Time For CRM 2.

Time for CRM 2.0 would be wrong to look for ‘pure’ stages. The software
Vladimir G. Dimitroff industry rapidly embraced it and made CRM a class of
technology solutions, misleading many to believe that
The tongue-in-cheek title (no, I’m not jumping on the hype ‘CRM can be bought and installed’ (yes, this is true about
bandwagon) is nonetheless meant to highlight the software, but not about customer relationships).
evolving nature of the customer centricity concept.
Ironically, the analogy with numbered software releases
Significant changes are taking place in the prevailing
became popular in the business lingo and is at the centre
views on business and society, and their implications on
of today’s “Web 2.0” excitement. It has to be said that
CRM (whatever the tired acronym may mean to you) are
CRM is not experiencing anything like a quantum leap
sufficient to drive new strategies and management
from ‘CRM 1.0’ to ‘CRM 2.0’. Using the software release
practices. What began as awareness of age-old business
model, one can find a ‘CRM 1.2’ version or even ‘CRM
principles, brought to modern-day marketing with critical
1.4.8’ along the timeline. I would certainly place the
help from technology, has now reached a stage where
technology-centred flavour of CRM a number in the
the technology-empowered, connected world is calling
middle of the range. More recent attempts at reinventing
for new approaches in marketing and most other
CRM (re-branding, to claim discovery of the ‘next big
management disciplines.
thing’) like CEM (customer experience management)
would probably qualify for something like ‘CRM 1.8’…
The story so far
The notion of customer focus dates from ancient times
The reality is that advanced forms of CRM were envisaged
when the small businessman, unknowingly, practiced
by the early pioneers of CRM, but considered futuristic or
‘perfect CRM’ in a most natural manner. In modern days
utopian for any practical purpose. They were defined by
concepts like relationship marketing emerged in the early
thought leaders as the organic evolution of a company
80-s, but it was only in the mid-90-s when technology
that has embarked on a customer centric journey.
propelled such practices into the mainstream and ‘CRM’
Peppers and Rogers would call that state of maturity ‘the
became a recognised (and, for a while, much hyped)
One-to-One company’. In the baseball metaphor used by
business discipline. For roughly a decade in existence, it
Round (UK) this would be a ‘4th Base company’, one that
has evolved considerably - and gradually, therefore it
has developed so far as to place customers at the centre

©Vladimir Dimitroff 2006 p 1 of 7

 Time For CRM 2.0

of business, seeing them as organised communities and the CRM ladder (see ‘Competing in the Customer
engaging them in critical processes. Needless to say, Dimension: The State of Customer Centricity Worldwide’
there were no case studies, not a single example of a by Craddock, Dimitroff & Dibeehi published by CRM
‘one-to-one’ or ‘4th base’ company. My only (and still Guru). While continuing to build essential capabilities,
favourite) example is the proverbial corner shop, where companies now have realistic opportunities to introduce
the owner knows intimately his handful of customers and, modern approaches, tools and techniques that define the
without a data warehouse, remembers their history and future of CRM.
their needs, and their family stories and much more… But
This may not be the revolution that ‘changed business as
for the corporate world this was beyond the horizon.
we know it’ but is nonetheless significant and different
from established models, therefore recognised as a new
Are we there yet?
stage in customer-centric thinking and practice. For lack
In recent years some companies, primarily from the digital
of fancy labels (and unwilling to engage in ‘I invented this’
economy, started exhibiting such advanced capabilities
branding), we shall call it CRM 2.0. Luckily this won’t
and behaviours. Even without the baggage of bricks and
cause confusion with Microsoft’s releases, because they
mortar, they still have plenty of old thinking and a few
skipped CRM 2.0 and launched CRM 3.0 instead (not
processes to fix - but prominent elements of advanced
what you may think, in the sense of this article). Similarly,
customer centricity make them stand out. Phenomena
hats off to the people who saw enough value in CRM 2.0
like virtual communities (online social networks) and the
as a brand to squat on the domain (but as of this date
ubiquity of mobile communications, the proliferation of
had no content on the site, http://www.crm20.com ).
UGC (user-generated content) are all unfolding at
amazing speed as we talk. Thought leaders already
So, what is it?
brought new concepts, like ROC (return on customer, in
The simplest way to describe CRM 2.0 is along the three
the Peppers and Rogers eponymous book). In her latest
parts of the acronym, comparing what they meant
book Outside Innovation Pat Seybold describes ‘How
before, and the new meanings that emerge:
customers will co-design your company’s future’.
It would be wrong to continue placing advanced
customer centricity in the distant future , even if the
majority of the world is still struggling on the lower steps of

©Vladimir Dimitroff 2006 p 2 of 7

 Time For CRM 2.0

©Vladimir Dimitroff 2006 p 3 of 7


Under Customer in CRM it was critical to recognise the
importance of customers for any business, and the fact
that they are individuals, not a grey anonymous mass with
‘typical’ preferences (statistical averages) and ‘common
denominator’ needs. The fundamental differences
between ‘the market’ and the customers who inhabit it
are yet to be understood by many business managers,
including marketers and even academics. But today
seeing them as individuals is not enough - they are
intricately interconnected with each other, and with the
business. The first signs of recognising this were seen in the
past in banking (the concept of households, tagging
family members’ accounts as belonging to related
customers) in retail (Tesco’s Clubcard allows and
aggregates multiple bearers) and in travel (BA’s Executive
Club scheme also recognises family members). More
recently mobile telecoms operators are also becoming
aware and introducing the ‘household’ concept for
multiple subscribers. They also start to recognise individual
(consumer) subscribers as related to corporate ones (e.g.
this low-value prepaid user is the teenage son of a
decision maker at a 500 SIM card corporate account)
and, increasingly (the more advanced operators at least)
are looking into communities and social networks.
To add complexity to the concept of ‘customer’ there are
multiple entities that a business depends on (and they
©Vladimir Dimitroff 2006
Time For CRM 2.0
depend on it). It is not unusual to call employees ‘internal
customers’, who have to be managed along CRM
principles (segmented, treated differently on a one-to-one
basis, building loyalty). Their behaviour and performance
dramatically impacts the (external) customer relationships,
one cannot have happy customers with unhappy
employees (and many studies show quantitative
correlation between customer loyalty and employee
engagement). Then there are suppliers who derive value
from the business as their customer, and deliver value by
providing essential ingredients for the business to satisfy its
own customers’ needs. The distribution partners bring the
product to the customers and, increasingly (in their re-
defined intermediary role) bring customer insight back to
the principal company. Another entity that cannot be
ignored are the investors, the relationship with them
demanding more than a press release on interim results.
They also come in all shapes and colours and segmenting
is the order of the day, even retention efforts are not
unusual.
As to Relationship, in CRM 1.0 it was originally important to
recognise that relationships are 2-way. In the pre-CRM
model of ‘broadcast’ relationships (one-to-many) it was
often said that the customer has a relationship with the
brand. But that was not enough - I have often been
heard to quote my former boss and mentor Don Peppers
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who said “Yes, brand is about relationship – just like my
teenage daughter’s relationship with Leonardo Di
Caprio”. CRM 1.0 did much to change this, not least with
sales-oriented database technology. Today we recognise
that not only our business has relationships with each
customer, but they also are related to each other in
multiple and complex ways. They always were, this is the
nature of society which was a network before there were
digital networks. But the revolution in communications is
giving the term social network a totally new meaning. The
digital networks facilitate and multiply inter-customer
relationships, but they also enable the business to study
and understand them. I will stop short of suggesting ‘to
manage them’ - because manipulation is definitely not
the name of the game and anyone who imagines they
can ‘manage’ networked relationships for unilateral
advantage simply doesn’t ‘get it’. One can derive huge
benefits from participating and engaging, facilitating and
encouraging networked relationships, gleaning insight
and aligning the business with the learning in order to
deliver benefits before getting any.
Loyalty was (and remains) the ultimate mantra of
customer-centric business. Almost separate from CRM,
there is an entire ‘loyalty industry’, not to mention scholars
and entire academic schools devoted to it. They keep
proving that loyal customers are more profitable, while
retention protects a market share that should translate
©Vladimir Dimitroff 2006
Time For CRM 2.0
into shareholder value. But in today’s world of choices
hardly any business can command the total devotion and
unconditional loyalty of each customer. There is a new
breed of promiscuity, or ‘split loyalty’ whereby any
customers persistently satisfy parts of their needs from 2 or
more alternative suppliers. The customer with a Sony
PlaystationTM, Sony TV and VaioTM laptop buys a Nikon
camera because of a feature where it excels over his
preferred brand. He also sticks to his tried and faithful
Nokia phones, although Sony Ericsson’s may be
technically better, because Nokia is recommended by his
trusted operator. Similarly, Tesco customers (a massive and
fanatically loyal bunch) would occasionally shop at a
Sainsbury’s for convenience or at M&S for a difference (in
taste or even just in packaging). Mobile penetration in
mature markets has long exceeded 100% and operators
are learning to live with the fact that their subscribers have
more than one phone or SIM card. In this picture the
objective of market share gives way to share of customer
and loyalty, while still possible and desirable, acquires a
new meaning.
In the Management of customers CRM 1.0 dictated that
they should be individually identified, their differences
understood, and each one (or group of similar customers)
treated differently from other customers or groups. This
brought the discipline of customer segmentation - one
cannot overstate the importance of understanding how
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this is different from market segmentation. Whereas in
segmenting markets we distinguish between groups but
are not aware of individual members, in customer
segmentation each individual customer is known to
belong to a particular segment - and, furthermore, is
known to exhibit a set of attributes (with a very individual
accuracy, usually a score) that qualifies him as belonging
to a segment. Good CRM dictates that this differentiated
view is used not only for marketing and service levels, but
in every end-to-end customer process, in planning and
managing the operations and financial returns of the
company. CRM 2.0 recognises the complexity and
dynamism of customer attributes (even the same
customer A may exhibit a different ‘score’ when
interacting with his related customer B from the one
displayed with related customer C). The streamlined
dimensions of strategic segmentation (usually
value/needs matrix) become a multidimensional maze
that, to make things even more complicated, pulsates in
all directions as dimensions change with each interaction.
To operate successfully in a networked environment,
companies are learning and adopting micro-
segmentation - and linking it to dynamic decisioning in
their systems. The discipline of social network analysis
(SNA) is also evolving and some amazing progress is
happening as we speak, as always helped by technology.
“Whisper, don’t shout!” used to be the motto of direct
marketers who proved many times over the effectiveness
©Vladimir Dimitroff 2006
Time For CRM 2.0
of targeted communications. The refined version of this
should now be “Whisper in the right ears for maximum
impact”. In the networked space there are some ‘nodes’
(customers) with far more connections than others and
some (not necessarily in proportion to the number of links)
have a lot stronger influence on others. Being able to
identify those community members and focusing
messages (and all ‘customer management’ efforts) on the
connected influencers is a critical CRM 2.0 capability and
provides an unparalleled competitive advantage.
A decade ago, with the advent of the digital age, the
advantages of a direct distribution model became
evident – and possible. Visionaries like Don Tapscott (of
“Paradigm Shift” fame) spoke of disintermediation and
their followers hurried to proclaim the imminent death of
a insurance brokers and travel agents. Ten years later the
agents are alive and doing quite well, thank you. Gurus,
having understood the value added by (by far not
parasitic) intermediaries started writing about re-
intermediation or redefining their role to reflect the
relationship principles of CRM. With CRM 2.0 every
stakeholder has become an intermediary - to continue
the trend of coining clever wording, I might call it poly-
intermediation or multi-intermediation. In a viral or WoM
(word-of-mouth) campaign a company has as many
intermediaries as it has been able to reach through those
all-important connected influencers.
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A twist of irony is that much hyped Web 2.0 (the origin of
my borrowed title) is the enabling platform but cannot be
a successful model in itself unless it embraces… CRM 2.0.
Understanding this will make all the difference in the
imminent shrinking of the ‘Web 2.0 industry’ at the tail of
the hype cycle (I cannot predict a dot.com-like implosion,
but some correction is in order). Businesses that jumped on
the bandwagon ‘just because everyone is doing it’ will
suffer the consequences of ignorance. In a press release
of a noisy recent acquisition of a UGC site, one senior
marketing executive declared ‘We enter the social
networks arena because it’s a powerful way to get our
message across’. One cannot be further from the true
meaning of connected relationship management (and
marketing). Communities don’t want our powerful
messages. We should be inside their networks to listen, not
to shout - and , occasionally, to whisper in the right ears.
There are already signs of outflow of memberships where
corporate powers have behaved with lack
understanding and sensitivity. Social networks (digital
ones to an even greater extent) have the amazing ability
to organise themselves, react dynamically and flexibly to
circumstances and bypass obstacles that get in the way
of their own objectives. Tomi Ahonen and Alan Moore
entitled their recent book “Communities Dominate
Brands” - a great illumination, still difficult to swallow by
many. The trick is to become one with your customers and
let them ‘co-create the future of your company’.
©Vladimir Dimitroff 2006
Time For CRM 2.0
What next?
There will inevitably be CRM 2.5 and CRM 3.0 but we are
not into star-gazing. Today’s opportunities are significant
enough, and the capabilities required- challenging
enough. My personal advice to would-be CRM 2.0
practitioners is to keep building the remaining parts of
CRM 1.0 for their business, in order to provide a solid base
for the innovation and avoid tensions form disconnected
capabilities. While building, though, nothing stops them
from adopting low-cost (and low-risk) CRM 2.0 methods
and techniques. One of our clients, addressing the
connected influencers recently performed an impressive
‘David vs Goliath’ in a very competitive market with a
stealth (whispering) viral campaign. The giant rivals are still
wondering where their customers went. Be creative and
bold, understand the principles and - just do it!
of
Vladimir Dimitroff is a director of PRISM Consulting, a firm with 10
years of excellence and innovation in customer strategies and
CRM. He can be reached at vdimitroff@prism.ch or phone
+44(0)7947-034 944
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