CRM: Management, Marketing or both?

The acronym CRM is a confusing one. Many people say it stands for Customer Relationship Management, while others suggest Customer Relationship Marketing. Let’s take a look at how both of these acronyms are playing out.

Customer Relationship Management

In the mid-’90s while many of us were working on Marketing Information Systems (MkIS) to support focused customer strategies, most software and systems vendors were busy building and selling “Customer Relationship Management” software as a way to capitalize on the growing interest in the acronym “CRM.” Fueled primarily by this influx of CRM software and systems, most people began to accept that “CRM” stood for Customer Relationship Management, and began their attempts to manage relationships with customers. Most organizations taking this approach have found that their CRM initiatives have failed to live up to expectations–both financially and with stronger relationships with their customers.

CRM–as defined through systems and technology–relies heavily on customer data, information, buying patterns, and the like. It assumes we’re able to gain the data we need to do a better job of “managing” the customer’s needs, values and expectations with our business. However, customers don’t tell us everything and assuming they did; there are so many external factors that will influence a purchase decision or loyalty to the business, we could never hope to have databases large enough or powerful enough to allow us to manage relationships for any length of time with any sustainable success. We try anyway. As a result, most of us are data rich and information poor and have learned the hard way that CRM is not about systems and technology. High hopes that having more customer data would lead to more effective and targeted marketing programs that would lead to higher revenue for the company have not materialized. Only capturing the data and trying to sell the customer more things doesn’t do a darn thing improve the relationship-a the fact that many have learned the hard way.

Customer Relationship Management is perhaps a misnomer. A better term for the systems and technology aspect might be Customer Information Management.

Customer Relationship Marketing

The term Customer Relationship Marketing–or the other CRM–seems to have fallen by the wayside. This CRM is perhaps the better phrase to use in describing what we do with customer information. We gather it, analyze it, identify patterns, and then make offers to a customer based on this data. We can make those offers through the mail, online, by telephone, by email, or in person. We can test our offers, our messages, and our channels to see which combination produces the best results
for our business. Customer Relationship Marketing? It seems like we once called this database marketing, and before that direct response. But, it should go further.

Customer Relationship Marketing should take advantage of the data and information gathered from all of the customer touch points in determining the best offer, message, and channel for the marketing efforts. Unfortunately, most organization don’t go this far. Most don’t have enough of the customer information needed to develop effective messages and compelling offers and have too much information that provides little value for marketers charged with increasing revenue. An example of which is the large volumes of transactional data that can be found with many catalogers. Most catalog operations can tell that a customer had purchased 25 pairs of blue shoes, but they often can’t make the correlation between those blue shoes and other blue things that this customer may have bought. If this correlation could be established, they would be able to determine what blue things the customer has already, and what blue things it could offer next.

Customer Relationship Marketing then is a term that describes a more deliberate approach to delivering the right products, to the right customer, at the appropriate time based on the data and information-purchase history, personal information, channel preferences, and the more–an organization has been able to collect. Is it anything more than glorified database marketing? Probably not as it’s now practiced. But, it has the potential to be so much more.

Can we hope to manage a relationship with the customer? Not in our wildest dreams. Customers can be identified, developed and nurtured, but never actually managed based on the data that we collect. Unlike personal relationships with family or friends, organizations don’t have the personal context for the data collected. Organizations can’t look at Ms. Jane Doe and know that she doesn’t like high-heeled shoes because she has problems with her feet. At best, it may only know that she never buys high-heeled shoes. That’s not–and never was intended to the be–a relationship from the customer’s perspective. It’s a business transaction, and that’s all.

In today’s world, most organizations require systems and technology to manage the vast of amounts of customer data we now collect. These systems, though, have nothing to do with managing the actual customer. Since most organizations now have this data, the focus should be on how to turn it into information to better deliver value to our customers, which will with any luck help create more revenue for the organization.

On the other hand, maybe organizations should stop trying to manage relationships with customers and began providing value for prices paid, along with a little friendly, helpful customer service. It would probably go a long way toward improving revenue. This approach worked long before the CRM acronym appeared, and will undoubtedly work long after it’s gone.

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