E-CRM - CRM for the connected economy - holds out the next great promise of improved productivity and enhanced profits. It's what Cap Gemini Ernst & Young vice president Andrew Keene calls "the stairway to heaven".
Many organisations are developing a notion of what they want to achieve by way of customer relationship management (CRM), Keene says. They know who their customers are and they know how they want to relate to them. Call that ideal "CRM Nirvana" and you might say that their real efforts are going into finding ways to build a stairway to that particular heaven.
It sounds simple enough. But now - before most organisations have even faced that question head on, and well before many have taken their first tentative steps onto the CRM treadmill - comes e-CRM to turn the stairway into a slippery slope.
E-CRM serves up more information than was ever available before about customers and suppliers by smashing through the walls that traditionally stand between a company's various departments. In giving companies a single, enterprise view of each customer it's designed to bind customers closer to companies.
Aberdeen Group says e-CRM derives from CRM techniques, which leverage call centre and direct marketing technology to market mass-produced goods and services to small market sub-segments. But it expands on this technology by using next generation segmentation and analysis technologies, comprehensive customer interaction data, multichannel communications and one-to-one interactions.
But definitions are loose and tend to lie very much in the eye of the beholder.
For instance, to SAS (a provider of analytical CRM) e-CRM is just CRM using the Internet as a customer touchpoint.
SAS promotions team leader Deirdre Brannick says from a SAS perspective e-CRM is another valuable channel of communication to customers.
"As customers interact with the organisation's Web site, information is generated about the customer's behaviour on the site," Brannick says.
Organisations should look at analysing that information, combining it with other internal customer information, and then using it to develop the marketing strategy and guide improvements to the customer experience.
SAS is developing a rules-based, real-time engine to allow organisations to provide a more relevant customised service via the Web in real time. This is due for release at the end of this year.
In one sense the logical sequel to ERP, e-CRM is a formidable blend of data mining, sales force automation, customer profiling software, computer telephony integration, Web interaction, personalisation and self-help software, customer data repository, databased workflow/CRM packages, 'clickstream' analysis, marketing process automation and other new economy software tools.
Ovum Research defines e-CRM as having two main elements:
* the use of direct-to-customer channels, principally e-mail and Web, but also emerging channels such as chat, WAP, ATMs and kiosks* using technology to select relevant material to be presented to the customer, in terms of content, offers and support information.
E-CRM, Ovum maintains, is essential for companies wanting to manage relationships with their customers and excel in an online environment.
While e-CRM is bigger than ERP by far, with about as little guarantee of a payoff, some pundits argue it's also the biggest threat to corporate viability since Y2K.
In theory, with e-CRM every interaction should augment the history of previous interactions, simplifying the process of anticipating customer desires in order to generate loyalty. In theory too, e-CRM promotes greater effectiveness in sales and marketing, not to mention higher customer retention and substantially reduced customer churn or wastage.
In reality, enterprise-wide e-CRM architectures are so complex organisations are forced to apply expertise in multiple technologies and system integration above and beyond the normal calls of duty to obtain that single view of the customer. But despite the complexity, many organisations may be forced to forge ahead or risk losing substantial market share.
Phillip Campbell, managing director and founder of e-CRM business consultancy WorkForce Transformations, claims Australian companies face a huge threat from international corporations that have taken up e-CRM systems. He says unless Australian companies hear the wake-up call about e-CRM, they're destined to find themselves overtaken, fast, by companies that have.
"Already around the world, companies are likely to commit more than $US10 billion to e-CRM-based strategies over the next two years while Australian companies are still trying to come to grips with CRM," Campbell says.
"Overseas there is an aggressive take-up of these systems because CEOs realise they can improve business effectiveness, reduce costs and provide a real boost to a company's share value."
Orange is a service of Hutchison Telecommunications specifically designed to meet the accelerating demand for additional phone lines and to provide competition in local call services.
Orange is relying on SAS Institute to provide world-class data mining software and consulting expertise to help it meet its customer growth targets.
The company hopes using SAS software and services to help it analyse large amounts of data will help it aim its marketing efforts more effectively as it strives to build its customer base to more than 400,000 by the end of 2002.
Marketing director Michael Johnson says Orange will use e-CRM tools to allow it to get closer to customers by offering personalised service whilst gaining mass market efficiency.
"Previous technology did not allow us to do this," he says.
"E-CRM will greatly accelerate the benefits of CRM, mainly due to the immediate feedback from new technology."
"Processes, interfaces, data, networking, software - the scale and complexity are vast," wrote Keen Education chairman Peter Keen in US Computerworld recently. (Keen's new book, The eProcess Edge (written with Mark McDonald), is co-published by Computerworld).
"For example, e-CRM demands that companies provide consistent and up-to-date customer, catalogue, order and inventory data across all their sales channels - Web, call centre and physical points of presence. How do you even conceptualise the infrastructure, processes and IT bases for achieving this? Electronic CRM makes ERP look small and easy by comparison."
To achieve e-CRM, IT organisations have to have customer information architectures that assemble diverse customer sources into a complete view of customers and their relationships to the organisation, then deliver this data for a wide array of application purposes. But they must also allow closed-loop integration between customer analytical systems and customer interaction systems.
Keen claims today's e-CRM architectures require a broad approach, and a vision that encompasses strategy, process, operations and technical architecture.
He says several companies have been successful with a phased approach to implementing cross-channel architectures that support the entire enterprise, with the most successful strategies grounded in vision, architecture, integration and business benefits.
"Arranging your customer interaction engine around a functional, flexible core allows you to leverage your investment into the future and become an early adopter of service techniques that give you a world-class reputation with your customers," he says.
But he adds the integration, methodologies and procedures required to create a truly customer-centric e-CRM solution are staggering.
And the situation may be significantly worse for Australian companies than it is for the US audiences that comprise Keen's main readership. As Campbell points out, many Australian organisations are still trying to come to grips with "traditional" CRM and with linking all the front-office communication channels with customers together.
Campbell says with too many CRM projects focused on the technology implementation, often using a "back office" implementation methodology inappropriate when dealing with softer, more intangible relationships, CRM projects are still failing at a rate of 60 to 70 per cent.
Which means it is not the best time, from the point of view of many Australian organisations, for the goal posts to be moving rapidly from CRM to e-CRM to e-RM (electronic relationship management) - a trend that demands a very rapid updating of CRM strategies.
And there are significant barriers to doing so. Research by Cap Gemini Ernst & Young, particularly in the banking and finance sector where the challenge is bigger than most, shows data and organisation pose the biggest impediments to CRM.
"How do I actually get a common view of my customer when they've got banking products and insurance products and funds products, and I don't actually know who the person is who has got all those products? That's the data problem," Keene says.
"And the organisational problem - and this is across all industries - is how do I actually organise and manage my CRM initiatives? Is it going to be run by sales, is it going to be run by marketing, is it going to be run by distribution, is it going to be run out of operations?
"And that is a significant barrier. So for instance one of the major banks has had a project stalled basically for this reason: it was launched by one part of the bank, another part didn't like the way it was done, and it's very hard to get that alignment of both."
Tony Lucas, Deloitte Consulting Australian and New Zealand ICS Baan practice manager, says different industry sectors are moving at very different rates into CRM and e-CRM.
Lucas says all the main players in the retail banking sector are moving into e-CRM and at least have initial capability around self-service on the Internet and selling of products and services, while financial and investment institutions are also moving down that path. The telecommunications industry is also moving aggressively into the area.
But he says many organisations in the manufacturing sector are still very much in learning mode, despite the fact that there can be huge payoffs for manufacturers moving into e-CRM.
A recent global study by Deloitte Consulting shows manufacturers can be up to 70 per cent more profitable by connecting with all trading partners through the Internet.
The study entitled, Digital Loyalty Networks: e-Differentiated Supply Chain and Customer Management, focuses on how companies can optimise their entire value chain to reap the real benefits of the new digital economy.
According to the study of 850 manufacturing executives in 35 countries - including Australia - manufacturers typically focus on optimising how they deal with customers' orders only when they are received, and thus concentrate primarily on internal processes and their interactions with suppliers. This results in an enormous amount of 'value' being locked in the front end of the supply chain.
"By deeply understanding their customers' lifetime potential, requirements, and costs to serve, companies can design and manage their manufacturing and distribution networks to ensure that each customer is paired with the right capabilities from suppliers, manufacturers, distributors, retailers and logistics providers to maximise customer loyalty and profitability," says Deloitte Consulting's Rod Gallagher.
Deloitte says such Digital Loyalty Networks are the next frontier of competitive excellence focused on maximising the lifetime value of customer relationships by 'reacting to order'.
JD Edwards introduced Siebel's CRM software to this part of the world. Director Glenn Wright says the company has so far sold only two e-CRM solutions, but that many of its small or more nimble or innovative customers are very keen to look at both CRM and e-CRM.
"But we also find that the mainstream of our customer base, and they are very much the bricks'n'mortar companies, are looking to put a toe in the water with CRM and to some extent with e-CRM rather than go to a full-on implementation," he says.
"One of the things we are finding is that our customer base and our consulting teams look very closely at the opportunities and look at the payback and look at the pitfalls."
Wright says while very large organisations seem to be going into both with a big bang kind of philosophy, JD Edwards' mainstream customer base - medium to large organisations - are taking a much more cautious approach.
"They're talking about trialling, they're talking about looking at what ROI they can get, and they're talking about not putting their whole traditional business at risk - rather taking one division for example, and seeing how that progresses with a CRM solution."
So despite the urgency it seems likely most Australian organisations will take a gradual approach to moves towards e-CRM.
That's certainly the approach of the Institute of Chartered Accountants in Australia (ICAA), currently targeting a payback of three to four years from an Onyx customer relationship management implementation that will also provide the foundation for its major push into e-commerce.
Deputy CEO Allen Blewitt says as far as e-CRM goes, ICAA has accepted that it must walk before it runs.
"It's a big leap for an association like our own - a traditional one which has quite a well-established reputation - to go to CRM, and we will bed that down first," Blewitt says.
"We certainly are going to link CRM very closely with our emerging Web strategy, and a lot of the data that will come out of the CRM will drive our Web strategy," Blewitt says.
"But the full data mining thing will be a second phase along with a number of areas of potential which we will explore once we are familiar with the core services."
Martin Hannah, founder and MD of Coresoft, believes it will be at least two years before there is a huge uptake of e-CRM in Australia.
"One very interesting characteristic of the e-CRM market place is that business operators are largely unaware what they are seeking is called e-CRM," he says.
Hannah says people won't budge on e-CRM unless a business case is explained to them in language they understand and in the context of a specific and current problem they have.
"One organisation will move on e-CRM because they want to solve a sales problem, another service, and another membership or customer loyalty," he says.
"Few, if any, have the entire e-CRM discipline in mind when they go to seek a new application. Even fewer really appreciate why having their e-CRM integrated to the rest of the organisation is important, until you explain it to them in terms of the way they do business."
Hannah says the fight for market share of the small to medium enterprise space for e-CRM systems won't be won with fat marketing budgets and promises of technical wizardry. Rather it will be by businesses able to communicate business propositions on an industry by industry basis.