CRM sustainability in a post-recession economy

By Denis Pombriant, Founder and managing principal, Beagle Research Group, LLC

17 Dec 2009 | SearchCRM.com

Sustainability is the next big issue for CRM. Coming out of a self-induced recession caused by overleveraging and other forms of overconsumption, we can expect people and companies to be more cautious about their spending. We really have no choice -- liquidity, or credit availability, is low, and those who have cash are inclined to hoard it.

But even assuming easy credit, there are other drivers, such as the escalating cost of energy, which will serve to keep the economic brakes on. In this revised landscape, economic drivers will cause business to rethink some processes, with the result that demand for new software should be just around the corner.

None of this is bad news, and it smacks of economic opportunity. The trick, as always, is to discover the drivers and the processes early enough to position ourselves and our companies to take advantage.

The economic drivers that I see include tight and expensive energy supplies, a cautious economy, satiated customers and a demographic shift. Other than that, it’s smooth sailing. Let's explore these individually.

Energy

As the economy was tanking last year, gas peaked above $4 per gallon and jet fuel was even more expensive. In a very short period, the cost of transportation doubled for many people, and that’s more than most can handle. From November 2007 to November 2008, Americans drove 122 billion fewer miles than during the prior period, according to the U.S. Transportation Department. That may have been good for the environment, but our economy thrives on business travel, and a big chunk of that decline was travel for business.

I haven’t seen comparable numbers for airlines, but we know they are in a seemingly perpetual cycle of losing money. High fuel costs didn’t help them. The opportunity I see here is the need to travel less while increasing our economic output. That will give an advantage to any software company that can help us maintain face-to-face contact with customers without travel.

Obvious candidates include the Web meeting vendors, but also consider companies that sponsor Web conferences for hundreds or thousands of people. While we’re at it, this could be a boon for desktop video development and production software. You don’t need lights, cameras and all that to produce influential short videos. I am already seeing some leading companies produce video -- Oracle, SAP and Sage come to mind. Look for more of this.

Economy

Before you throw your hands up and say the problem is too big for us to solve and we need a government solution, take a deep breath. The software trend over the last 10 years has been to reduce costs and pay as you go, and it’s been successful. Pay as you go has legs in this economy. Remember that K-mart, and later Wal-Mart, reintroduced layaway in time for last year’s holiday shopping. At the time, I said that software companies ought to be developing applications that enable other companies to do the same thing. A newish business model that enables more vendor financing would do a lot to sidestep the wreckage in the financial sector and help get the economy moving at a more robust pace. The opportunity here is obviously the software that makes small, short-term financing possible.

Customers

Thomas Friedman’s book “Hot, Flat, and Crowded” goes into great and disturbing detail about our overconsumption in the last couple of decades. At this point, many people are tapped out and have garages full of things they thought they needed. Many companies find themselves overleveraged too. Each of these ideas is reason enough to buy less, so vendors will need better tactics and strategies for uncovering real customer need. All this suggests a fundamental rethink of sales force automation (SFA). If you are an SFA vendor and can think outside the box -- with an eye to social media -- there’s opportunity awaiting you.

Demographics

An article in the Harvard Business Review by professor John Quelch last year uncovered an interesting truth about customer loyalty. People of a certain age -- think of them as post-tuition-paying baby-boomers -- are less interested in new things than in new experiences. We’re not talking about the garden-variety experience of someone having a pleasant time using your gizmo; this is about eating out at that Afghani place I like in Cambridge rather than remodeling the kitchen. It’s also about selling the McMansion and moving closer to the city so that it becomes realistic to take the commuter rail to a play in the evening. Quelch calls these people middle-aged simplifiers.

If you’re in CRM, this spells opportunity to rethink some business processes and use social networking to carefully listen to customers as they describe the next important things in their lives. Your customers will need to support new business processes to address the demographic shift.

So there it is. Out of adversity comes opportunity, and this piece only scratches the surface. There’s more out there if you look and apply ingenuity and innovation. Good luck with that.