Hype Cycle for Customer Relationship Management, 2003

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1 S. Nelson Strategic Analysis Report 6 June 2003 Hype Cycle for Customer Relationship Management, 2003 Customer relationship management is maturing as a business strategy, but many aspects of CRM are more hype than reality. Enterprises should be careful about exposing clients to these technologies until they prove their value. Management Summary Customer relationship management (CRM) continues to evolve. Although it's still an immature business strategy, it has moved beyond its legacy of "siloed" sales, marketing and customer service systems. Nonetheless, many enterprises are still grappling with basic aspects of CRM, while more-aggressive enterprises are looking for the "next big thing." In either case, you should remember that CRM is about customers their processes, their preferences and what they want from you. Once that's understood, the technologies and tactics begin to fit into an overall picture. Remember that your customers are your most-important assets, and strategies designed to attract and retain them will yield long-term competitive advantages. Gartner Entire contents 2003 Gartner, Inc. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

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3 CONTENTS 1.0 The Hype Cycle On the Rise Wireless CRM At the Peak Marketing Resource Management Fully Integrated Self-Service Customer Experience Management Customer Data Integration Real-Time Analytics CRM Suites Sliding Into the Trough Partner Relationship Management CRM External Service Providers CRM Overall E-Marketing Climbing the Slope Self-Service Selling Campaign Management Systems Affinity/Loyalty Programs Data Quality Entering the Plateau Segmentation SFA Conclusion...10 Appendix A:Hype Cycle Definitions...11 Appendix B:Acronym Key June

4 FIGURES Figure 1. Hype Cycle for Customer Relationship Management, June

5 1.0 The Hype Cycle Visibility Key: Time to Plateau Real-Time Analytics Fully Integrated Self-Service CDI CEM CRM Suites Less than two years Twotofiveyears Marketing Resource Management Sales Force Automation Partner Relationship Management CRM External Service Providers Segmentation Data Quality Affinity/Loyalty Programs Campaign Management Systems CRM Overall Self-Service Selling Wireless CRM E-Marketing As of June 2003 Technology Trigger Peak of Inflated Expectations Trough of Disillusionment Slope of Enlightenment Plateau of Productivity Maturity Acronym Key CDI customer data integration CEM customer experience management CRM customer relationship management Source: Gartner Research (June 2003) Figure 1. Hype Cycle for Customer Relationship Management, On the Rise 2.1 Wireless CRM Definition: The use of wireless devices to send CRM information to customers and customer contact employees. Justification for Hype Cycle Position/Adoption Speed: This is still a fine concept, but it's difficult to implement. The size of viewable areas on handheld devices is delaying the adoption of this technology. Business Impact Areas: Field service dispatch and sales will find immediate benefits. Marketing will not be a leading user of this technology. 6 June

6 Selected Vendors: Oracle, PeopleSoft, SAP and Siebel Systems. 3.0 At the Peak 3.1 Marketing Resource Management Definition: Automation of marketing processes. Justification for Hype Cycle Position/Adoption Speed: Marketing resource management (MRM) attempts to automate the hardest process of all marketing. This is a new area for many marketing organizations. Business Impact Areas: This will significantly affect marketing, especially in the business-to-consumer (B2C) area, as enterprises become process-focused. Selected Vendors: Aprimo, AssetLink, Citat and Unica. 3.2 Fully Integrated Self-Service Definition: Enabling customers to meet their own service requests. Justification for Hype Cycle Position/Adoption Speed: Although it is still plagued with difficulties, many enterprises are implementing it to save costs. The quality of self-service is often low. Business Impact Areas: The ability to move routine requests out of the contact center will provide cost reductions, but more call center training will be needed. 3.3 Customer Experience Management Definition: Working with customers to determine the appropriate interfaces. Justification for Hype Cycle Position/Adoption Speed: Customer experience management (CEM) is a new area for most firms. As enterprises begin to design processes working back from the customer, this will become important. Business Impact Areas: Web sites will benefit the most from this, but interfaces to employee-facing applications will also gain. 3.4 Customer Data Integration Definition: A combination of cleansing, hygiene, standardization and data strategies. Justification for Hype Cycle Position/Adoption Speed: Customer data integration (CDI) is a step up from traditional data hygiene. As enterprises realize that one of the major causes of CRM failure is data quality, this will become increasingly important. Business Impact Areas: Since CRM is a data-based strategy, this will affect all aspects of CRM. The problem for most enterprises will be admitting their data weaknesses. Selected Vendors: Acxiom and Experian. 6 June

7 3.5 Real-Time Analytics Definition: Analyzing data in real time, or close to real time. Justification for Hype Cycle Position/Adoption Speed: To date, most analytics have been in the batch mode. As real-time enterprises (RTEs) become more prevalent, enterprises will want to model on-the-fly to determine how to sell more and improve service. Business Impact Areas: Real-time analytics will greatly affect marketing and customer service. Most applications are not structured to support the demands of this area. Selected Vendors: Data Distilleries and E.piphany. 3.6 CRM Suites Definition: Software applications that combine sales, marketing and customer service functionality in one package. Justification for Hype Cycle Position/Adoption Speed: The competition between best-of-breed applications and suites is hot in CRM. Many enterprises like the promise of easier integration that a suite offers; however, suite functionality still lags best-of-breed by two years on average. Business Impact Areas: CRM suites will open the door to customer processes, since suites can support process flows better than multiple individual products. Selected Vendors: Oracle, PeopleSoft, SAP and Siebel. 4.0 Sliding Into the Trough 4.1 Partner Relationship Management Definition: Partnership relationship management (PRM) is CRM brought out to partners. Justification for Hype Cycle Position/Adoption Speed: This technology is important as an extension of sales force automation (SFA). It is still being developed, and the vendors are scattered in this area. Business Impact Areas: Sales will be highly affected, especially in industries with dealer networks. Selected Vendors: Allegis, Click Commerce, Comergent Technologies and MarketSoft. 4.2 CRM External Service Providers Definition: Third parties that provide additional services around CRM software. Justification for Hype Cycle Position/Adoption Speed: Seventy percent of CRM deals still have external service provider (ESP) involvement. Many IS departments need ESP assistance to do integration, installation or support. 6 June

8 Business Impact Areas: Even the promise of suites has not slowed this trend. IS departments should expect the presence of ESPs in this area for some time. Selected Vendors: Accenture, Akibia, eloyalty and IBM 4.3 CRM Overall Definition: CRM's goal is to discern key business information and apply that information to improve sales or customer satisfaction. Justification for Hype Cycle Position/Adoption Speed: CRM is still experiencing a backlash resulting from vendor overpromising, privacy concerns and an emphasis on technology as a solution. Failure rates are starting to improve. Enterprises do not have clear expectations for CRM and, thus, cannot accurately measure results. Business Impact Areas: All areas of CRM will benefit, as enterprises learn why CRM fails and how to avoid such failures in the future. 4.4 E-Marketing Definition: The use of electronic channels to carry a marketing message. This would include areas such as marketing, banners and personalized Web content. Justification for Hype Cycle Position/Adoption Speed: Using electronic channels for marketing is still associated with "spam" and pop-up ads. Enterprises are starting to integrate e-marketing into their broader marketing mix, especially as they develop better customer databases. Business Impact Areas: Marketing will be affected by the ability to use e-marketing and low-cost media for customers that prefer it. The key will be to segment correctly. Selected Vendors: Blue Martini Software, BroadVision, E.piphany and Kana. 5.0 Climbing the Slope 5.1 Self-Service Selling Definition: Allowing customers to sell to themselves. Justification for Hype Cycle Position/Adoption Speed: Sales representatives are the most-expensive way to sell a product. Moving customers to low-cost channels has a large economic impact. This technology is especially relevant to routine or simple sales, but self-service selling will even affect more-complex sales. Business Impact Areas: Sales. Will greatly lower sales costs. 5.2 Campaign Management Systems Definition: Campaign management systems (CMSs) serve as a central communication hub. 6 June

9 Justification for Hype Cycle Position/Adoption Speed: At one time, CMS solutions meant junk-mail generators, but they're now communication hubs that control the flow of inbound and outbound customer information. New CMS capabilities include multichannel support, real-time capabilities, integration with business intelligence tools and simplified data mining. As of early 2003, enterprise use is between 30 percent and 40 percent. Business Impact Areas: Marketing mainly, as well as customer service, as enterprises get a better handle on the history of communications with the customer. Selected Vendors: Chordiant Software, DoubleClick, E.piphany and Unica. 5.3 Affinity/Loyalty Programs Definition: Programs to encourage customer loyalty. Justification for Hype Cycle Position/Adoption Speed: Marketing has come a long way from giving away glasses in gas stations. Enterprises are increasingly looking to emulate the success of frequent-flyer programs to hold their customers close. Business Impact Areas: Marketing is becoming more sophisticated in this area, with multiple programs based on customer preferences. 5.4 Data Quality Definition: Making sure data is accurate, relevant and appropriate. Justification for Hype Cycle Position/Adoption Speed: Inaccurate data is one of the top reasons CRM fails. Good data requires more then just software; it also requires a person to be responsible, and it requires that data-capture strategies ensure good data. Business Impact Areas: Customer-facing areas, because the burden of improving the process will fall on them. Marketing departments will need to develop ways to encourage customers to supply much of this information. Privacy will continue to be an important concern in this area. 6.0 Entering the Plateau 6.1 Segmentation Definition: Dividing customers into replicable groups. Justification for Hype Cycle Position/Adoption Speed: Customers are not all the same. The number of segments grows all the time. Enterprises are developing multiple segmentation schemes, with thousands of segments each. Business Impact Areas: As data mining and segmentation move to the forefront, marketing is becoming more of a science. 6 June

10 6.2 SFA Definition: Using technologies such as laptop computers, personal digital assistants (PDAs) and contact databases to automate the sales process. Justification for Hype Cycle Position/Adoption Speed: SFA is one of the oldest areas of CRM, and it has had many failures during the past few years. An emphasis on sales force acceptance is stabilizing SFA. Business Impact Areas: Improved sales, as SFA systems go from being mainly pipeline reporting to senior managers to producing real productivity gains for sales representatives. Selected Vendors: Oracle, PeopleSoft, SAP and Siebel. 7.0 Conclusion Because many CRM technologies are at the Peak of Inflated Expectations or sliding into the Trough of Disillusionment, it's easy to think that the period ahead will be a bad one for CRM. In fact, these are normal stages in the development of this market. In particular, during the next two to five years, many of the CRM technologies will reach a point of mainstream acceptance. Enterprises and vendors that realize this will be able to plan accordingly, so that, as the market moves through the CRM Hype Cycle, they will be better prepared than their competitors to succeed. 6 June

11 Appendix A: Hype Cycle Definitions Technology Trigger: A breakthrough, public demonstration, product launch or other event generates significant press and industry interest. Peak of Inflated Expectations: During this phase of overenthusiasm and unrealistic projections, a flurry of well-publicized activity by technology leaders results in some successes, but more failures, as the technology is pushed to its limits. The only enterprises making money are conference organizers and magazine publishers. Trough of Disillusionment: Because the technology does not live up to its overinflated expectations, it rapidly becomes unfashionable. Media interest wanes, except for a few cautionary tales. Slope of Enlightenment: Focused experimentation and solid hard work by an increasingly diverse range of organizations lead to a true understanding of the technology's applicability, risks and benefits. Commercial, off-the-shelf methodologies and tools ease the development process. Plateau of Productivity: The real-world benefits of the technology are demonstrated and accepted. Tools and methodologies are increasingly stable as they enter their second and third generations. The final height of the plateau varies according to whether the technology is broadly applicable or benefits only a niche market. Approximately 30 percent of the technology's target audience has or is adopting the technology as it enters the Plateau. Time to Plateau/Adoption Speed: The time required for the technology to reach the Plateau of Productivity. 6 June

12 Appendix B: Acronym Key B2C CDI CEM CMS CRM ESP MRM PDA PRM RTE SFA business-to-consumer customer data integration customer experience management campaign management system customer relationship management external service provider marketing resource management personal digital assistant partner relationship management real-time enterprise sales force automation 6 June

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