, however, as the aforementioned competitive pressure to derive more value from customers has International Data Corporation predicting that CRM will be an $11 billion market by 2003.
CRM solutions can generally be categorised as being front-end, back-end or middleware, although some vendors claim to be able to offer a complete solution. Front-end products deal with communication and transaction channels, such as the internet, mobile devices, call centre automation or kiosks – things that your customer or sales and service force would use. Back-end products are things like databases, or data warehouses and the relevant management tools, whereas middleware would be things like servers and software for data analysis, or tools for managing marketing campaigns.
Even companies that don’t offer everything usually have partners that complement their services. Siebel, for example, is regarded as the market leader in the CRM space. It’s traditional strength has been in sales force and call centre automation, basically the front-end operations, although it does provide links to the major back-office enterprise resource planning (ERP) products. It also has a non-exclusive partnership with IBM for back-end data warehousing.
Other companies focus on different areas. Hyperion and SAS Institute are two of the major players in the analytics area although both have partnerships with other companies in complementary areas and have developed a suite of applications that build on their core strengths.
Its all about implementation
“One of the major decisions companies need to make is to go with best of breed solutions and try to integrate them, or go with a complete solution from a single vendor,” says Juni Yan Yuk Ping, Oracle product marketing manager for Greater China. Oracle is a relatively late entrant into the market for CRM technology, but with the release of its 11i product range in March it now claims to offer a fully integrated suite of CRM applications that can operate seamlessly with other Oracle products.
One bank that has opted for the best of breed approach for its CRM strategy rather than a single vendor is Standard Chartered, which along with National Australia Bank has one of the most developed CRM systems in the Asia-Pacific region.
“We have not focused down on one vendor, although there are certainly some vendors that can provide tools across that whole spectrum,” says Steven Parker, Standard Chartered’s head of customer information.
Standard Chartered has selected a range of products for the physical data warehouse, analytics and data mining, campaign management, rules engines and personalization and front-end tools, whether it be sales and service platforms or e-commerce. The integration of these products is handled largely by the bank’s inhouse development team.
“We have an IBM data warehouse and Visual Banker sales platform. We use a lot of SAS in terms of analytics and data mining for that warehouse,” says Parker. “We have a number of rules engines, we’ve got channels and we’ve just recently upgraded to the Protagona campaign tool [from Recognition Systems].”
80/20
Software vendors, including CRM companies, seem to all have adopted the magic 80/20 percentage split when describing the level of customization their product needs during the implementation process. The 20% customization process for large customers is often done in-house with the assistance of the vendor, although sometimes a third party consultant is also bought in. For this reason most of the better CRM vendors have a PriceWaterhouseCoopers or Ernst & Young in their list of global partners.
“Standard Chartered doesn’t do everything inhouse like, for example, HSBC does,” says Parker. “We use lots of technology providers and also do some stuff inhouse. It’s a bit mix and match.”
In the CRM arena the banks’ customization varies depending on the application. “Certainly in terms of campaign rules engine we have very little customisation. Sales platforms we customise quite heavily because you can take quite different approaches in terms of your sales and service culture,” he says. “You can have highly directed sales and service processes or much more open ones. Our processes tend to be a bit more open.”
With technology spends in the financial services industry generally increasing, the life expectancy of a new purchase is an important consideration. In the six years that Standard Chartered has been concentrating on developing its CRM strategy, Parker says he has seen product life cycles shrink to around four to five years, but this has been tempered by falling prices. “What is tending to happen is the applications are becoming cheaper and becoming more open which makes it easier to integrate,” he says. “There are swings and roundabouts here. Although the product life cycle may be reducing, it’s also often becoming cheaper to both buy and implement.”
“It depends a bit on how big a thing you purchase in the first place, how integrated it is with what you have and how open that application is. Generally you are talking about toal replacement in four or five years, not part. In certain areas that change cycle might accelerate, but in other areas where it’s big ticket, requiring a lot of integration work I would expect it to stay similar,” he says.
“Most banks’ product systems date 10,15, even 20 years for some of them. So already that’s a much shorter cycle than the big legacy systems.”
