Tuesday, November 04, 2008

The Disconnect Between CRM Definitions

There are two definitions of CRM. The one used by 95% of practioners goes something like this:

"CRM is the systems and tools to integrate customer and marketing stimulus data together to provide useable information for marketers and managers."

The academic version is a lot more complicated. It includes the above technology, but CRM in academia is a whole branch of research. It seems a bit like an unholy alliance between the people doing the analytical marketing and the people thinking about it. Speaking of unholy alliances, there is an academic department dedicated to CRM at Duke University--The Teradata Center for Customer Relationship Management at Duke University (Fuqua). Three years ago, this group put out a special addendum in the Journal of Marketing on CRM. I read it when it came out, but I just re-read the introduction. In this 20 page pre-read to a bunch of CRM research, which mainly focuses on ROI studies around CRM, they acknowledge the definitional difficulties around CRM. They acknowledge that the concept of CRM has lost some of its meaning:

"...on the basis of our preceding discussion, it could be argued that CRM is the relabeling of a mixture of different marketing ideas in the extant marketing literature..."
(Boulding, Staelin, Ehret and Johnston, "A Customer Relationship Management Roadmap: What is Known, Potential Pitfalls, and Where to Go., Journal of Marketing, October 2005)


The preceding discussion they refer to outlines a bunch of really important topics in marketing that CRM supposedly encompasses:
  • Value maximization--firms and customers maximize utility

  • Need fulfillment (Levitt 1960)--marketers need to sell needs not products

  • Augmented product (Levitt 1969)--customers buy products as solutions / buying experience

  • Relationship marketing (Berry 1983)--the ongoing relationship, not just the transaction, is the critical marketing focus

  • Market orientation; market focus; market-based learning--information about the customer / market is the key to successful marketing

  • One-to-one marketing (Peppers and Rogers 1993)

  • Mass customization (Pine 1993)

Where they end up is defining CRM as something building on the above seven concepts and incorporating technology, but definitely not as just "Siebel / Oracle" or "Salesforce.com" Instead they define a bunch propositions, acknowledging that "The field of CRM has begun to converge on a common definition." I have separated these into four "definitional" propositions and another six "success factor" propositions. They didn't do this, but I think it's much clearer this way:

Definitional Propositions

  • CRM is the outcome of the continuing evolution and integration of marketing ideas and newly available data, technologies and organizational forms

  • CRM enhances firm performance

  • Effective CRM implementation does not necessarily require sophisticated analysis, concepts, or technology

  • The core of CRM is the concept of dual creation of value

The success factors basically list what it takes for CRM to work. I think this is a pretty good list by itself:

Success Factors or Prerequisites

  • CRM effectiveness depends on how it is integrated into the firm's existing processes and capabilities

  • The successful implementation of CRM requires that firms carefully consider issues of customer trust and privacy

  • The successful implementation of CRM requires that firms carefully consider issues of consumer fairness

  • Inappropriate and incomplete use of CRM metrics can put the firm at risk of developing core rigidities, thus leading to long-term failure

  • Successful implementation of CRM requires that firms incorporate knowledge about competition and competitive reaction into CRM processes

  • Effective CRM implementation requires coordination of channels, technologies, customers, and employees

Even after going through these, though, I'm struggling for a definition. There's actually one sentence in this paper that I really like that I'm going to quote that is a good definition:


"Indeed, CRM goes beyond a customer focus. Not only does CRM build relationships and use systems to collect and analyze data, but it also includes the integration of all these activities across the firm, linking these activities to both firm and customer value, extending this integration along the value chain, and developing the capability of integrating these activities across the networks of firms that collaborate to generate customer value, while creating shareholder value for the firm."

So there you have it... a good definition for CRM. I'll use it. But of course, most people still just mean Salesforce.com.

5 comments:

Anh said...

When I am asked, "What is CRM?", my response depends on the person asking. If I think they are capable of understanding the complicated definition, then I'll give them that. Otherwise, I start off with "Think of it as an address book..." and slowly add bits and pieces until I see steam rising from their head.

I'll have to see if I can find that article you had referenced. Maybe it'll help me refine my explanation of CRM.

Andy Hasselwander said...

Here's the link to the article from www.marketingpower.com:

http://www.marketingpower.com/ResourceLibrary/JournalofMarketing/Pages/2005/69/4/jmkg.69.4.155.aspx

Cliff Allen said...

One of the challenges that CRM has had (among others) is that it needs to be implemented as a unified marketing and sales effort -- which is hard to accomplish.

But, I've always thought "marketing" should include both the outbound promotion activities and the relationship-building sales activities. And very few people share that view.

Ben said...

The point you make about incorrect use developing core rigidities is an excellent one – if used properly a good CRM package makes a huge – and positive – difference. The package we use here - www.EnterpriseWizard.com – has been invaluable in building a hugely useful stockpile of customer information, which in turn has lifted profits almost exponentially.

Ben said...

The point you make about incorrect use developing core rigidities is an excellent one – if used properly a good CRM package makes a huge – and positive – difference. The package we use here - www.EnterpriseWizard.com – has been invaluable in building a hugely useful stockpile of customer information, which in turn has lifted profits almost exponentially.

Sociable