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Thursday, August 19, 2010

The flaw in Customer Relationship Management (CRM) as the sole approach to Customer Intimacy

Part 1 of a 2 Part Series on Individual Relationship Management (IRM) versus Customer Relationship Management (CRM)

By Guest Author, John Fleming, Executive Advisor to Solutionz

For well over a decade, customer relationship management (CRM) practitioners have touted the marriage of customer information with demographic, psychographic and behavioral propensity data to help you get closer to your customer, member, guest or prospect.

While this has taken customer intimacy way beyond what was possible before the application of technology to the challenge of knowing your customers better, there are inherent flaws in this approach.

CRM, being technology driven, largely collects customer data from past transactions with the assumption that past behavior begets future behavior. And, by putting this information at the hands of the frontline while engaging a customer will help the sales or service teams be more informed, increase cross-selling and up-selling, increase close rates, reduce expenses and in general contribute to a firms operational excellence.

The benefits of CRM accrue to the organization. If it were a net sum analysis one can see that what is gained by the firm is at the expense of the customer. This is an exaggeration of course as customers are not led in and tied down as we pry their money from them but they are guided toward options with varying degrees of energy to buy additional options. Service contracts anyone? Or the softer online approach of: “Customers who bought this also bought:…” and the list plays out before you.

This is not a “relationship” this is a system to optimize the output from each customer contact. It does not consider the different preferences of customers at different points in time or with different products, or as we suggest, in different circumstances and with different intent and with different companions.

"Do I have a relationship with 17 million people?" asked Jim VonDerheide, vice president, CRM Strategies, for Hilton Hotels , I don't think I do," VonDerheide said, answering his own question. "Do I interact with 17 million people? You bet." 

The focus of CRM is optimization of transactions and processes and has little to do with managing a relationship.

But, let’s look at the customer side of the transaction. They are always the other side of the sales/service engagement. It would not occur without them. Yet, few of us has the same need or personal mindset every time we are on the customer side of the transaction.

We could be alone or with several kids tugging at our coat tails; we could be with a spouse or a business associate or buying for one of them; we can find ourselves an endless number of personal preferences or personality modes.

To make the customer experience one that meets or exceeds the customer’s expectations we would ideally be able to adjust to these individualized circumstances and ‘relate’ to the customer in a manner that would leave them in a better mind set than when we started. And, feeling that they would want to come back and better recommend us to others. The challenge then is to be able to relate to each customer transactions as a positive engagement of two parties who collectively strive for relationship that can be repeated time and again. Not just an interaction.

The bottom-line challenge is that CRM is one-dimensional, as is the typical customer profile. People are inherently multi-dimensional -- behaving one way [aka having different preferences] when they are alone, another when they are with their spouse/partner, another when they are with friends and yet another when they are with family. Add to that the dimensions of intent and situation and it becomes immediately apparent as to why traditional CRM really cannot reliably predict behavior.

Stay tuned for tomorrow's blog which will present part 2 of the argument for IRM - Individual Relationship Management.
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