Being easy to do business with is the essence of customer relationship management (CRM.)

As this ethos exists in manufacturing companies as much as anywhere else, why then does manufacturing have one of the lowest penetration rates when it comes to the use of CRM technology?

It's no secret that CRM software was invented to help salespeople track leads and keep records of their interactions with customers. Such sales force automation or front-office applications lack the connections to the back-end business systems that are required for managing an entire order, which for most manufacturers are key to effective customer management.

You have to manage the order correctly to ensure that you can make the right product and deliver it to the customer on time, at a price that yields a profit. Sales force automation doesn't help with that. It is about managing leads; it can't tell you how to get the order right.  

The CRM landscape is changing, however. Vendors are responding to the need for front-to-back-office integration. Consequently manufacturers are starting to buy more CRM software; to such an extent that AMR research sees the sector doing the lion's share of investment in CRM when the economy improves (soon?)

Increased functionality

What sort of functionality are vendors building into their software to help manufacturers get orders right? "Guided selling" seems to be a hot ticket. It attempts to simplify what is often the most complex portion of order management: configuring the product. 

For example, Wavin, a Dutch manufacturer of plastic pipes and fittings, uses a guided selling tool to help its customers choose the right products for their needs. The customers, mostly architects and engineers employed in the construction industry, use a design calculation tool within Wavin's CRM system which lets them put in the specifications for their product, such as a heating system. They end up with a list of items that will fit into that system and they are immediately able to place an order.

In other words, the system has allowed engineering knowledge and expertise out of the factory and into the hands of the customer,  giving them confidence that they wont be able to make a bad choice.

Manageable CRM

The above is a good example of "third generation" practicality applied to CRM adoption: a cross-functional approach (sales and engineering) that addresses a particular aspect of customer service, the end benefits of which are tangible and therefore measurable. Other companies have not been so lucky. According to Gartner Group, up to 80% of CRM projects fail.  Either because instant gratification can rarely be achieved by simply bolting-on a piece of software without an existing customer service capability ("first generation" cart-before-the-horse CRM.) Or, at the other end of the scale, wholesale re-engineering of customer management processes have led to over-ambitious and intangible goals ("second generation" frozen-in-the-headlamps CRM.) 

Vendor choice

So, if a manufacturer is fortunate enough to be in-touch with all his customer "touch-points" and has identified who are his most valuable customers and how to retain them, who can he turn to for a CRM application? Predictably the choice is great. 

Siebel is the most experienced player in the CRM market place, a "best of breed" player if you will. Microsoft has also made no secret of its entry into the CRM market, as good an indication as any of the long term prospects for the marketplace. However, it is perhaps the mid-range ERP suppliers such as McGuffie Brunton and Lilly Software Associates, who by offering integrated CRM capabilities as extensions to their core planning and control systems probably make CRM an easier choice for the SME manufacturer. After all, the single database philosophy of a foundation ERP system is ideally suited to supporting CRM applications, rather than run the risk of having customer data fragmented and inconsistent over several databases. 

Rekindling the market

Analyst Nick Hewson, MD of the Hewson Group, has been tracking the initial highs and more recent lows of the CRM market. He is cautiously optimistic for the future based on his conviction about the underlying reality: the need for ever-higher standards or customer service. The requirement for integrated customer management is not going to go away and a widening gap between customer expectations and corporate capabilities is what will rekindle the market.

"Vendors at either end of the market are the ones who are likely to benefit," says Hewson. "It is interesting that some of the companies that are doing better at the moment are those who support back-room processes as well as customer contact." Many of the big players do not always have the best in class applications for CRM, "but they do address the need to support back room processes."

At the other end of the scale, companies with niche-market appeal have promising prospects and in many cases are winning business at the expense of the larger established players. "The reason is that they can often demonstrate greater expertise" says Hewson. "These companies are winning the confidence of customers because of their depth of industry understanding. Although how sustainable this is in the long run is another question."