DM Review would like to welcome Denis Pombriant to our illustrious lineup of online columnists. Denis has years of expertise in the area of customer relationship management and his new column will focus on the "customer" and "relationship" aspects of CRM. He welcomes your feedback.
There has always been a good deal of commotion in the CRM industry regarding the so-called mid-market. I say so-called because I am not sure the mid-market even exists. There is no doubt that smaller companies are solidly on the CRM bandwagon and that revenues emanating from very large CRM buyers appear to be tailing off. So middle-sized companies are in the ascent and vendors need to chase them hard, right? Not so fast.
The Mid-Market Misnomer
Conventional wisdom has it that the market life cycle follows a well-worn pathway from early adopters who can spend lots of money on innovative technology to late adopters who come for last call, presumably because they have little compelling need for a given technology and so wait until it reaches commodity status when it is usually dirt cheap and idiot-proof to install. Of course waiting that long forfeits most of the competitive advantage that could be gained from the implementation, but that's a story for another day.
The mid-market lives in the no-man's land in between - where most of the demand and potential profit for vendors lies. But this view of the market is inconsistent and wrong. For example, there's inconsistency with our own terminology. In two cases - "early" and "late" - we speak of chronology milestones within the life cycle, but between the two we suddenly switch to company size as the primary descriptor and presumably determinant.
In fact, our research shows that middle-sized companies - defined by revenues generally between $50 million and $500 million - are actually buying all the time. So-called mid-market companies are well represented in the early and late adopter phases as well as the middle of the life cycle. Similarly, the ascendancy of the mid-market in no way means that the larger companies have stopped buying. It simply means that in relative terms large companies are buying less than their smaller cousins.
What many refer to as the mid-market is really the "mainstream," the large concentration of buyers that wait until a technology has proven its business worth before spending their smaller budgets. Geoffrey Moore explained all this in his landmark book, Crossing the Chasm, and we've been getting it wrong ever since. The mainstream is made up of a heterogeneous mixture of companies that for various reasons do not jump at the first sign of new technology.
Those reasons generally have to do with three challenges middle-sized companies see all the time but which are by no means limited to their group. These challenges include the availability of resources, the competition in a company's primary market and the presence or absence of an executive champion who is willing to take a calculated risk in order to possibly gain a breakthrough in company performance.
In other words, the CEO of a company - middle sized or otherwise - does not wake up one morning and say, "I've got to get a CRM solution because it's time for companies with revenues of $145,675,042.17 to buy." Real life isn't that simple. There are specific drivers that propel decisions and they are rarely black and white.
The three drivers we have identified - resources, competition and champions - represent three continuums that can interact and combine in numerous ways to drive the same decision, which is why we see early adopters with revenues of $50 million as well those with $50 billion in revenues.
The Rush to the Mainstream
In the rush to serve the middle-sized company that wants CRM, we find vendors doing any number of things to attract business. In fact, many of the new features that vendors constantly bring to market will not hurt and some will be positive boons to smaller companies attempting to get down the CRM curve.
There are two basic trends of interest, the first is packaging services with software and providing a fixed price guarantee for deployment. This avoids many of the potential problems with delays and overruns - two things that cost extra money that mainstream companies do not have in abundance and, therefore, drive the market for antacids.
The second trend, which is also valuable and aimed to help lower the costs associated with deployment, is product verticalization in which a vendor embeds a great deal of domain expertise into the CRM product to make it ideal for a particular market. Vendors frequently refer to this domain expertise as their best practices. Why reinvent the wheel the argument goes, just deploy our product and you will have everything you need. Of course a problem can develop if too many of your competitors start using the same software - if all the competitors use the same best practices what's left to compete on? Price? This is probably oversimplified, but something to think about.
The thing I don't hear many vendors talking about and the thing that never seems to make it into a press release, is the idea of analyzing your business and planning your CRM deployment. These activities are not very sexy and software vendors in general are loath to see customers stop and think (it lengthens the sales cycle), but in my research I have noted a strong direct correlation between planning and success.
In a survey I did last year, companies that said they analyzed their CRM needs and planned deployments accordingly reported a positive ROI 72 percent of the time. In the same survey, companies that did neither reported a negative ROI 67 percent of the time.
What is also interesting to me are the anecdotal reports from CEOs of new companies that make customer feedback applications. These CEOs say that they routinely include more services with their offerings than rough software industry averages suggest just to make sure implementations are successful. These CEOs tell me that shortly after deployment they usually conclude a second deal with the same customer that is bigger than the first. It is frequently no trouble getting the customer to agree to the second deal because the customer is so pleased with the first results.
Recent CRM vendors' efforts to make their products more accessible, relevant and easier for the middle-sized company to use should be applauded, but giving a product a label like mid-market is not a guarantee of long term success. And buyers should be aware that their responsibilities do not end when they sign a check.
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