Customer Relationship Management - Market Trends

The Evolution of CRM

In the late eighties, CRM began to emerge as the successor to Enterprise Resource Planning (ERP). ERP had a traditional, product-centric approach to marketing a company's products and services. CRM developed because ERP lacked the personalization sought by today's companies and to provide basic communication, contact, and analysis tools. In CRM's early days, these tools and the three areas of CRM - service, marketing, and sales - were poorly integrated and marketing databases could not fully utilize their potential. CRM lacked good automation and advanced technological applications.

As the nineties progressed, CRM systems changed rapidly, and two factors significantly affected CRM’s success. First, global competition increased tremendously, causing products and services to be more difficult to differentiate. The product-centric view of traditional marketing changed to a more customer-centric view, offering customers more personalization. The second factor was advanced technology, which gathered customer information from all over the enterprise into a single system. New technologies enabled greater processing power and data analysis capabilities. In addition, data architectures became more integrated and consistent.

Currently, as CRM becomes a more integral component of the modern business enterprise strategy, many companies are turning to wireless devices to deliver market-differentiating customer service. CRM is used with data warehousing, data mining, and other intelligence-based applications. The market continues to develop as many ERP vendors try to respond to the competition by integrating front-office applications with back-office systems.

CRM still has many downsides. Product maturity and cost-effectiveness have not always reached the desired results. There is frustration among end users about the performance and capability of the CRM solutions. Clients are not convinced that CRM performance measures up to the market and vendor hype and label CRM systems as overpriced. CRM is a fast growing market and prices are positioned to decline.

There is great competition between vendors to differentiate their products and services along functionality, integration with existing systems, ease of use, and the range of target markets. Currently, CRM offers faster response to customer inquiries, increased efficiency through highly developed automation, and a deeper understanding of customers through advanced analysis systems. CRM tools are developed continuously and more sophisticated applications enter the market rapidly.

Future of CRM

During the last few years, globalization in the field of e-commerce has challenged companies to make customer communication truly interactive. The new customer relationship management strategy is moving away from one-to-many mass-communication philosophy to a more individualized one-to-one communication. Real-time, automated marketing communication regarding personalized sales and services will make companies’ communication with the consumer more relevant and timely. New electronic channels are developing continuously, making CRM’s existence in companies’ strategy even more vital.

Today’s CRM market trends are challenged by increasing customer expectations and customer relationship complexity caused by the new and continuously evolving technology, greater mobility in the field, and faster development of new products. Companies must increase their ability to manage and respond to the relationship-complexity function between customers and themselves. Companies must shift from the old paradigm of mass production to the new paradigm of mass customization to meet the customers’ exacting demands.

It is estimated that the CRM market will grow from $3.7 billion (US$) in 1999 to $16.8 billion by the year 2003. According to a recent study from AMR Research, the CRM segment is expected to grow at a compound annual growth rate of 49% through 2004, which is more than double the overall expected increase in the IT services market. Stronger front-to-back office integration and wider concentration on CRM business processes are the key reasons for CRM’s notable growth.