Why breaking the rules will be the next lesson of CRM
by: Matthew Wright
Matthew has worked in top companies on both the client and marketing services sides of the business – and believes passionately in leveraging these different viewpoints to meet client needs.
He has almost 10 years marketing experience in the fmcg sector, mostly spent with Procter & Gamble (including 3 years based in Italy). He also worked as Marketing Manager and media co-ordinator for Cussons, makers of Imperial Leather. These experiences give Matthew a users understanding of the strengths and weaknesses of the whole marketing mix.
Immediately prior to joining Zalpha, he spent 3 years at the Henley Centre, one of Europe’s leading marketing strategy / consumer marketing consultancies. Here, Matthew was committed to ‘bringing the outside in’ to clients, so ensuring that their business and marketing plans were truly customer driven. While at the Henley Centre, Matthew specialised in Financial Services, CRM and Channel Management. He also has c. 3 years service side experience gained in the marketing consultancy parts of Ernst & Young and marcomms agency Mountain View.
The insight and experience that Matthew has gained on agency and client side, both here and on the continent, means he brings a holistic, thorough and action oriented approach to his projects.
|"The Rules" is a controversial US book detailing how to ensnare a husband by employing a strict code of conduct. The premise of this self-help guide is that any woman can take control of her life as long as she follows a pre-determined strategy which includes such tactics as always letting the man pay and never being the one to telephone. Coincidentally, the guide provides an inadvertent object lesson for businesses struggling to achieve CRM.
Though very successful in terms of sales and an entertaining read, it's less clear how effective ‘The Rules’ is at generating marriages - or more critically how many of those unions manage to last the course! However, the whole approach does provide a perfect illustration of the mistake many companies make when trying to develop a relationship with their customers. Appealing as it sounds to be able to apply a formula which will work every time, we all know that human beings – whether they be customers or potential husbands – behave in diverse and individual ways. My bet would be that for every man who plays by The Rules there are dozens of others whose reactions and behaviour just don’t fit the mould. And this failure to recognise individuals is one reason why CRM has yet to deliver its full promise. Rather than providing guidance and empowering people in the frontline - those actually facing the customer - they generate constraints and offer edicts. So what pitfalls are there for the unsuspecting marketer? And how can companies escape them?
The main principle behind CRM is that customers can be segmented and then each group treated accordingly. But as people increasingly create and live by their own identities, it seems harder than ever to put people 'in boxes' – or to predict their responses or future actions. So most CRM programmes stereotype consumers while still hoping to deliver highly tailored communications. In short, the customer has been left out of the entire process. Many companies might argue that at least some attempt at CRM is better than none at all. However, get those segmented messages slightly wrong and the chances of their causing offence are huge. When we watch a TV ad or read a poster, we accept that it is targeted at everyone - so if it's not relevant to the viewer or reader, it can be overlooked or ignored. The problem with segmented messages is that they are dressed up as being for specific individuals and therefore invite a more critical response. By generalising what a customer might be like, and using this insight to drive creative, a company takes the risk that many individuals within that segment may not be anything like the average.
The main reason for this situation is that segmentation is decided by hard data parameters and although these can be diverse, they all have an inbuilt flaw when it comes to CRM programmes. For instance, it is very common to use a propensity model and group customers together by internally-driven measures, such as value, or risk of switching. Whilst useful indicators for a company tracking its sales, it is unfortunately one step removed from the customer and so communications tend to have little relation to some recipients’ attitudes or values.
Another mistake is to use key discriminators to cluster people into groups of like-minded consumers. This falls down in practice since we are living in an era when traditional discriminators have limited ability to inform about attitude, and are in any case becoming less and less relevant. At the same time, we are living in an increasingly heterogeneous society. Class is a good example of the interaction of these two trends. As Tony Blair suggests, ‘we’re all middle England now’ – but it’s not a bland, uniformly colourless place. Rather, it is an England of individually chosen identities, where people live increasingly pick & mix lifestyles.
Changing attitudes to age and family create further challenges since lifestages no longer occur at such predictable intervals. Though some products and purchases are age-related, in many areas we are no longer ‘acting our age’, but instead decide what activities we want to do, when we want to do them, unconstrained by social dictums. The average age of marriage and having a first child have both increased and now there is also a much broader spectrum - a first time mum could be twenty years old but she could also be in her fifties!
Similarly, the standard married household of 2.2 kids, living in a two up, two down, has been replaced by a much more flexible view of what constitutes a family – embracing single households to multi-family occupancy and including all the steps in between. In fact, the so-called traditional nuclear family now represents significantly less than a third of all households in the UK!
The crux of all this is that segmentation, no matter how many ways in which it chooses to ‘slice and dice’ customers, is not CRM. All it can do is prioritise segments, and give mass messaging a greater percentage chance of being relevant to the individual. The downside is that when those messages miss the mark they can do untold harm. It’s like going out to dinner with a potential suitor, and using the same approach and conversational gambits, regardless of the identity and personality of your date – not a great foundation for a sound relationship!
“The Rules” is a book which was conceived to catch a stereotype – a certain kind of person living in the mid-late twentieth Century. But how many of these people really exist today? ‘The Rules’ appear to need updating and arguably, the same applies to Customer Relationship Management. At present, CRM tries to convince consumers and marketers that it is ‘one to one’ but in fact all it does is put people into segmented boxes. Recognising customers as individuals is an easy theory but is actually much harder to achieve in practice. CRM programmes which are there to facilitate and empower the relationship have perversely often ended up by damaging it. So in an era where age, gender, and other drivers of motivations and behaviour have changed, the premise of CRM has to as well; we can no longer successfully segment in the old way.
The answer to this problem is not to abandon CRM altogether – since the basic theory is sound – but to develop CRM programmes so that they can embrace soft data. What is needed now is an approach that generates far more customer insight than at present and is less reliant on fixed formulas. Better systems will help but these will not be enough. Inevitably, there will need to be more empowerment and responsibility to the frontline, and more empathy with the consumer through the collection and interpretation of soft data. The final result will be better customer relationships and the dawn of the next generation of CRM strategies. The key fault of existing segmentation techniques is that they assume the end-recipient will always be reactive to the selected communications strategy, and that those reactions can be anticipated. However, real customers are individuals who can also act in unexpected, proactive and spontaneous ways. In fact the marketplace is actively training them to behave in this way through media such as the internet and interactive tv. It is therefore no surprise that hard data is struggling to cope. Computers can crunch numbers but only a brand specialist can cope with soft inputs and channel them back into a CRM strategy.
Bringing hard and soft data together, with no brick walls between disciplines, enables an organisation to create sharper consumer insight, better strategy and tangible results for clients. This is not an easy fusion: the skill sets required for both are so different, that an eclectic group of people is needed to deliver them. Once the right team is in place, companies then have the challenge of identifying how best to gather and use this soft/hard information. Again, a holistic approach makes sense - merging a sound methodology for the generation of ‘hard data’ with a more creative approach to collection of softer insights. For example, companies can continue to interrogate transactional data in a planned manner and support this with qualitative research. Insights can also be added from inbound, unplanned, customer contacts where each incoming call represents an opportunity to ask one or two attitudinal questions. From these small beginnings, a company can build up a good understanding of that consumer, in an open, non-invasive manner. Given the number of times companies may have contact with their consumers, this could quickly build up into a detailed picture. Furthermore, it’s a dynamic approach which recognises that people change over time.
In the future, businesses which are able to operate in this way and temper hard data with the insight drawn from 'soft' consumer information will be guaranteed to reap significant rewards. They will be able to build CRM systems which can effectively empower the front line, and as a consequence they will finally start delivering the results that have been promised for so long. Similarly, men and women will discard 'the rules', and start to treat prospective partners as real people. Love, happiness and prosperity will abound! Or then again, maybe I'm just a hopeless romantic!