November 6, 2012
By Leonard Klie, Editor, CRM magazine and SmartCustomerService.com

Social Adds to CRM's Appeal

The growing adoption of social capabilities is enabling a richer understanding of customers and a faster overall development and deployment cycle for CRM, according to Nucleus Research's 2012 second-half Technology Value Matrix for CRM.

The iterative nature of cloud development and the ability of vendors, system integrators, and internal developers to adapt CRM to support new and changing business processes mean new functional and integration capabilities are being added, often on a quarterly or faster basis, the report finds.

Of particular notre is the adoption of social media and the need for companies to understand and manage how customers interact with them and influence others across social networks. This has driven development, acquisition, and integration of social monitoring and interaction capabilities for CRM.

"Companies continue to achieve significant returns from functionality and usability enhanced by the deepening use and widespread adoption of social media as a means of understanding and managing how their customers interact," says Rebecca Wettemann, a vice president at Nucleus Research.

The report also maintains that companies will continue to invest in CRM because these technology trends and others have driven significant ROI opportunities.

The report does note, however, that offering CRM applications in the cloud via the software-as-a-service model is making it easier for customer to switch applications within the first six months of deployment. This, in turn, is forcing many vendors to shift their short-term sales strategies and valuation of the overall lifetime value of a customer.

The value matrix refers back to earlier research from Nucleus that found that 52 percent of customers deploying cloud-based CRM solutions were willing to switch vendors and applications within the first six months of an installation.

"Customer loyalty is won or lost every day, and the rise of cloud applications in the CRM space has quickly changed expectations in how applications should deliver value over time. With that said, no customer is truly loyal in the cloud, requiring vendors to step up their sales discipline and allocate additional focus of their attention to providing excellent service to new customers and those approaching the period of re-evaluation of their existing cloud CRM solutions," Wettemann points out.

And the trend is likely to continue as more vendors start to offer CRM in the cloud, the research suggests. Vendors looking to capitalize on this and steal customers from their rivals should market the smooth migration to their products.

Nucleus also found that if cloud CRM companies can keep customers past the initial six-month period, the percentage of customers likely to switch drops significantly (to 18 percent) for an average of 30 months before rising again as customers seek out further ROI from competing cloud CRM solutions.

CRM vendors that build long-term strategies will face less risk of customer switches over longer-term subscription periods.

The trend, while adding challenges for the vendors, gives more control to the end user. "The cloud has shifted expectations about initial and ongoing delivery of value, and relatively low switching costs mean customers can keep their vendor on the hook to delight them beyond the initial deployment," Nucleus concluded in the report.

The report also identified Microsoft, Oracle CRM On Demand, Oracle Fusion CRM , and Salesforce.com as leaders in the industry. It named Aplicor, Cegedim, Infor, Infusionsoft, Oracle-Siebel, Oracle-RightNow, Sage, and SAP as "others of note."