While customer relationship management (CRM) is a popular topic in marketing and data warehousing, within the CRM value set there lies the seeds of a consumer backlash.1 Consumers will eventually figure out what is happening and rebel against the institutions which employ CRM in the wrong way.
Don't get me wrong, some aspects of CRM are just great! When I call my favorite hotel chain, I like that they remember I want a nonsmoking room. I like the fact that I don't have to repeat all my contact information. When I call my preferred airline, I like them to have my seating preferences on the screen as I talk to the CSR. What I don't like is unsolicited phone calls (at any time) because my bank, or some other company they gave my personal information to, is trying to milk me for more revenue. More on that later.
One common function of CRM is to stratify customers by current or potential profitability. Using that information, companies treat the more profitable customers better and, in some instances, actually try to discourage the least-profitable customers from continuing to patronize their service. The former may be tolerable; the latter will produce some serious unexpected consequences. However, some of the MBA marketing gurus who have never had eye contact with a consumer may not understand an important word: community.
Fundamentally, databases don't know and can't know the full value of a human who is our customer. Our CRM-based calculations of a customer's current or future value can be very, very wrong. Terry Moriarty has correctly pointed out some of the hidden links between bank customers, which gives them additional value. For instance, a low-balance elderly widow may be the mother of a high-balance tycoon. Offend her, and he moves his business elsewhere.
I am the first to acknowledge the change in the nature of community in the U.S. (and the world). The nostalgic image of a small farming town with a one-branch bank and the chief teller who knows everyone is rapidly disappearing. Additionally, as people move from small towns to large cities and sprawling suburbs, the sense of community also changes drastically.
In the urban and suburban landscape, consumers have more choices. The business-consumer relationship changes significantly. Loyalties abate. As consumers lose their identity in the urban sprawl and sea of faces at the megamall, companies get away with treating them as individual profit units without really knowing them. That knowledge about people is what CRM doesn't always deliver.
Proprietor versus Megabank
What's the difference between a very large company and a sole proprietorship? Among other things, size, agility and the nature of the knowledge asset. Many proprietorships grow to be large, ungainly corporations. (What sometimes saves them is certain efficiencies of scale.) In growing so large, they degrade knowledge about customer into structured data, and lose a lot. It is a wonder they don't always alienate their customers; yet they sometimes do.
In many ways, a sole proprietorship has a lot going for it particularly knowledge, much of it intuitive and unmeasured. The proprietor probably can't tell you how much he knows about his customers he doesn't realize how much he knows. However, he intuitively acts upon that knowledge, repeatedly, in pricing and sales decisions.
In the normal course of business, this proprietor captures a mountain of knowledge (I can't call it "data" yet) about his customers and their community. He knows each customer's face and name. Credit decisions are simple.
He also knows the community. He knows what's going on. If there is a fire down the street, it impacts the community. He knows, intuitively, what that fire means, probably to each of his customers. How do you capture the "house fire two doors down" event in a relational database?
The proprietor knows his customers, their needs and how valuable each customer is to him. He knows their roles in the community, and that figures into his relationships with them. Can CRM match that unstructured, intuitive knowledge?
As Companies Grow
Growth has ruined many originally good, small businesses in the following way.
When a very successful enterprise must expand beyond a sole proprietorship, that informal, intuitive knowledge about the customers also fragments among many personalities. Much of that knowledge is subsequently lost or "unshared." The proprietor may hire a technician and a front-office clerk who deals with the customers. The enterprise divides its roles (and its knowledge) into a number of people, none of which will have the complete "big picture." True, "specialization" may bring about more "efficiency"; however, the knowledge is fragmented.
Enterprise employees need to talk to each other and share their knowledge about customers, products and services. This may begin with unstructured, informal dialogue; however, as enterprises grow larger, more structured, formal mechanisms are required. Forms are designed and used to capture observations about customers and their actions. The forms are eventually replaced by computer systems and computer files. Much of that knowledge degrades to data, in the form of "facts" (data elements) about products and customers, the customers' orders, etc.
I used the term "degrades" quite deliberately. Any time you try to structure knowledge into a database, you are inevitably going to leave something out. Your customer file may not have a customer characteristic field for "arthritic," even though you may see it when an affected customer comes through the door.
As enterprises grow, their corporate knowledge (as stored in data) about each customer generally diminishes. It is true that larger companies can calculate with greater precision how much each customer purchased last year. However, there are always aspects to each sale which may not be captured (except in the memory of the sales rep).
This informal knowledge about each customer and each transaction is difficult to capture electronically. What knowledge can be structured and "tabularized" is lost, in part, by "capture" processes that can be tedious, confusing and lacking in motivation. Much significant knowledge is unstructured, and the only way to capture it is to write it down in text (or perhaps a sketch, if appropriate). This is something which takes time, and most people are disinclined to expend the effort required.
Even if a database is designed to capture more obscure facts about customers, such as relationships with peer customers, that knowledge is more easily known than it is recorded. Consider friendship and domestic partners. Where do you put these in your customer database? Additionally, how do you capture it quickly? ("Excuse me, I need to break eye contact with you over the counter here while I call up a free-text screen on our computer database and tediously type what you just told me as a friendly aside. Whoops, have to backspace. There it is; now I've got it. Hello? Where did you go? Hello?")
Then there is privacy. I will tell a person I know more than I will tell a stranger. Americans are becoming more savvy about corporate databases and are starting to reveal less about themselves. This undermines the effectiveness of a CRM database and marketing strategy.
I realize that knowledge about me may inevitably be shared in the normal course of community and society. I may trust my local grocer with some information about myself. However, I made eye contact with him, and I asked him not to tell anybody. Or, that may have been implicit with the relationship. In small towns, gossips do share information about people. However, we determine who the gossips are pretty quickly, and we learn not to tell them things.
There is an increasing consumer backlash against the collection of CRM-like data and sharing it with other companies. This is quite understandable. This may undermine any positive benefits that a company's CRM efforts may seek.
Yet there are numerous facts and nuances about me that aren't in the megacorporation database. Consider nicknames versus given names. I use my middle name. Structured databases want my first name. Many may capture a middle initial; fewer capture a full middle name. How many have an indicator that the middle name is the one commonly used?
This database design omission is helpful for me, however. When telemarketers call and ask for me using my first name, I know that they don't really know me. My defenses go up, and I am unlikely to do business with them. (This contrasts with the local bank I use, where they know me by name when I walk in the door and use the name I want to be known by. Are they going to get my business? You bet!)
Many other facts about me are relevant to my business relationship. Are those captured in the database? Are they reliable? Are they current? Can they change? These are other significant risks of CRM data accuracy and currency.
Recently, I went into my bank branch and observed the teller patiently helping a cognitively disabled man understand his transaction. I bet that customer didn't have much of a balance. I bet the hard, cold CRM-marketing formulae would have said to abandon him as a customer. He's not worth the time. However, I thought more of the bank because they treated him with respect and were patient with him. Yes, I had to wait a bit. If I had been in a hurry, my attitude might have been different. However, that bank was not there simply to exploit the community.
The bottom line is this: Don't expect too much from CRM, but also don't let it undermine the other aspects of your relationships with your customers. Don't abandon the intuitive, human contacts you (or your local employees) have with your customers. If necessary, find new ways to capture customer knowledge, which improves that relationship.
Don't let CRM undermine your image in the community. Don't let CRM make the institution insensitive to its legitimate supportive and cooperative role in the community. Don't let CRM give your enterprise a black eye because of unexpected side-effects. Don't let your customer base regret that you adopted CRM. Use it in a positive way.
Your comments are welcome: NMScofield@aol.com.
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