CRM To Lead Market For Analytical Applications

by Michael Pastore

CRM To Lead Market For Analytical Applications

The worldwide demand for analytical applications is being led by customer relationship management (CRM) initiatives, a market that will record revenues upwards of $2 billion by 2004, according to International Data Corp. (IDC).

The need for new and established companies to measure, predict, and optimize business performance has fueled demand for analytic application solutions. According to IDC, worldwide revenue in this market space is expected to accelerate at a compound annual growth rate of 28 percent, from $2 billion in 1999 to more than $6 billion in 2004.

"To succeed in today's business and e-business environments, companies must look at ways to optimize financial performance, customer relationships, and the production and delivery of products and services," said Henry Morris, VP for IDC's Data Warehousing and Information Access program. "Analytic applications software automates the planning, forecasting, and predictive modeling activities for companies, giving them the edge they need over the competition."

IDC found the overall market for analytic applications remains highly fragmented. In 1999, the top five vendors comprised only 30 percent of the market. "The fragmentation is partly due to the diversity of the market included within the overall analytic applications space and the number of new entrants to the marketplace," Morris said.

IDC believes CRM applications will remain the fastest-growing segment. Revenue, which grew 75 percent in 1999, is projected to surpass $2.3 billion in 2004. Driving its growth is Web site analysis, the success of which is linked to personalization, the driving force behind turning Web browsers into buyers.

A survey of customer relationship management solutions and strategies by Cap Gemini Ernst & Young found that few companies track investments made in customers and, therefore, have no real sense of ROI.

"There is clearly no single rule or prescription for turning a company into a customer-centric business, but we do know it's critical to track what has been invested and how it's impacting customer behavior," said Paul Cole. "Our survey doesn't show that management is delinquent in its efforts to better reach and interact with its customers, but rather that market forces -- competition, customer expectations, technology -- are changing so rapidly that management faces formidable challenges in delivering a consistent and seamless customer experience."

The survey was administered to senior marketing, sales and customer service executives. Highlights show that companies face some key hurdles in their effort to reach and retain customers:

  • A lack of discipline in measuring ROI from CRM initiatives -- 42 percent of executives do not know because they did not measure Product-based organizational structure. Well over half organize around product groups (41 percent) or geography (29 percent) vs. customer segments.

  • No complete view of customer history or activity.

  • No one executive "owns" the customer experience. More than half of executives we interviewed (54 percent) said their companies split this responsibility across multiple executives.

The study found that those companies that are growing the fastest tend to "touch" their customers more often and are more likely than others to be directing their IT investment toward CRM initiatives. This provides strong evidence of the economic payoff of CRM.

According to the survey, 65 percent of companies are Customer Satisfiers -- they recognize customer satisfaction is important to ensure continued revenue streams and have established methods to track performance and implemented some automated solutions to interact with customers across multiple touch points. The

most sophisticated CRM business model is Relationship Optimizer. These companies, of which there are relatively few, typically provide special treatment to high-value customers, synchronize their channels, and collaborate with customers on design and delivery of products and services.

Cap Gemini Ernst & Young's CRM study further analyzed data by different industries including high technology, financial services, telecommunications, retail/consumer products, utilities/energy and entertainment/hospitality.

Key highlights from this analysis include:

  • Consumer packaged goods and utilities companies lag the market in CRM performance.

  • The entertainment/hospitality industry has the most Relationship Optimizers (17 percent).

  • Eighty-one percent of high technology companies are Customer Satisfiers.

  • Forty-two percent of telecom companies have not completed any CRM efforts in the past two years.

Originally appeared in CyberAtlas.

  This article was originally published on Friday Jan 26th 2001
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