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CRM Contracts, Negotiations, and the Hidden “Gotchas” | CRM Magazine Blog

CRM Contracts, Negotiations, and the Hidden “Gotchas” | CRM Magazine Blog.

I am quite puzzled to read this recent post in the CRM Magazine blog. The post itself is largely based on what Gartner Analyst Jane Disbrow said in the Gartner CRM summit in Arizona.

To quote:  “Offers, promotions, and discounts are appealing, but you might end up with something you don’t really need.

Often people just think ‘We have to buy new software,’ but they don’t think of the additional aspects,” Disbrow said. There are many (hard and soft) hidden costs involved with implementing new projects that must be taken into account:

  • Training costs,

  • Customization of code,

  • Implementation time and manpower,

  • Database management, and

  • Data conversion.

Not only are those important to look out for, but Disbrow said that customers need to be aware of the silent software-as-a-service “Gotchas.” Many people think that SaaS lets you scale up and down with users whenever you’d like, she said. However, that’s truly not always the case. On-demand applications can bring along a tailwind of additional expenses including:

  • Storage fees,

  • Premium main fees,

  • Data protection and rights to data,

  • Set-up fees and customization fees,

  • Sand-boxing fees,

  • Fees for customers and business partners,

  • Document functionality, and

  • The ability to reduce or re-level volumes midterm.”

How different is this scenario from any other purchase?
Upfront cost is not the same as lifetime costs; most people get it; corporate purchasers certainly do. And, a product sold as a service will have to embrace some of the same uncertainties of a service sale; just as a service is more difficult to specify than a product, so it is more complicated to price.
Would it be fair to say though that a CRM product sold as a SAAS would typically be, in spite of the uncertainties identified above, cheaper, friendlier and easier to set up and customize than a similar enterprise class software product?
Nothing is as good as it is marketed to be; but nothing is as bad as it is often dismissed as 😉


Pitfalls in current sales lead logging methods

.. and a solution

There are essentially 2 ways most CRM systems currently recognize a “Lead”.

New contacts as leads: Many systems simply log any new contact name with address as a lead. The contact name may have been sourced from any place: web-form, trade-show attendant, purchased list, telephone directory; no matter. They are all “lead”s and are fed to the top of the funnel for further action by sales or marketing.
The benefit of this apprach is it has the widest reach; because it casts the net really wide. For a new company, this closely matches the business process as well. Very few existing customers/ contacts; so, any which way to expand the circle is useful.
The problem of this approach is that it can overwhelm your lead-processing system by putting the onus of swiftly “qualifying” all these contacts onto the sales or marketing. And since the quality of the input (the list of contacts) is never good, leading to a frustration with the qualification process.

Contacts with tasks as leads: An improvement on the above system is logging contacts with specific actionable requests as leads. In this way,  a contact who has asked for a quote or a demo or a salesman’s visit or even attended a seminar or clicked on a link in a e-mailer is tagged as a lead.
The benefit of this approach is that this makes available for qualification a smaller list of contacts to start with. Also, the contacts have qualified themselves somewhat by professing a level of interest. This is as useful for a new company as an established one, with existing list of clients.
The problem with this approach is that it still leaves the bulk of qualification tasks open. And, there is still no systematic way to prioritize which leads need attention ahead of others.

Over-riding issue with “metrics”: Marketing gets measured by leads that they manage to “create” while sales is measured by revenue. For a detailed discussion read my previous posts, here and here. So, even under the second scenario above, marketing has an incentive to “stuff” the funnel with contacts as leads who have shown even the slightest desire to engage with us. Unless there is a clear understanding of the minimum state of qualification at which the lead gets passed on to sales, such leads will continue to be held in contempt by the sales function.

In B2B scenarios, we need to recognize that decisions are normally collectively undertaken. Also, by attaching a lead to a contact, we are re-stating the obvious: this contact can potentially give us business. Well, that’s why he was in your contact list to start with, isn’t it?
A lead, thus:
1. Is not a contact but is associated with one or  more contacts in the same customer account.
2. Needs to be nurtured and progressed into a deal.
3. Needs to be jointly “owned” and seen as having resulted from sales and marketing efforts in order  to have credibility.
4. Needs association with a product or service that we can sell into that account.
5. Needs to result from activities performed by the contacts in an account – as logged in the system and sales and marketing activities targeting those contacts related to the same class of products and services.
I discussed this in more depth in my post called A better way to recognize “leads” in CRM systems.

What do you think? Is a shift of focus from contacts to their activities warranted? Do share if you spot challenges in either the thought or its practical implementation.

CRM system components

A component level diagram for a CRM System

A component level diagram for a CRM System

There is no dearth of CRM products available in the market, either on desktops or delivered on the cloud. A simple search can throw up more than 200 product names. Most are “me-too” products, the CRM is not a new concept.

To a prospective user of a CRM system, all this choice spells confusion. It really comes from the lack of exactness of what really is a CRM system.

Whether the CRM system is deployed via the desktop/ intranet or over the internet using the SaaS model, most common CRM softwares will have one or more of the components shown above.

Campaign manager: Manages the setting up of (marketing) campaigns, targeting a list of customer contacts who will be targets of a particular marketing message; be it product promotion or communication regarding a new capability.
Sales Force Automation: Manages the logging of customer activities, whether in response to a campaign or otherwise, creates and manages “deals” and essentially manages the sales funnel.
Content Manager: Rarely seen in low-end systems, this integrates web-publishing with other communication (like e-mail newsletter) so that information sent to the customer, from whatever source, is always current and same irrespective of media.
1.  Quote making (optionally backed by a quote configurator)
2. E-mail engine (backed by a template repository; optionally a template generator). A template is basically a HTML page that is created and stored in the system, for use in communicating to customers. Different types of communication may have different templates.
3. Order acknowledgement: (optionally linked to the ERP system for committing delivery time at the time of acknowledging the PO).
4. Analytics and reporting engine: Extracts data from the profile and activities of contacts and accounts and reports on trends and status.

For a small to medium size operation, (upto 40 front-line sales execs) I do not expect that you will need all of the above functionalities. What do you currently use?

A better way to recognise “leads” in CRM

… why we need to re-define “leads”

In most common CRM systems, a lead is what marketing produces for its labor and a deal is what the sales guys make or chase. The system treats them differently.

If this is your worldview as a B2B marketer, be ready for strife, disagreement and worse across the great sales-marketing divide.

First up, let us agree on a few things:

Sales-guys may be rock-stars but, they could not do much without the company, its products and the reputation that precedes them. And, we like to think of sales as a linear process, with customer moving from a stage of low awareness to high engagement and making the transition from being hand-held by marketing to sales.

Worse, when a “lead” is exclusively “tainted” with the marketing origin, sales do not take it seriously. When faced with a lead-inbox full to the brim on a Monday morning, the impulse of the sales executive is to do one of the following:

1. Trash the lot

2. Scan through the lot and mark most as useless and the rest as “already existing in the system”.

Sales leads are a result of many factors (company brand name, past experience and purchases) and activities undertaken to make the customer aware of our products and services. In B2B scenarios, sales and marketing both have a role to play.

Why not recognize that?

There is a reason. Over a period of time, B2B marketing departments, under pressure to justify their existence, have bought into a metrics system that recognizes only “lead generation” from marketing campaigns as a measure of success.

So, marketing is eager to tag every little sneeze from the customers as a lead and ascribe that to the cold they caught from the aircon running in their own office. This has led to the exact opposite of what was intended. The more numerous marketing leads have become, the less useful they are.

We define a lead as a signal coming from a buyer organization which needs follow up. A lead, upon qualification can become an identified opportunity for a sale.

A lead is NOT an individual. However, a lead arises out of actions taken by one or more contacts working in a buyer organization (account).
In this view,
1. A lead transforms into a deal
2. We recognize that many activities jointly contribute to creating a lead. It is no longer  “we ran a seminar and we got 200 leads”. Now it is more like “we have logged customer activities (attending a seminar, asking for literature, asking for a salesman’s visit or wanting to see a product for evaluation purposes) all showing interest in a certain product/ product category of ours in the past month. Something is happening here; let’s have our sales guy investigate.”

A CRM system’s job is to log activities. A lead should be created automatically as an aggregation of those activities related to a certain product or class of products.

Involve sales managers in scoring the activities that make a lead, and communicate to the sales that each lead is recorded because of multiple validations from  activities. I expect this process will be a winner.

What do you think?

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