State of Customer Relationship Management: The Canadian Report 2010
Customer Relationship Management Investment
- Highlights and Key Findings
- Customer Relationship Management Investment
- Customer Relationship Management Service Industry
- Customer Relationship Management Employment and Skills
- Customer Relationship Management Innovation
- Best-in-Class Analysis
- Final Remarks
- Annex I —Tables
- Annex II —Definitions
Firms can conduct CRM through a combination of in–house and outsourced investment. In–house CRM is defined as the internal investment a sector makes in terms of related personnel and capital in Canada, while outsourced CRM is defined as the purchase of CRM activities from service providers in Canada or abroad. A comprehensive view of CRM activity in Canada can be gained by examining investment volume combined with investment intensity. Investment volume reflects the quantity of CRM activity in a sector, while investment intensity represents the proportion of resources allocated to CRM activities.
Customer Relationship Management Investment Volume
CRM investment across wholesale, manufacturing, finance and insurance, retail, and logistics and transportation services sectors was $116 billion in 2009.Footnote VIII,4 The wholesale sector made the largest in–house CRM investment in Canada, committing $37.8 billion (Figure 3). This significant in–house CRM investment is due to the wholesale sector's main value–added activity of representing manufacturers' products. As such, priorities for the wholesale sector's investment include sales force development and commitment toward expanding inside sales channels.2
The establishment of product and brand recognition in the marketplace through advertising and promotion is a key CRM focus within the manufacturing sector. Manufacturers often rely on the specialized expertise and agility of advertising agencies to drive their marketing and promotion activities, contributing to the sector committing 56 percent of its CRM investment (or $17.3 billion) toward outsourcing.2, 4
Customer Relationship Management Investment Intensity
CRM investment intensityFootnote IX reflects the commitment of resources allocated to CRM activities within a sector. The variability of CRM investment intensity across sectors is influenced by different business models inherent to each sector. Again, given the business model of the wholesale industry, a larger proportion of their sales revenue is expected to be reinvested in CRM (10.3 percent) compared to other sectors (Figure 4).
The lower CRM investment intensity found in the retail sector is partially attributable to the considerable amount of CRM activity performed by consumer product goods (CPG) manufacturers and wholesalers promoting and supporting the products carried by retailers. The product and customer support provided to end consumers by CPG manufacturers is only part of the CPG manufacturers CRM after–sales strategy. The business–to–business (B2BB2B) component of CPG manufacturers' after–sales support focuses on logistics and order processing and typically operates separately from the end consumer support.2
The main shift in sector rankings for investment volume versus intensity is due to the increased importance of CRM activities within the finance and insurance and the logistics and transportation services sectors, compared to the manufacturing sector. Competing within sectors in which they neither produce, represent nor sell tangible goods, the finance and insurance and the logistics and transportation services industry players focus on CRM activities to differentiate themselves from their competitors.2
Customer Relationship Management Investment Trends
While the recent economic downturn affected the business plans and strategies of firms, investment in CRM has remained a priority. Across sectors, firms are increasing their focus on expanding their sales and offerings through inside channels as a means to control costs and drive short–term results.2 Overall, sectors have maintained or increased their CRM investment to retain their current customers and market share (Figure 5).
During the mid–2000s, the logistics and transportation services sector anticipated a continued era of high growth and firms invested heavily in CRM to attempt to capitalize on future business opportunities. However, the recent economic downturn left the sector with excess capacity due to volume reductions in 2008. Industry players reacted to the significant drop in volume and weak forecasts in the second half of 2008 by adjusting their internal efforts in marketing and sales force in some key segments. By mid–2009, firms cited an improvement in volume as well as growth forecasts as a driver for them to reinvest internally in CRM.2
Meanwhile, the manufacturing sector has maintained its CRM investment level over the past several years to minimize the impact of sales contraction. In particular, manufacturing firms have focused on their retention strategies while fostering growth through their existing customer base. Firms often measure the success of these efforts by tracking their market share rather than changes in sales volume, especially during periods of market fluctuations.2
Notably, the retail sector considerably increased its CRM investment by 29 percent between 2005 and 2009.4 In addition, the retail sector increased its allocation of CRM investment by 10 percent toward more in–house activity between 2002 and 2009. Retail is the only sector that substantially altered its allocation of CRM investment between in–house and outsourcing over that time period (Figure 6).
A key aspect of the increase in CRM investment (both total and the in–house portion) by the retail sector has been retailers' integration of CRM activities into their business–to–business processes to improve their sales forecasting and supply chain management through collaborative planning, forecasting and replenishment (CPFR).2 CPFR is an e–based system and joint long term commitment of a retailer, logistics and transportation services provider, and a manufacturer that links point–of–sale information throughout the retailer's supply chain, enabling the retailer to increase sales and reduce both stock outs and inventory carried while improving the manufacturer's production planning.5 Although large retailers originally developed the concept of CPFR, it is now being adopted across non–consumer product goods supply chains through the use of forecasting / demand planning software and advanced planning and scheduling (APS).Footnote X,6
Outsourced Customer Relationship Management Investment Forecast
The importance of CRM to firms' competitiveness is expected to remain strong over the next several years across sectors. In particular, the manufacturing sector is forecasted to increase its CRM outsourced investment by 17 percent between 2009 and 2012, resulting in the sector investing over $20 billion in CRM through service providers in 2012 (Figure 7).
In addition to the manufacturing sector, the finance and insurance sector is also expected to grow its outsourced CRM investment significantly over the next several years. A forecasted growth of 18 percent between 2009 and 2012 is partially attributable to finance and insurance firms aiming to capitalize on business opportunities presented by their strong position in the global market.2,7
- Footnote 8
For a detailed breakdown of CRM investment volume, see Annex I.
- Footnote 9
CRM investment intensity is defined as CRM investment divided by sales. For a detailed breakdown of CRM investment intensity see Annex I.
- Footnote 10
For further information on CPFR, see Industry Canada's report entitled State of Retail: The Canadian Report 2010
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