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What is Customer Relationship Management?

CRM is a business strategy designed to anticipate, respond and satisfy customers and grow customer relationships for mutual benefit.

Successful CRM is much more than just a one time project activity. In fact it's a change in company culture and a continuous journey that matures as customer needs evolve, organizational capabilities advance and the customer relationship evolves.

Customer Relationship Management is a business strategy first and foremost. CRM software provides the underlying framework, data management and process automation to empower CRM strategies.

A CRM Industry Look

The CRM software industry is incurring more shift than at any time in the last 20 years. The CRM Buyer Guides shows three primary CRM software growth sectors are growing at vastly different rates and even in different directions, thereby changing the relative mix for each and changing how the market views, buys and deploys CRM software.

Customer Relationship Management software consists of the operational CRM, analytical CRM and social CRM sectors.

  • Operational CRM (sometimes called traditional CRM) primarily manages transaction processing, record management and basic reporting, and is best known by the three tenants of marketing, sales and service. Key customer facing business processes include account management, contact management, opportunity management, marketing campaigns and incident management. The operational Customer Relationship Management software market has rebounded from low single digit growth after the turn of the century, however, has yet to return to the bold double digit growth incurred in the 1990s. For the year ended 2011, CRM software growth was approximately 8 percent. However, somewhat hidden within that uptick was a 28 percent growth rate for cloud or software as a service (SaaS) CRM systems. In fact, SaaS-based Sales Force Automation (SFA) solutions exceeded 50 percent of the entire market for the first time ever.

  • Analytical CRM solutions deliver insightful trends, patterns, relationships and other often difficult to discover information about customers and their behaviors, thereby, permitting companies to better predict and respond to customers for growth initiatives or other strategic benefits. CRM analytics tools are often part of broader business intelligence (BI) software suites, which may include dashboards, data marts, data warehouses, data mining systems and online analytical processing (OLAP). These analysis tools aggregate, synthesize and disseminate the high volumes of customer activities into visual, easy to consume views so that executives can learn from the information and take action to improve their operations.

    For nearly every year of the last decade analysts have predicted that the next year will be the year that analytical software will take off and achieve big growth. However, these forecasts might now actually be coming true. For the calendar year ended 2011, analytical CRM software grew over 20 percent, its biggest growth rate ever, and now makes up 15 percent of the total CRM software market. Most credible research suggests that 2012 growth will continue to rise for CRM analytics.

  • Social CRM recognizes the indisputable change in customer relationship management—from vendor driven monologue communication broadcasts to customer driven two way dialogue. Social CRM brings together the strategy, processes and online tools for companies to engage customers in a dialogue that satisfies the customers' increasing requests for candid and transparent information while also enabling suppliers with new channels for feedback, increased interaction and enhanced customer relationships.

    The social CRM market barely made up 1 percent of the total CRM industry only a few years ago. For the year ended 2011, social CRM software tools and applications achieved approximately 51 percent growth and now makes up nearly 7 percent of the total CRM software market.

For the last decade, operational CRM software has made up 90 percent of the total CRM market, with analytical CRM software contributing the next 9 percent and social CRM picking up the last 1 percent. However, each sectors growth rates are clearly changing the overall mix of the CRM software industry. Analyst firms such as Gartner and Forrester advise that over the next several years, operational CRM software will decline from 90 percent to 70 percent, analytical software will increase from 9 percent to 20 percent and social CRM will achieve the highest incremental gain from 1 percent to 10 percent.

However, even when recognizing a relatively slower growth for operational CRM, its important to recognize that this CRM sector still makes up the high majority of the software market and further, it is the underlying platform for both analytical and social CRM tools. It's also quite likely that many of the operational CRM vendors will build or buy analytical and social tools, thereby morphing or consolidating what are today three different sectors into a single software market.


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