The Rise of Big Markets: a comparison

 

CRM; The World’s biggest business application and Older Women, the World’s most powerful consumer group: A Comparison

What can be learnt from a comparison between the emergence of the now dominant CRM (Customer Relationship Management) computer application market and the sexual goods market for women which we regard as dysfunctional and immature and –by extension – the commercial economy that applies to older women which we also regard as dysfunctional and immature – even though (potentially) it is the most powerful consumer group ever seen. As Hewson were very closely involved in the development of CRM we have something of a view on this….

In April 2016, our colleagues at Gartner predicted that by 2017 CRM will be worth $36bn annually to IT vendors (mainly Salesforce.com, Oracle, SAP and Microsoft). That will make it bigger than the ERP area, which includes the Finance, Manufacturing, HR and Logistics applications that historically the global economy has been built on. In fact, it will make it the biggest business application of all time (and in terms of overall spend on all customer management related activity probably to be counted in hundreds of billions) Yet, just over twenty years ago CRM didn’t really exist…. what happened and what can we learn from its rise?

The first and most important observation about CRM is that it was logically inevitable. Back in the early 1990s it seemed to us beyond argument that technology that enabled a dynamic and structured interface between sellers and buyers was both possible and transformational and that the acquisition and use of data from customer interactions would influence how commerce was carried out and how the consumer experience would dramatically change. Look around you today and (for better or worse) CRM is ubiquitous and mandatory for any significant business.

Go back to 1990 however and in practice CRM didn’t look inevitable at all –despite the logic. It didn’t even have a name and although people later suggested that we named it that was not in any way true (although who actually did so was always something of a mystery). The acronym is annoying and often misleading but it stuck. By 1990 computers had proved very good at structured applications such as finance but less adept at messy areas such as human interaction. The 1980s had seen the somewhat inflexible and hard data experiments in database marketing and the birth of rather more free-form contact management systems such as ACT and SFA (Sales Force Automation) systems such as Brock. From these, it might be argued, a raft of innovatory and often, maverick software houses had established themselves to a degree –establishing some key concepts but surviving on small projects and little investment. It was a time of experiment and evangelising but little progress.

In 1993 – after much research and writing other publications on relationship management applications – Hewson produced a report called Emerging Information Technologies – a Marketing Opportunity. It was actually a collection of about 40 essays produced by academics and technologists, including several by a – then – much smaller Microsoft; and it was co-edited by the famous Professor Malcolm McDonald and (the later to be famous –and also a professor) Hugh Wilson. The report considered how the changes in IT would enable forward-looking companies to revolutionise their marketing and customer management strategies. It was one of those reports that are later referred to as ‘seminal’; it was certainly very influential and one of a number of thought-changers on both sides of the Atlantic that catalysed a big shift.

The ‘Big Shift’ was, in practice, engineered by the emergence in the US of well funded and thought out software companies such as Siebel, Clarify and Vantive (all of which very quickly floated on Nasdaq). These companies were aimed at the Large Enterprise market and were, critically, close coupled with the big Consulting/Integrator firms such as Arthur Andersen.  The consulting firms had, arguably, been slow to spot the potential for customer management applications and the vast amount of integration and organisational change work that would flow from this. Clients all over the word proved to be prepared to believe that this new way of business was mandatory and worked best when plumbed in to the inflexible legacy systems where ‘back office’ data was stored. Consulting and Integration revenues increased in quantum amounts as did software licences. Siebel was the fastest growing company in America and achieved a market capitalisation of $24bn by 2000.

Inevitably, after the tech market collapse of 2001 there was a consolidation and Oracle acquired some of the transformational CRM companies (eg Siebel in 2005 for $5.9bn) and together with SAP offered clients a fully integrated solution. It should be noted however that the market leader in CRM today is Salesforce.com which was established in 1997 and now has a capitalisation of $51bn. The latter proving that an innovatory (Software as a Service/Cloud platform) and disruptive entrant into a fast-consolidating market can become a permanent and global market force. CRM is a contentious area where failed promises often followed inept implementations and over-complex technology. But as the Internet age dawned and e-commerce gained influence the customer interface and experience inevitably started to hold centre stage.

So what can be learnt from this?

The inexorable rise of CRM is a classic business school case study. The dominant position it enjoys today looks, in retrospect, both logical and inevitable. But it didn’t appear so in the early 1990s. The supplyside didn’t have the credibility or market reach to move from being an entrepreneurial experiment. The emergence round 1995 of viable suppliers and the market reach and influence of the consultant integrators meant that CRM ‘Crossed the Chasm’ very fast indeed.

In 1995 the message that was coming to the ‘user’ community was one they wanted to hear. Companies believed they had a sales and service vacuum and every serious influencer was telling them they had a solution – backed up by the full panoply of marketing, advertising and media messaging. A powerful and well funded push continues to this day and for 20 years there has been no shortage of products and development – or critically – access to these.

How does this contrast with how we see the (45+) Female Economy?

What we are doing here is contrasting the growth in the world’s biggest market in business software with the potential in the world’s wealthiest consumer group. It seems to be common ground that the latent spending power residing in over 45 women is second to none and increasing all the time. But equally, there is a substantial body of opinion that the focus on this market is way short of what it might be – that the empathy of marketers and advertisers is with a young market.

It is difficult to be certain of all the facts. The research into the older woman economy and willingness to investigate appears to lack depth and any discussion is more speculative than it should be. However, we would argue that WSS findings are likely to be definitive indicators and have litmus tests that are hard to ignore.

Indicator No 1.

This Indicator covers all adult women but a key lesson can be learnt in respect of older women. Up to 100 million women use sexual products and yet this consumer base has grown without any of the conventional market drivers. No brands, only late-market improvement in products, no marketing and mostly inappropriate retail (both online and High St). This is a consumer driven market where consumer pragmatism has had to triumph against inertia from the ‘normal’ commercial world. It is particularly so for older women who are, on any serious examination, excluded from any normal retail access that they would recognise. It is the reverse of CRM where the IT and Consultant industry overwhelmed all aspects of the customer market with both products and marketing messages after a transformation in market reach occurred.

Indicator No 2

The Fifty Shades of Grey trilogy is possibly a contentious literary matter but the fact is that the book was the fastest selling in British publishing history and worldwide involved well over 100 million women. The consequential impact has been hard to discern. It was a generational event and older women in particular laid down a marker. Search the global media however and the analysis is of a sensationalist nature and not a business enquiry. The prima facie conclusion is that the causal impact on retail thinking has been negligible.

Litmus Test 1

The fact is that notwithstanding the known size of the female sexual goods consumer base set out above and notwithstanding the likely lifestyle and health needs of older customers the significant Beauty and Skincare brands are absent from the lubricant market. So indeed are traditional (non drugstore) retailers. At a time when anti-ageing products are so energetically marketed questions must be raised about the true interests of the customer – particularly when the available research is so persuasive about the likely benefits of lubricant and the societal benefits of psychological confidence. This Litmus Test goes a long way to demonstrate that commercial attitudes to older women have not shifted in practical terms and that the narrative is a generation out of date. 

Is there any resemblance to the outset of the CRM market?

For us the question is ‘Is it like 1993 all over again?’ A marketplace that, on logic, has a potential and a future shape very different to the one that exists. The answer we think, is ‘yes’ because the focus of marketers and advertisers is drawn elsewhere together with the necessary energy and retail dynamism needed to propel change. This extends to a great degree to the media commentary as well.

There is of course a difference compared to CRM which lies with the fact that the end customer – ie. The older woman consumer is already out there as a massive revenue force. They are adopters and users already but apply – consciously or unconsciously – an active pragmatism to sidestep commercial inertia. This can be seen most clearly in sexually related goods but we suspect that pragmatism masks shortcomings in how the older woman is treated in many sectors. The cultural narrative that backgrounds these shortcomings is strong and it is not one where older women have centre stage.

‘True’ product markets and their use and value are hard to assess when they have not been investigated, tested and understood. Lubricant is clearly a case in point but do we really know what older women want in terms of retail environments? Or what they want from product markets that range from cars to financial services? What do they think about emotional and immersive spaces and about service levels and knowledge and about feeling that at least some marketing messages are thought through and directed at them?

(c) Hewson group 2016