Why CRM Doesn't Work: How to Win by Letting Customers Manange the Relationship
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Why CRM Doesn't Work: How to Win by Letting Customers Manange the Relationship
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CRM (Customer Relationship Management) was supposed to help businesses better understand their customers and increase efficiency. Yet most companies are not getting the return they expected. Is it possible to make your customers happy, and, at the same time, improve ROI? Is there a practical, affordable way to get customers to tell you what they really want?
In Why CRM Doesn't Work, leading international marketing consultant Frederick Newell explains why it's time to change the game to CMR. CMR allows you to empower customers so they'll tell you what kind of information they want, what level of service they want to receive, and how they want you to communicate with them-where, when, and how often. It is a bold solution for business people at all levels in all industries who want to stay ahead of the curve in the development of customer loyalty. Newell shows by lesson and example why the current CRM isn't working, what needs to change, and how to put the CMR philosophy to work at your company-without additional expense. You'll read case studies of good and bad relationship marketing from companies as diverse as Kraft Foods, Procter & Gamble, Budweiser, Charles Schwab, Dell, IBM, Lands' End, Sports Authority, Radio Shack, and Staples.
With this book, you can build long-term relationships and bring in profits instead of relying on one-time sales. Why CRM Doesn't Work is important reading for companies of every size that are trying to satisfy and sell to today's consumer.
Author Biography: Frederick Newell, leading international marketing consultant and CEO of Seklemian/Newell, has helped giant multinationals as well as small businesses around the world develop and manage customer relationship strategies to strengthen customer loyalty and increase profitability. Newell is the author of loyalty.com, Wireless Rules, and The New Rules of Marketing.
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Why CRM Doesn't Work
how to win by letting customers manage the relationshipBy Frederick Newell
Bloomberg Press
Copyright © 2003 Frederick NewellAll right reserved.
ISBN: 1-57660-132-3
Chapter One
Why Doesn't CRM Work?Does the customer really want to be managed?
I'm not stupid. I read about what you guys call customer relationship management. Why doesn't it work for me? Companies ask for my preferences and I tell them what I want from them. Still, each offer is more meaningless than the last. Why doesn't your so-called CRM make my life easier?
Marketers hear this from so many customers that the question becomes, who's the enemy? Is the customer the enemy or was Pogo right: "We have met the enemy, and he is us"? Our customers are crying out for us to understand their individual needs. They tell marketers what they want, but we keep bothering them with irrelevant offers.
In the preface to loyalty.com (McGraw-Hill, 2000), my book about CRM and Internet marketing, I said: "CRM is now moving to the center of corporate strategy as a process of learning to understand the values that are important to individual customers and using that knowledge to deliver benefits the customer really wants and making it easier for the customer to do business with the company."
No one would question the fact that CRM has since moved to the center of corporatestrategy. A Jupiter Media Metrix study reports that 74 percent of U.S. businesses spent more money on CRM infrastructure in 2001 than they did in 2000, with a majority increasing their spending by 25 to 50 percent. A Gartner Dataquest survey forecast that CRM services revenue would increase 15 percent in 2002. A similar Gartner, Inc. survey reports 52 percent of respondents rated CRM as their highest business priority. The same is true in Europe where a Cap Gemini Ernst & Young and Gartner survey of 242 senior marketing executives from 145 firms reports that 67 percent of respondent companies launched a CRM initiative between 1999 and 2001, and over one third consider CRM a top priority.
Taken together, what do these statistics mean? The acceptance of CRM has been confirmed. The enthusiasm for CRM has been proven. The investment in CRM has been quantified. But why have so many firms that have embarked on CRM initiatives failed to realize the kind of results they anticipated? In 2001 only one in five of all CRM solution providers actually realized a profit. As a group, solution providers lost $8.8 billion dollars, spending three dollars for every two dollars in revenue. CRM has obviously not been the panacea many had hoped.
Is CRM Really About the Customer?
One reason CRM practice is at a standstill and why so many companies are failing to see a return on their CRM investment is that, because of its celebrity, the label "CRM" has been loosely (and often incorrectly) applied to anything that suggests customer-centricity. It is almost impossible to hear a common definition of CRM from industry experts, even among executives within the same company.
Some think CRM is a matter of technology. Some still believe it's just the process of segmenting customers. Some think it's a matter of selling efficiency. Many marketers still think CRM is just an advanced stage of database marketing-using your customer database to find which customers would be the right ones for a specific product offering. They don't yet understand that relationship building must start with an understanding of the customer's needs. They talk about "share of wallet" but fail to realize that you can't get access to the customer's wallet if you don't first have access to the customer's heart and mind. As our customer said in the beginning of this chapter, CRM ought to be about making her life easier. Do that first, and then you'll gain access to your customer's heart and mind.
CRM Practice at a Standstill
Industry consultant David Raab says, "Customer relationship management has now reached the awkward stage in its adoption cycle. The concept and its benefits are widely accepted, but few complete implementations are in place. What's lagging is CRM practice." It may just be that we're going about customer relationship management in all the wrong ways. Len Ellis, executive vice president of enterprise strategy, Wunderman, New York, says all the talk about CRM reminds him of what Voltaire said about the Holy Roman Empire:
It's not holy, Roman or an empire. There's a certain degree to which CRM is not about the customer nor is it about relationships-at least not how it's practiced now. Marketing automation is fine, but it's not about the customer. Most marketing automation is about costs and speed. Selling efficiency is not about the customer, it's just about leveraging your resources. Value maximization, in terms of figuring out which of your customer segments are going to deliver the most top or bottom line, that's not about the customer. So a lot of the benefits that are claimed for CRM are really benefits that accrue to the enterprise, but have nothing to do with the customer.
Handing Over the Car Keys
The fact that marketers must recognize the power of the customer is not a new concept. As far back as 1936 the American Marketing Society began publishing the semiannual Journal of Marketing. In the first issue John Benson, then president of the American Association of Advertising Agencies, talked about looking ahead after difficult days. Except for his outdated use of the personal pronoun, this excerpt could have been written today:
As a form of commercial intelligence advertising must keep abreast of this fast moving world. One has to run pretty fast these days to keep from falling back.
The depression undermined much that we had thought was solid as a rock. Seven lean and desperate years put all tradition to the test; billions of property lost; millions of people without jobs. Such a collapse could not occur without business itself being put to a drastic test. Our ideas of doing business have been challenged and are being weighed in the light of a new point of view as to what is economically sound.
... The common man is out for an equal chance to win; the buyer, be he large or small, wants full value for his money as much as anybody gets; and as you well know, the consumer is king.
Perhaps hereafter we shall use less ingenuity in the way of fanciful appeal and more in finding out what people really want. The consumer himself is boss.
Today new technologies have given even greater power and freedom to customers. Customers, not companies, control the purchasing process today by having access to more information, and having it in real time. The Internet has given them unprecedented research tools. A customer shopping for a car today may enter a dealership with more knowledge about models, options, and price than the salesman on the showroom floor may be aware of-if she hasn't already made the purchase on the Web. What does this mean for marketers? That we need even greater ingenuity in finding out what people really want-and giving them control-than we did sixty-some years ago when John Benson gave us this advice.
People are more comfortable when they feel they are in command. We see this in simple things. For example, when I feel the first sign of a cold coming on, I start taking cold pills. For some reason I don't feel comfortable with the promise of the extended twelve-hour tablet. If I use the four-hour version, I feel more empowered to control the dosage. In a similar manner, customers want to determine the channels and dosage of marketing they receive. In recent Yankelovitch study of marketing channel use, the need to control channels was constantly in the background of consumers' responses. Larry Kimmel, chairman and CEO of Grey Direct talks about this consumer desire for control, giving his belief why both direct mail and catalogs remain in such high favor with consumers, even though responding via telephone and online or e-mail channels requires less effort.
Direct mailings and catalogs can be viewed when convenient, or easily ignored by a customer. "They're controllable," Kimmel says. "In the phone situation there is a possibility of being talked into upgrading. Some consumers don't want to engage in that."
Moving Toward CMR
Customers have shown they don't want to be hunted like prey. They don't want to be managed; they just want companies to make their lives easier and less stressful. They're not removing their names from mailing lists for defensive reasons. Rather it's an offensive lifestyle management tactic aimed at reconfiguring and improving-not severing-their connection with marketers.
The time has passed for customer relationship management, which has been trying to make business better for the company. It's time to recast the discipline of CRM as one of greater customer empowerment. Customer management of relationships (CMR) makes doing business better for the customer. As a business strategy, CMR requires management change, not change management. CMR also requires operational and process changes that will allow the company to respond to individual customer's needs. Within your enterprise, CMR will touch every business and cultural area, every human relationship, and every technology.
CMR is not about launching yet another campaign, and it is not about formulating one more promotion. It is much more, even, than the sum of database marketing, targeted advertising, collecting information about customers, and offering new services. It is about creating an experience, personalizing the interaction with individual customers in ways directed by the customer, and thereby developing relationships.
Paul Greenburg, executive vice president of LiveWire Inc., talked about this customer empowerment in CRM at the Speed of Light: Capturing and Keeping Customers in Internet Real Time (McGraw-Hill, 2001): "What is empowering is not forcing customers to do anything they don't want. Let the customers tell you what they care about." The new CMR is a process of turning power over to the customer: allowing the customer to tell us what she's interested in and not interested in, what kind of information she wants, what level of service she wants to receive, and how she wants us to communicate with her-where, when, and how often.
And customers will tell us what they care about. According to a 2001 survey sponsored by Teradata, a division of NCR, 80 percent of Americans are willing to share personal information with companies if it means getting more personal service. Sixty percent of those surveyed said companies that provide personal offers combining online and offline information about their shopping preferences offer an advantage that "makes life easier." But customers will be disappointed if they never see a benefit from the information they give. If you are asking customers for sensitive information and aren't putting that information rapidly to use to make their lives easier, stop asking those questions. Collecting information that may some day prove useful is not just bad CRM; it is the opposite of what CRM should be.
Updating the Concept
Corporate boards have been swept away with enthusiasm for CRM because customer relationship management appeared to meet three of business's fundamental needs:
1 Understanding customers' buying behavior for better targeting of offers
2 Spreading customer information across the enterprise to allow customer-facing personnel to be more efficient
3 Creating greater operational efficiency to reduce expense
CRM still meets the three fundamental needs listed above, but the model has lost its luster. Companies that have failed to achieve benefits from CRM are beginning to realize their efforts have failed to meet the fundamental needs of the customer. David Bradshaw, an analyst at Ovum, likens CRM to a fashion industry. "Last year it seemed that CRM was all the rage. It was the hottest solution and companies spent millions to get a piece of it. Now, about one year later these same companies have a high-priced outfit that barely fits. But I tend to agree with the analysts, authors, and other industry pundits-CRM is not an outdated leisure suit. It's merely stumbled on the catwalk and with a little time it will prove to be as essential as the little black dress."
Fulfilling Bradshaw's forecast will require more than just a little time. It will call for a re-examination and re-evaluation of the CRM concept. Finding ways to empower the customer in the adoption cycle of a new CMR suggests a reappraisal of objectives. Companies that started CRM efforts to improve efficiency are now looking for ways to increase effectiveness. They are seeking new ways to do the right thing rather than just doing things right.
Common Causes of Failure
Before starting on the new journey to CMR it will be a helpful exercise to review some of the causes of companies' failures to achieve benefits from existing CRM initiatives. Though the goal of the new CMR takes relationship building to a new level, the process relies on many of the same disciplines required for the old CRM, and we can learn a lot from past failures.
Too often executives want these initiatives deployed quickly and broadly because they want to see a prompt return on their investment. They see CRM as an easy solution to their business problems. It is only after the initiatives begin to unfold and become tangible that these individuals begin to realize the gaps in their expectations.
It's Not About the Technology
Sure, CRM means obtaining customer information, understanding what different customers are worth, treating different customers differently, and improving efficiency. But none of these goals should define the route to success.
In 1998 three professors, Susan Fournier, Susan Dobscha, and David Glen Mick, wrote an article called "The Premature Death of Customer Relationship Management." They said in part:
Companies profess to do relationship marketing in new and better ways every day. Unfortunately, a close look suggests that relationships between companies and consumers are troubled at best. When we talk to people about their lives as consumers, we do not hear praise for their so-called partners. Instead, we hear about the confusing, stressful, insensitive and manipulative marketplace in which they feel trapped and victimized. Companies may delight in learning more about their customers than ever before and in providing features and services to please every possible palate. But customers delight in neither. Customers cope.
In the four years since that article appeared little has changed.
Continues...
Excerpted from Why CRM Doesn't Work by Frederick Newell Copyright © 2003 by Frederick Newell . Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Table of Contents
Foreword (Seth Godin). Preface. PART I: WHAT’S NOT WORKING. 1. Why Doesn't CRM Work? Does the customer really want to be managed? 2. It's Not a Question of the Chicken or the Egg. It’s not technology that drives relationships. 3. "One Girl in a Convertible . . .". It takes more than a database. 4. Why Do We Have Two Ears and Only One Mouth? The importance of dialog. PART II: WHAT NEEDS TO CHANGE. 5. It’s No Longer Good Enough to Ask Forgiveness Rather Than Permission. One person’s relevance is another person’s intrusion. 6. Permission in Action. The Internet as a permission-only zone. 7. Type, Point, Click, and Send Now. Cheaper and faster than a letter, less intrusive than a phone call, less hassle than a fax. 8. Who’s Minding the Store? CMR is not about how you look at customers—it’s about how customers look at you. 9. Personalization Technology—Boon or Bust? Empowering the customer requires more than just personalization. 10. But What About the Loyalty Card? Does CMR mean the end of traditional loyalty marketing? 11. No Card? No Problem! Customers tell us a lot without volunteering personal information. 12. All Cows Look Alike. Brand building—it begins and ends with the customer. Part III: HOW TO CHANGE. 13. Before You Build a Better Mousetrap. Is CMR for everyone? 14. Customer Service—Who Cares? CMR doesn’t mean “best customer service” for everyone. 15. Which Customers and Why You can’t make everyone happy. 16. Crossing the Chasm—What Will You Need to Change? Eight steps to CMR success. 17. There’s No Free Lunch. But CMR should not be an added expense. 18. Don’t Boil the Ocean. Be wary of the big-bang approach. Part IV: A LOOK AHEAD. 19. There’s No There, There. Can customer relationships survive Internet ubiquity? 20. Electronic Empowerment. How will electronics revolutionize customer communication? 21. What Do Customers Want from Mobile Messaging? Do customers really want to order groceries while driving home from work? 22. Will Wall Street Care? Relationships as a corporate asset. Conclusion. Afterword . Notes. Index.What People are Saying About This
"Fred Newell raises relationship marketing to a new level, beyond database marketing, loyalty programs, targeted advertising, and customer relationship marketing. Read this before your competitors do." - Philip Kotler SC Johnson & Son Distinguished Professor of International Marketing, Northwestern University Kellogg School of Management "In this competitive world, hanging onto customers is critical. Fred Newell's new book is a commonsense approach to helping you do just that." - Jack Trout President, Trout & Partners Ltd. "Frederick Newell has hit the CRM nail on the head. A lot of company managers thought you could create profits by buying CRM software and building an expensive data warehouse. Fred has pointed out that they were wrong. You cannot predict or modify customer behavior with CRM. What you can do is waste a lot of money. What you need is a customer database and intelligent customer communications, which come from creative strategies, not a piece of software." - Arthur Middleton Hughes Vice President for Business Development, CSC Advanced Database Solutions "Fred Newell does a wonderful job of helping us understand why so few companies get the return from CRM initiatives that they expect. Why CRM Doesn't Work makes a compelling case for putting the customer in the driver’s seat and allowing the customer to manage the relationship. The book is filled with practical examples and tips and is an ideal solution for business executives intent on avoiding 'CRM backlash.' In the process, Newell addresses a host of relevant topics ranging from wireless technologies to brand building to permission marketing in a cogently written and easy-to-read treatise. Newell moves beyond the buzz and quickly gets to the essence of what companies need to do if they expect to win the 'hearts and minds' of customers. A must-read for any manager in an enterprise focused on improving its profitability, as well as the quality of its customers' lives." - Jonathan Copulsky Lead Partner, Customer and Channel Strategy Practice Deloitte Consulting "Fred Newell, in his trademark easy-to-read style, showers us with ideas and examples to illustrate his message that 'it's not technology that drives CRM, it's intelligence about the customer.' He rightly reminds us that the customers must truly be placed at center stage and that we must listen with both ears to their stated and unstated needs. As a recent definition of CRM states, 'Customers Really Matter.' Fred's book is timely for all businesses." - Brian Woolf Author, Loyalty Marketing: The Second Act "CRM has been promoted as the answer to customer development and loyalty. Fred addresses head-on why this has failed for so many companies that have spent heavily and had such big expectations for CRM. Importantly, Fred now takes customer development and loyalty to a new level—beyond CRM—by redefining and empowering the customer. This is the way to build a successful customer-focused business. Fred is always ahead of the curve." - Charles J. Beech Chairman and CEO, Message Factors, Inc. "If you're struggling with a CRM initiative in your company, get this book. It can set you straight clearly, easily, quickly and, most of all, through a very readable format." - Don Schultz Professor, Medill School of Journalism, Northwestern University