June 2000

BY TIM GULERI, OCTANE SOFTWARE, INC

We are all familiar with the reasons for getting closer to our customers to improve their satisfaction and retention: the costs of acquiring a new customer far outweigh the costs of retaining an existing customer, decreasing customer defection by as little as five percentage points could double profits (1). To achieve high customer retention rates, companies have been striving to reconnect with customers to build personal relationships with each customer. We are all more likely to return to local shops and restaurants where we, and our preferences, are recognized. The same holds true for businesses of all sizes and locations -- even if we are interacting with companies located across the globe from us, or via the Internet, we are likely to keep our business with those companies that know our histories and our preferences and take action on that knowledge. Add to this e-business, where competitors are literally only a click away, and the pressure to build personal relationships with customers is even greater.

We are all also familiar with the promises of customer relationship management (CRM) software -- a technology solution that will unite sales, service and marketing to provide a complete view of each customer. Traditional CRM solutions have provided many companies with improved customer service rates, but have failed to fulfill the promise of giving employees who interact with customers complete insight into the customers' histories with the company, allowing the employee to take the most appropriate action. Furthermore, these client/server solutions have been slow to react in incorporating functionality to manage the Internet interactions necessitated by e-business. The competitive pressures in the new economy -- the customer economy -- demand a new form of CRM, called eCRM, which can finally deliver the promised benefits.

The Customer Economy
The customer economy is characterized by incredible customer expectation for speed, ease and quality of interactions. The fact is, customers today want what they have always wanted: choice, convenience and responsive service with a personal touch. The difference is that the sheer volume and complexity involved in delivering those benefits has changed dramatically. In the past, companies served a limited number of customers through storefronts and over the telephone. In the new customer economy, the contact channels used to interact with customers have multiplied, encompassing both assisted and self-service options. To compete effectively, companies must now be able to deliver the same consistent, personalized, high-quality service across all interactions and all communication channels: Web, e-mail, chat, voice over IP, phone and fax. For example, today's customers want to use the Web to help themselves to information, compare prices and buy products and services. But they also want the option to send an e-mail or pick up the phone when they have a question, as well as fax an order or even chat online with a sales or service representative. Above all, they want to effortlessly switch channels at any point without breaking the thread of communication, being penalized for choosing the wrong channel or losing the entire history of their interactions when moving between channels.

In "Serving the Whole Customer," Forrester Research states, "The bottom line is that companies must treat customers holistically -- and not as a grab bag of uncoordinated data points held in separate systems." To help companies compete successfully in the customer economy, companies need a single eCRM system that provides support for all existing and future communication channels and full use of customer data across the extended enterprise.

Customer-facing functions must be rapidly adaptable, allowing organizations to accommodate real-time business change and seize new market opportunities. Companies must be able to communicate with customers on a one-to-one basis, across the many diverse channels customers now expect. Organizations must also be given tools to interpret customer information into strategic business intelligence, applying it across their operations to better serve customer needs.

Revolutionary Pressures
The first phase of client/server CRM applications that automated customer-focused business processes enjoyed some success; however, these systems have failed to unite the extended enterprise around the customer to create the personal relationships necessary to retain customers in the customer economy. Due to the lengthy and complex implementation cycles and the modular designs of client/server CRM applications, companies have continued to implement the solutions as stove-pipe applications for functional units. Marketing, sales and service continue to work as separate entities, each with their own isolated islands of customer information. Furthermore, client/server CRM solutions do not effectively extend CRM outside the enterprise to involve partners and customers themselves. Efforts to incorporate Internet channels into the applications have resulted in bolt-on Web interfaces that only further complicate deployment and implementation.

The next phase of CRM saw the rise of point solutions focused on managing new communication channels or incorporating partners and suppliers into the enterprise. These solutions offer functionality for specific channels such as e-mail management or online chat, or for communications with partners; however, many companies found that the result of a point-solution strategy for CRM compounded their problems as these solutions are not easy to integrate into one cohesive customer care system. The result was that, in addition to isolated islands of customer information in marketing, sales and service, organizations were faced with separate sources of customer information in each communication channel. None of these solutions delivered the dynamic, integrated, multichannel view of the customer necessary to address the requirements of the new customer economy.

Next-Generation eCRM
The promise of seamless, multichannel customer care has been aggressively marketed to both companies and their customers, with the result that customers now demand that level of service from all companies. However, the reality is that few companies have been able to deliver it. As new contact channels are added, as response times continue to compress and the demand for convenient, personalized service increases, many companies are finding that their technology is not up to the challenge. To bring all these technologies together with the latest in customer care solutions, the next generation of eCRM has evolved.

Technology is finally catching up, providing the multichannel infrastructure necessary to effectively manage business relationships in the new customer economy. Client/server computing models are giving way to more flexible, Web-based architectures providing the required combination of feature-rich applications and Internet architected infrastructures. New communication technologies are giving customers, employees and partners anytime, anywhere access. Business intelligence applications, data warehouses and datamarts are helping companies improve segmentation and one-to-one marketing capabilities. The ability to easily "connect" front-office and ERP systems is progressing, enabling organizations to develop a complete view of their customers.

Beware the hype. Most CRM and eCRM vendors are promising to provide companies with a complete view of customer histories, with multichannel capabilities and advanced Internet technology. When looking for a next-generation eCRM solution, be sure to delve deep into both application functionality and architecture. Next-generation eCRM systems should include:

• A blended application for:
  • multiple functions: sales, service/support and marketing,
  • multiple users: employees, customers, partners and vendors,
  • multiple communication channels: Web, e-mail, chat, voice-over IP, phone and fax.
• An enterprise application infrastructure providing:
  • enterprise integration,
  • Internet-class scalability,
  • actionable business intelligence,
  • a flexible design environment.

The next generation of eCRM software is built from the ground up on an Internet-native architecture that provides both dramatic improvements in the speed and ease of deployments and a true blended application for customer care. These eCRM infrastructures can allow organizations to manage all marketing, campaign management, sales and service functions through a single application. All employees, regardless of function, can now work from the same application through tailored interfaces. They have access to the same set of customer information, delivering on the promise of a complete view of the customer. Additionally, because only a Web browser is required to access the application, these innovative eCRM solutions empower companies to more easily extend the application out to partners, resellers, vendors and customers.

Next-generation eCRM applications must also provide the scalability and flexibility demanded by e-business. The ability to handle both the high volumes and data intensity associated with enterprise use and the high transaction rates and random usage peaks associated with Internet use are essential qualities that distinguish eCRM from client/server solutions.

A business' success is measured by its strength in recruiting, acquiring and retaining customers. eCRM applications that offer superlative business intelligence and analytics empower businesses by delivering deep, actionable knowledge about customers. Capturing data from all customer contact points while simultaneously drawing in data from disparate databases provides the foundation for proactive, customer-centric business strategies. The ability to quickly analyze and apply this business intelligence enables enterprises to tailor their offerings to meet customer demand -- a critical competitive advantage in the customer economy. Business trends are rapidly identified. Customer segmentation data are accurately analyzed and allow redefinition of business rules on a real-time basis.

The Promise Of CRM Fulfilled
Currently, a few eCRM providers have dedicated the development of their software technologies to meeting the needs of the new customer economy. These solutions were designed to deliver what CRM has always promised -- a unified, extended enterprise empowered with complete insight into each customer and critical business intelligence to provide personalized, consistent interactions across all channels and functions.

1 Harvard Business Review, Frederick F. Reichheld, "Learning from Customer Defections," 1996.

Tim Guleri is CEO and co-founder of Octane Software, Inc., a provider of multichannel customer interaction applications and infrastructure software for sales, service and marketing. On March 15, 2000, privately held Octane Software agreed to be acquired by E.piphany, Inc., a provider of customer-focused analytic, campaign management and real-time personalization applications.