For the forward-thinking corporation, business processes and corporate best practices are not stagnant one-time decisions or implementations. They are dynamic, reacting to changes in the competitive landscape as well as being internally driven as part of a corporation’s strategy for long-term growth and shareholder value..
Thisblog article discusses the dynamics of Industry CRM solutions. Today Vertical solutions are horizontal and in the future we will have only Industry CRM solutions to survive. Vertical solutions are specifically tuned for the customer’s business. Such applications support the way companies do business, supporting existing business processes. They do not force companies to bend into a prepackaged generic template often offered by horizontally based solutions
When considering vertical solutions, we are typically referencing software solutions that are written for, or modified for, the specific needs of a particular industry or sub segment of an industry. These applications are often tailored to meet an industry’s needs using the business processes, rules, and best practices of companies within the specific vertical as a model. Companies within the same vertical will have similar solution requirements. Certainly some requirements will be unique from company to company. Therefore, even a vertical application will require some tailoring for each specific installation.
Key attributes of vertical solutions are noted in the following list. Specifically, vertical solutions:
1. Are custom tailored to meet industry needs
2. Typically include an additional configurable set of capabilities appropriate for the industry
3. Are based on business processes and rules of the industry
4. Include reporting and analytics that are germane to the industry
Implementing an appropriate vertical application in a given industry provides many benefits over the implementation of a horizontal solution. At the top of the list are ease of implementation and lower cost of implementation. In summary, the benefits of vertical applications are that they:
1. Are easy to implement.
2. Reduce training and adoption time, since the applications are written in the vernacular of the industry.
3. Leverage industry best practices by incorporating lessons learned from other implementations.
4. Are cost-effective.
Each industry has its notions of a customer, as noted in the preceding section, but they have very different implications when it comes to their management. The following are some examples of organizations that require systems to manage their day-to-day business, all of which have very different means of selling or delivering services to their target audiences.
Pharmaceutical SalesA pharmaceutical sales representative is more of a sales influencer than someone who is involved in taking a sale or taking paper. The role of a pharmaceutical sales representative is to sell the latest drug therapy. But who does the buying and selling? A physician does not purchase a case of medication from a pharmaceutical sales representative. Drugs are sold when a patient fills a prescription at his or her local pharmacy.
The sales representative really influences the sale in this example. He or she educates the physicians about the benefits of the therapy and how and when it should be used. The better the influencer and educator, the more effective the sales representative. Why is this distinction important? Remember, we are dealing with a CRM application and specifically the sales force automation (SFA) component within
the application. If a pharmaceutical sales representative does not sell, how is he or she compensated? And how does sales management manage the pipeline of sales opportunities and forecast sales volumes? Pharmaceutical sales representatives will be compensated on how a specific drug does in a specific region. Forecasting might be done based on seasonality of the therapy in question, but it certainly won’t be based on traditional direct sales 30-, 60-, or 90-day forecasts. The sales force management segment of a conventional CRM software application won’t work here.
Heavy Equipment Sales
On the other side of the equation is a direct sales representative for heavy construction equipment. In this case, the salesperson will be intimately involved in the presales process (educating the target audience about the product), the sales process (pricing, quoting, RFPs), and, in many cases, the transaction and delivery process. In this case, the person or thing the business is trying to manage with a
CRM solution is truly a customer. Sales management will rely on forecasting information that the representative has entered into the SFA component of the CRM system and manage the pipeline based
on traditional sales cycles specific to the heavy equipment industry.
The Public Sector
In the public sector, there are no "customers"; rather, there are cases, assets, and property, to name just a few. Case management is this vertical’s CRM solution. The notions of sales, marketing, and support are truly different in every way. Simply changing the names on a couple of database fields won’t completely address this vertical’s needs. Consider a social worker’s customers ,families, parents, and children in some form of crisis. The social worker needs to track the services for which these individuals qualify and those for which they do not qualify. From a marketing perspective, there could be ongoing communication about service termination or new options coming online. There could be integration requirements with other sectors within the agency that require security compliance or health-related issues that require HIPAA patient records security. One doesn’t need to wander too far down this path to see that horizontal CRM features and functionality aren’t appropriate for this vertical. Also within the public sector, consider the tax collector’s office in any town in the country. There are vast opportunities for automation in bill collection, taxes being only one of many. Web-based solutions for billing are a boon to towns. Online collection makes payment and recording easier and more convenient and provides for better and faster tracking and reporting. In the tax assessor’s business process, who is labeled the customer? Is it the name of the person paying the bill or the property associated with that owner? In these cases, this revenue is applied to the property first and then threaded back to the owner of the property. The property always remains, but the owner, or owners, may change over time.
Of these examples, heavy equipment sales is the most suited to the current crop of horizontal CRM solutions. Current horizontally focused CRM applications are appropriate for industries in which:
1. The customer is clear.
2. The sales process, or channel, is relatively simple.
3. The target audience for marketing is well understood.
4. Service and support has repeatable processes.
Determining the Best Strategy for Your Organization
Each software application installation will require some level of customization. The question is, "Which strategy will require more time and money?" Customizing a horizontal application up to the company’s vertical requirements? Or starting with an inherently vertical application and bringing it up to the company’s requirements? The goal is how to limit the amount of customization and at the same time get the highest degree of vertical features. Early iterations of CRM solutions were generally focused on horizontal market segments, and most suppliers ended up creating large monolithic applications. The
phrase "large monolithic applications" is not necessarily a negative one. They did a fine job for the markets for which they were originally designed. These solution sets had to be horizontally focused, largely due to the economics of very high development overhead and the need to spread this cost over a large number of customers. Vertical solutions are becoming more prominent as the market has matured amid consolidation, price competition, and the need to differentiate to continue to drive sales.
In the early going, only forward-looking companies and niche players considered developing vertical solutions out of the box. These companies quickly became acquisition fodder for those seeking a quick answer to the vertical demands of their customers. In general, end-user organizations have two strategies for addressing the demands of vertical business requirements (see Picture enclosed):
1. Purchase a horizontal solution and customize it to their requirements. In this case, the customer is purchasing a product for which the supplier’s stated strategy is to maintain one code base and iteratively expand its functionality over time. To address specific vertical industry customers, these vendors will customize the software each time. They will start with their horizontal application and customize it each time with expertise from the vendor’s professional services organization, a partner organization, or a third-party bolt-on solution via Web services and the like. These vendors will develop centers of expertise around selected vertical industries to specifically address the needs of these customers. These centers of expertise can include in-house professional services teams with industry experience or dedicated partners with vertical knowledge and solution sets that can be integrated into the base application.
2. Purchase a vertical solution and tune it to their requirements. In this case, the customer is purchasing a product for which the vendor has committed to supporting specific vertical solutions for each market segment. The horizontal application is often the base code, and this code is iteratively upgraded into specific vertical-focused products. In some cases, as with niche software vendors, the code is written from the "ground up" with the specific vertical in mind. These products have the ongoing benefit of multiple installations taking into account current best practices and market dynamics. Any vendor that supports multiple verticals through a strategy of acquisition can get a quick leg up on the competition but must be careful when considering the challenges of bringing the solutions into the fold of product offerings. Those that do can gain instant expertise, credibility, and market share within a specific vertical market.
Fundamentally, every organization is in a vertical market segment. It is just how the software vendors decide to address each segment that is different. It is largely a vendor market strategy choice that has driven the aforementioned differences in addressing these market segments. And this strategy is often driven by the internal economics of the companies, their vertical strategy philosophy, and the fastest, and easiest, way to support as many customers as possible.
Customers should be concerned not with the economics driving the vendor’s decisions but rather with simply trying to get the best possible solution by spending the least amount of time and money.
In the subsequent articles we will explore the vertical crm solutions offered by Leading application stalwarts.
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