SaaS’ Next Wave: Customer Lifetime Value Management

The latest quarterly financial results from Salesforce, along with the buzz surrounding the company’s upcoming annual Dreamforce lovefest, have brought greater attention to the rapid migration of customer relationship management to the cloud.

However, today’s Software as a Service CRM solutions deliver limited value-add if the organizations that use them are unable to realize marketing and sales promises. This is especially true for enterprises that must ensure that they guide prospective customers along an omnichannel journey via their mobile devices and traditional storefronts, and even a variety of Internet of Things experiences.

Today’s bold promises are raising customer expectations, and you don’t have to look far to find market data that clearly shows the detrimental impact of growing customer dissatisfaction. For instance, 82 percent of consumers have stopped doing business with a company because of bad customer service.

That translates into US$41 billion in lost revenue for U.S. companies each year.

In a world in which customer loyalty is a fleeting commodity and customer churn is intolerable, it isn’t too soon to think about the next SaaS wave. Customer lifetime value management in the cloud inevitably will supplant the market focus on CRM to ensure a seamless customer journey.

Expanded Opportunities

There is no question that Salesforce deserves the bulk of the credit for transforming the CRM market and turning the uninspiring enterprise application segment into an exciting new business opportunity.

Salesforce has reimagined the nature of the CRM application with the end user in mind, and changed the way the application can be acquired as a subscription service via the cloud. It also has demonstrated how a software vendor can assume responsibility for hosting an application rather than forcing customers to continue to contend with the traditional deployment and management burdens of on-premises software.

Its success has spawned a new industry and countless new SaaS companies offering myriad on-demand apps via the cloud. Its AppExchange SaaS marketplace boasts more than 2,800 apps. The vast majority of them focus on the front-end tasks of identifying prospective customers, communicating with them, convincing them to purchase products and services, and recording sales.

CRM has gained even greater mindshare as a pivotal piece of a business’ go-to-market efforts. CRM has become a euphemism for customer engagement management and customer experience management. It also has subsumed other front-end functions, such as sales force automation and marketing automation, along with the associated analytics and business intelligence applications essential for business success.

CRM’s expansion led Gartner to broaden its definition of the “CRM market” and to predict that CRM sales will outpace the back-office application market in the coming years.

The Integration Challenge

However, today’s rejuvenated CRM solutions are nothing more than glorified Web-based customer records management systems unless they are properly integrated with the back-end systems necessary to ensure that customers get the products and services they expect. This is particularly important in a brave new world in which the Internet of Things will expand exponentially the ways companies are expected to engage with their customers.

It means organizations must start evaluating, acquiring and implementing cloud-based solutions to power their back-end business processes, so they can develop and deliver quality products and services in a predictable and cost-effective fashion.

For most organizations, this will require back-end applications such as enterprise resource management, fulfillment, supply chain, financial management and accounting systems.

The ERM segment will continue to exceed the CRM segment, with nearly twice the CRM dollar value, according to IDC’s recent report, “Worldwide SaaS and Cloud Software 2015-2019 Forecast and 2014 Vendor Shares.”

Other Vendors Moving In

In order to reduce the level of complexity that has plagued most large-scale enterprises, smart IT and corporate executives should adopt a more holistic approach to implementing the continuum of front- and back-end applications necessary to meet their customers’ needs.

That means putting in place a customer lifetime value management platform that links applications and associated business processes to achieve their omnichannel requirements.

Just as Salesforce has attempted to provide a platform to pull together the essential front-end elements, other software vendors — such as NetSuite, Oracle and SAP — can be expected to put greater emphasis on their cloud-based CLVM platforms to meet their customers’ escalating expectations and business objectives.