Big companies routinely collect mountains of personal information about customers in the hope that the data can be used to do targeted marketing based on individual preferences. But getting positive business results from such customer relationship management (CRM) endeavors isn't anything close to a sure thing.
Many CRM strategies have stumbled because of difficulties in developing a strong understanding of who customers are and what they really want, according to technology users and consultants who spoke at a CRM conference held here Wednesday by The Conference Board Inc., a nonprofit association of business executives.
Companies may build multiterabyte data warehouses to crunch information on their customers and try to determine their buying habits or product preferences. But the results aren't always meaningful, conference attendees warned. "People who bought Madonna [CDs] also bought lawn mowers -- who cares?," said Jack Aaronson, director of personalization at New York-based online bookseller Barnesandnoble.com Inc. "Just because there's a correlation, that doesn't mean it's important."
The potential effects of missteps can be costly. According to a new survey of 1,600 US residents that was detailed at the conference by Impiric, a New York-based marketing consultancy owned by Young & Rubicam Inc., 66 percent of the respondents said they have troubled relationships or no relationship at all with at least some of 42 major companies in industries such as airline travel, retail and consumer packaged goods.
Some companies are achieving measurable business results through CRM initiatives. But that can involve tweaking -- or in some cases, even obliterating -- historical approaches to dealing with customers or selling products and services, said attendees at Wednesday's conference.
For example, customers of Charles Schwab & Co. have stepped up their demands for investment advice services to go along with the company's low-cost stock trading capabilities. But that flew in the face of Schwab's internal culture: Until last year, "it used to be almost heresy to use the word 'advice' around here," said Janice Rudenauer Shaler, vice president of electronic brokerage operations at the San Francisco-based discount broker.
In fact, call center representatives at Schwab used to be penalized for doling out any advice to traders, Shaler added. But she said the company worked through those problems by having co-CEOs Charles Schwab and David Pottruck "evangelize" the importance of providing advice to customers. That message was further strengthened by last month's announcement that Schwab plans to acquire New York-based US Trust Corp. and expand its investment advice services.
Even an Old Economy company such as General Motors Corp. has been able to change its ways. Historically, GM's dealers have been separated from one another across the automaker's different product divisions. The problem with that setup is there was very little cross-selling going on between the different divisions, said Chuck Kirk, general manager of enterprise customer management at Detroit-based GM and a former CIO at Chicago-based Fruit of the Loom Inc.
To help remedy the situation, GM recently turned on cross-divisional shopping capabilities for a group of 250,000 customers who were using its Web site to look for new vehicles. The move gave the customers information about other kinds of GM cars than the ones they initially inquired about, and Kirk said the company's purchase rates have increased by 8 percent since the initiative was launched.
Not that it was easy to pull off. "We had islands of information between divisions," Kirk said. Content had to be presented so that customers on one division's Web site could look at product information from another one, he said. Getting GM's Web designers to go along is a process that "isn't completely there yet," Kirk said. "But we're getting there."