Consulting Journal: Trends - CRM and consultants

Trends: CRM and consultants

by David Blakey

CRM has been almost destroyed by consultants - and consultants may yet save it.

[Monday 18 February 2002]

Early history

The history of customer relationship management is long. Ever since customers have been buying from suppliers, and ever since customers have had a choice of suppliers, those suppliers have had to manage their relationships with their customers in order to increase their market share, sell more product, increase their margins and market new products.

‘Customer Relationship Management’ (CRM) has a shorter history. Its earliest ancestor was the customer information management system (CIMS, CMIS or CIS), which was built upon sales recording systems. Each sale that was recorded provided some data about the customer. So, CIMS were developed to present that data from the point of view of the customer rather than the sale. It was extended to purchase order systems and sales order systems. CIMS presented information about the customer's payment record, as well.

Most CIMS were developed before system users were able to perform queries on individual customers and get a response within seconds. They usually produced their output in the form of full reports on 11" by 15" continuous paper. These reports were filed more often than they were read.

Later, CMIS were developed using databases and user queries, but the pattern for the systems remained the same. They used data that was entered by other applications. CMIS collected, collated, sorted and reported.

Rebirth

The next stage coincided with the recognition that networked applications could provide information to any user on a network. This was applied to networks within hotels, for example, which enabled information recorded about a customer at reception to be viewed in the restaurant. This process began with billing information, as with the traditional customer information systems, and then developed characteristics of its own. In hotel applications, a guest's preferences could be recorded and then retrieved next time that guest checked in.

At this time, the expression ‘customer relationship management’ system to be used, although, in fact, the nature of the information that was recorded did little to improve the relationship between a business and its customers. For a hotel, recording whether a guest preferred a smoking or a non-smoking room only changed the relationship. Instead of asking: ‘Do you want a smoking or non-smoking room?’, the staff at check-in would ask: ‘And you still prefer a non-smoking room?’. This did not improve the relationship.

The practice of CRM began as a management skill. At first, CRM was separate from CRM systems. The consultants who worked in CRM were more concerned with improving their clients' relationships with their customers than in encouraging their clients to record information in databases. CRM consulting soon split into three areas.

First, there were the ‘traditional’ CRM consultants, who worked with their clients to build strategies for selling more of a product or more from a range of products and then to implement those strategies in policies and procedures for customer relationships.

Second, there were the consultants who based their strategies around the functions provided by CRM systems and databases. These consultants recommended systems as a means of implementing customer relationship strategies.

Third, there were the developers and vendors of CRM systems, who recommended to their clients that the installation of CRM systems would enable them to implement CRM.

While the first kind of consultant is still around, and is usually found working in large corporate clients, the second and third have taken the largest share of the available market. Most small to medium corporate clients will use consultants who either implement systems as a means of implementing strategies or implement systems as a substitute for developing strategies.

Like other consulting disciplines that actually have a clear and useful goal, such as enterprise-wide resource planning and supply chain management, CRM has, on the whole, been debased into a systems development and implementation exercise. It is probably that the same clients would thought they could implement ERP and SCM by buying systems have done the same with CRM.

The future

Actually, the future for CRM looks bright. And the cause of this bright future is an unlikely source. Consulting practices themselves need something more than CRM systems can provide. Within a consulting practice, different consultants with different disciplines can deal with the same clients. So, consultants from the business process improvement division, from the supply chain management division, from the e-commerce division, from the mergers and acquisitions division, and from many other divisions, can all be working for the same client. The flows of information between divisions are actually quite poor within most consulting practices, and their quality is inversely proportional to their size, scale and scope. The flows are especially poor between divisions operating in different countries, in multinational consultants dealing with multinational clients.

The systems that consulting practices developed some years ago have not yielded the results that were expected. These Web-based databases have worked well for consultants to record and retrieve information about disciplines, methodologies and sectors, but they have not helped with individual clients.

Now, consulting practices, led by the big multinationals, are developing client relationship management strategies and are looking for new systems to make those strategies work. If they do, their success may spread out to their own clients.

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