Saturday, 9 August 2008

Is CVM the new CRM?

A fair bit of the economic research I do is speculative and it's gratifying when it ends up in a useful commercial output. This is one good example.

The work I've done on how people evaluate prospective utility and make decisions has led to the concept of structured value modelling. This in turn allows us to consider how people influence each other's models of value. And the outcome of that is that we have created a new category of software: Client Value Management or CVM software.

Traditional CRM systems are good for high-volume marketing - especially to consumers. They are not very popular amongst business-to-business services providers - for instance professional services firms. The reason being that CRM is a reductionist tool - its concept is to allow the simultaneous management of large numbers of people by making simplifying assumptions. If we assume that people fall into one of four demographic groups then we can send them messages at a cost of 4p each and hit a million people with a £40,000 campaign.

However the consequence is that the messages are extremely untargetted and therefore much less effective - because they are not adjusted to the specific value model of each recipient. If you sell consumer goods costing a few pounds each, you may have to live with this - because you simply can't afford to spend more on sales than the price of the product.

But if you sell business-to-business; if your market size is small; if your service costs enough; and especially if the service is tailored uniquely to each client; then CRM is not going to sell it for you. You need to customise your pitch to each client and make sure that what you offer is a match for what that individual client finds valuable.

The way people usually do this is through networking and individual conversations; sales meetings and customised proposals; and indeed by iteratively refining the service they offer, even after being commissioned to provide it. All effective processes, but they take a lot of work.

By creating tools to model the psychology of value, and to understand and measure the relationship between what person A does, and what person B receives, we can support this process, make it more effective and amplify it by orders of magnitude. These tools can help sales teams and marketers to understand why their clients buy from them, and thus make it happen more often. So we've spent time building this software and it's now one of our key products for 2008 and beyond.

Client Value Management is, in short, the new CRM - for professional services firms and other business-to-business service providers.

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