More Than A Fling

The Truth About CRM

The forerunners to CRM were techniques developed in the 1960s by direct-mail marketers like Sears, book clubs and publishers of newsletters, says Jay Curry, chair of Netherlands-based The Customer Marketing Institute, a CRM instruction center. "They were first to use the computer to store information about their customers for reasons other than sending out an invoice," explains Curry. "They were saying, 'Who is this customer, what do they want, and what are their interests?' "

CRM received a boost when ACT!, a contact management program for PCs, debuted in the mid-1980s, adds Tinjum. Then a series of books came out during the 1990s from marketing experts Don Peppers and Martha Rogers on "one-to-one" marketing. The rise of the Internet and its ability to collect computerized data on customers who shop and surf on the Web was the final impetus. "Without information technology, it was impossible to treat people as individuals," says Curry. "With information technology, we can."

Many types of businesses have tried CRM, but it has been absolutely embraced by e-businesses. Web surfers provide marketers with fresh, accurate data every time they fill out forms, register at sites, place orders or click on links. "It's a dream world for CRM," says Curry.

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Most popular CRM software fit best with businesses that sell to other businesses, as opposed to consumer marketers. "The mainstream [software] players do not do a good job of working with consumers," Tinjum says. Top-selling software include ACT! and Goldmine for small businesses, SalesLogix and Pivotal for mid-range companies, and Siebel Systems for large enterprises. A growing number of electronic CRM (or eCRM) providers deliver their services over the Internet. These, including Agillion and Salesforce.com, require only that their clients have a computer, Internet access and browser software.

Small firms generally lag behind larger ones in adopting CRM. And perhaps that's not so bad. Some 70 percent of CRM efforts reportedly fail to meet expectations. One reason may be that companies tend to simply purchase software and expect CRM to result, Tinjum says.

The truth is, CRM is a multistep exercise. First, you analyze all your individual customers by sales volume and profit trends. Then you select the best and most profitable customers and identify their needs. You attempt to sell your best customers even more-and you try to find more like them. Finally, you stop serving the worst customers, those too small to be worth the trouble or those who actually cost you money.

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This article was originally published in the September 2000 print edition of Entrepreneur with the headline: More Than A Fling.

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