Investment in customer relationship management technologies by North American retail financial institutions is set to increase at a compound annual growth rate of six per cent between 2001 and 2005, according to new research from TowerGroup.
In a new report, "CRM IT Spending: What Are Retail Financial Services Institutions in North America Spending on Customer Knowledge Technologies?" the research firm focused solely on customer knowledge technologies such as data warehousing, analytics and knowledge distribution.
On a global basis for 2001, TowerGroup estimates that IT spending on the customer knowledge side of CRM in retail financial institutions will be $4.3 billion. Of that, just over 50% will be spent in North America.
From 2001 to 2005, the report expects North American spending on customer knowledge technologies to grow at a compound annual growth rate (CAGR) of six per cent - considerably higher than the anticipated growth for the economy as a whole over the same period.
Knowledge distribution technologies are currently the smallest slice of the CRM technology pie, accounting for 19% of the total customer knowledge area. These include marketing customer information files (MCIFs) designed to assist marketers; campaign management and database marketing software which designs, executes and tracks complex marketing campaigns; and customer interaction management/personalisation software that directs personalised messages between a customer and an institution. The report predicts this sector will experience the most rapid growth at a 7.8% CAGR through 2005.
While investments in CRM have typically been focused among large retail financial institutions, TowerGroup expects more small and mid-sized institutions to actively pursue CRM business strategies in the next few years.
"In the minds of many retail executives, CRM was equated with a major technology expenditure," says Kathleen Khirallah, a senior analyst in TowerGroup's retail banking practice. "Across North America, retail financial services executives are realising that CRM is far more than technology - it also encompasses business processes and people."
She notes that while technology will continue to play a key role in driving CRM, it will be increasingly coupled with business policy reviews and training programs that support total CRM initiatives. "This shift will bring significant benefits to smaller retail institutions, as they discover that their organisations can actively pursue CRM business strategies without investing every last dime of their capital on technology."