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Top 3 reasons why CRM fails to earn my loyalty (and Social CRM won’t, either) 

Bob Thompson | Dec 10, 2011 701 views 10 Comments

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At a recent conference I had an interesting discussion with an executive for a large non-profit organization, originally hired to lead the organization’s “CRM” activities. Shortly after starting, she changed her job title to include “customer experience.”

Why? Because with a “CRM” title, her boss expected that one of the first things to be decided was which CRM system to implement.

The “customer experience” angle allowed her to focus the organization on learning how constituents perceived their experiences—like giving donations, interacting with people, and web visits too.



That took a year.

Now they’re driving systems changes with an outside-in approach. Start with what the experience should look/feel like, then figure out what systems and data are required to deliver experiences that will make constituents happy and loyal.

Now, some may say this is what CRM is, or what CRM was supposed to be. Fine, then why did this leader feel compelled to change her title, if “CRM” meant focus on customer experience/loyalty?

Treat me as a person!

Which brings me to the point of this post: Why does CRM fail to drive loyalty? Speaking as a customer, I believe it comes down to three reasons.

  1. I am not a “lead,” I’m a person

    There are tons of marketing automation systems designed to separate the wheat (qualified leads) from the chaff (time wasters). While it’s true that marketing organizations need such systems, they are not designed to provide a loyalty-building experience. Especially if you don’t end up as a prospect worth “nurturing.”

  2. I am not a “deal,” I’m a person

    Once a “lead” is passed to a sales automation system (SFA), the job is to manage these opportunities to close as many as possible. I can see why reps need (or at least tolerate) such systems, but it doesn’t do anything for me. You see, I’m only concerned about whether my needs are met, not whether I’m a good “deal” for the rep. Sadly, Sales 2.0 hasn’t changed this internal orientation.

  3. I am not an “incident,” I’m a person

    When something doesn’t work, getting it fixed quickly is of course important. Service/support systems can certainly help. But I don’t want to feel like I’m just another number in the system. A little empathy and personal caring goes a long way. Putting agents on Twitter won’t make them more social.

Will “Social CRM” be any different?

Years ago we did an ROI study on CRM projects and concluded that about two-thirds were “successful.” But successful at what?

Turns out that most managers bought the idea that CRM would increase loyalty (it was the No. 1 expected benefit). In practice, however, CRM delivered tactical benefits that were mainly valuable to the company: efficiency, cost reduction and improved decision-making. Few reported that CRM had anything to do with increasingly loyalty, and this I feel is one key reason for the dissatisfaction with CRM performance over the years.

Said another way, CRM has been mainly about systems, data, and how the company can extract value from customers. I think IBM gave one of the most straightforward definitions in a recent Social CRM white paper:

“CRM strategy, enabled by processes and technologies, is architected to manage customer relationships as a means for extracting the greatest value from customers over the lifetime of the relationship.”

Social CRM proponents tout it as “CRM 2.0″—a strategic makeover that is all about customer collaboration and mutual value. My recent study found that expectations are sky high that Social CRM (broadly speaking, meaning the use of social business applications to support customers, partners and other external relationships) will improve the customer experience and increase loyalty.

Personally, I’m skeptical. Not because social technologies can’t help, but because business people are slow to change. It’s far too easy to apply new tools to old thinking.

Most of Altimeter’s 18 Use Cases of Social CRM are a social update to marketing, sales and service automation. Which is mainly intended to drive leads, manage deals, and handle service incidents.

Which brings us full circle. If you treat your Social Customers like leads, deals or incidents, Social CRM won’t help build customer loyalty, either.

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10 Responses to Top 3 reasons why CRM fails to earn my loyalty (and Social CRM won’t, either)

  1. George Taylor December 10, 2011 at 1:43 pm (1 comment) #

    Great points on this, Bob! Wrongly, companies have been taught to believe that customer relationship management is something that can be bought and implemented. Wrong! The technology is great if designed to enhance the objectives/culture/processes/structures, but too often the cart is placed in front of the horse. I think the challenge is that the technology feels a lot more tangible and easier to implement than the hard work of getting your org aligned around customers, so it becomes the silver bullet. The problem – it just makes bad experiences happen faster.

  2. David Raab December 10, 2011 at 2:15 pm (27 comments) #

    Bob, you raise an interesting point. I’m a person too. But isn’t the purpose of a business to make money — and, indeed, to make the most possible money in an ethical and legal fashion?

    “Extracting the greatest value from customers” has a harsh ring to it. The author might better have written “building the highest value relationship possible”, which implies that both parties benefit. But I think the author simply assumed that customers maximize their own value. If so, then the goal from business’s perspective is indeed to extract maximum value, since this will only happen if the customer finds they are getting the maximum value as well. (Granted, this assumes the customer is free to switch suppliers…not always the case but still largely true for most businesses.)

    Here’s a little thought experiment: let’s say you could deliver exactly the same product you do now, but cut your price 10%. That would increase the value to the customer but decrease the value to your business. Would you judge that a sound business decision? If not, then what principle are you applying other than “extracting the greatest value”?

    This relates directly to your point of being a “person, not a lead”. Why should a company spend resources on “time wasters”? If the definition of “time waster” is someone who will never generate any value, what’s the benefit of building their loyalty?

    In practice, good marketers don’t discard time-wasters, but put them into a low-level nurture stream that maintains a modest relationship and tries to build something more. One beauty of marketing automation is it can do this so cheaply that companies can provide this low-level service to everyone, including those who would otherwise be discarded altogether.

    Treatments by sales and service people follow the same logic: yes, people should be treated in ways that maximize long-term value rather than short-term revenue. But that’s just good practice in standard CRM terms. Actions that maximize value will probably result in greater loyalty, but loyalty is not an end in itself.

    So ultimately you’re simply talking about doing a better job of understanding value. This is a technical, tactical issue, not something that requires a fundamental change in business philosophy.

  3. Michael Lowenstein, Ph.D., CMC December 10, 2011 at 2:28 pm (70 comments) #

    Bob –

    Excellent, excellent, excellent!! In study after study of b2b and b2c consumers, it’s invariably found that customers consider loyalty programs, and most other frequency leveraging devices managed through CRM systems, to be benefiting the company more than themselves. Unless, through value-add experiences and relationships, there’s a DNA-type focus on treating customers like people on an individual basis (YES – You are a person!!), terms like “Social CRM” and “CRM 2.0” will be headed for the business phrase recycle pile in much the same way as “Reengineering” a decade or so ago.

    Michael

  4. Bob Thompson December 10, 2011 at 2:38 pm (875 comments) #

    David, I’m not sure what point you’re arguing. I’m not saying CRM isn’t valuable to the company. Actually my point is that CRM is mainly about value to the company, not the customer.

    Yes, businesses exist to make money. And CRM helps extract value from customers. Nothing wrong with that.

    No, businesses shouldn’t waste time doing things that won’t be create value, someday.

    But what does marketing/sales/service automation (or their socialized versions) do to create value (and loyalty) for me, the customer? I care about my experience, not how the company is making money.

    You say “Treatments by sales and service people follow the same logic: yes, people should be treated in ways that maximize long-term value rather than short-term revenue. But that’s just good practice in standard CRM terms.”

    People should be treated that way, and it’s a good practice to advocate. No argument there. It’s unfortunate that most CRM efforts are not aimed at customer experience but rather value extraction.

    Tell me, how many of the the marketing automation projects that you study consider any element of the prospect experience? Even un-qualified prospects could deliver value long-term, because prospects still are a source of word-of-mouth.

    Ideally, CRM projects would balance company vs. customer value. It hasn’t worked out that way in the real world.

    Customer Experience Management (CEM) has emerged as the way most companies are addressing this imbalance. Great companies do both CRM and CEM well.

  5. Mary Ann Markowicz December 10, 2011 at 2:39 pm (1 comment) #

    Bob,

    Your insights are spot on. I will add too that with the refocus from customers-as-leads to customers-as-humans, companies will also be forced to refocus their employees-as-expenses to employees-as-humans as well.

    Internal siloes are going to disappear – maybe painfully so – but will HAVE to disappear so as to meet the needs of human customers.

    Maybe the titles CEO and CFO should be converted to CCO. If the Board mandate to ONLY service the financial interests of their company didn’t exist and every CEO and CFO were charged with servicing customers instead of their companies, we would have a very different professional world.

  6. Bob Thompson December 10, 2011 at 2:48 pm (875 comments) #

    Great point. I suspect companies that treat customers like numbers treat their employees the same way.

  7. Michael Lowenstein, Ph.D., CMC December 10, 2011 at 3:20 pm (70 comments) #

    As a fundamental element of customer-centric processes and behaviors, all organizations need to recognize the importance of employees as advocates and ambassadors (to customers, other employees, and the world at large): http://www.customerthink.com/article/linking_employee_behavior_to_customer_loyalty_advocacy

  8. David Raab December 10, 2011 at 4:01 pm (27 comments) #

    Bob, the point I’m trying to make is that I do not believe “Ideally, CRM projects would balance company vs. customer value.” This treats them as two sides of a ledger that are opposites — as in my example, I can raise the price or lower it, and one or other party wins.

    CRM (and CEM) projects maximize company value, period. One way to do this is to deliver better value to customers; it’s arguably most important way and maybe in the long run the only way. But you deliver customer value as a means to the end of creating company value, not to deliver customer value for its own sake.

    I think you, I, and the other commenters all agree that companies should consider the customer experience when they design their policies. And I’ll gladly acknowledge that it’s sometimes tough to measure the long-term financial value of improved experience. But just because it’s tough, doesn’t mean we can ignore that company value is the goal. Otherwise we start looking at “customer experience” as an end in itself, and that just doesn’t provide a useful basis for action.

    Concretely, look at the discussion around Net Promoter Score: the only reason business people use it is because they believe it correlates with better business results. That’s how it was promoted in the first place and questioning that research is how it’s been attacked. See http://customerexperiencematrix.blogspot.com/2007/07/more-attacks-on-net-promoter-score.html for more on that.

    Are you simply saying that many CRM and marketing automation deployments look only at costs and don’t take into account the long-term impact on value received from customers? No argument. Are you further saying that looking at treatments from a customer perspective (aka CEM) is a good way to increase company value? Again, no argument. But if you’re saying that the company should use CEM to create value for the customer without considering the impact on company value, or perhaps even by reducing it — well, I respectfully disagree (and don’t want to be in the boardroom when you make that case).

    To answer your question about marketing automation deployments — industry best practice is to understand buyer roles and needs at each stage in the purchase cycle, and to design treatments to meet them. That’s pretty much the definition of CEM. Sure, plenty of marketing automation deployments fail to match the best practice. But that’s my point exactly: we don’t need a new goal of “customer value” to improve things. We just need to follow practices that are already well defined and grounded in the one goal all business people can agree on: making money.

  9. Bob Thompson December 10, 2011 at 6:20 pm (875 comments) #

    David, by “balance” I don’t mean a zero sum game at all. What I mean is that a company should be as focused on creating value for customers (which drives loyalty and therefore business performance) as extracting value (which is what shareholders want).

    Creating value for customers is not done out of altruism, but because it’s the key to long-term business success. Extracting value is also important, because regardless of your overall value proposition, companies should try to get the best return for it. CRM shines here.

    Customers will defect when they are (or perceive to be) taken advantage of, and search for better alternatives. Think BofA and Netflix. So you’re right, as you suggest customers are always free to fight for their own value.

    Companies can also “over serve” customers and build raving fans, right up to the time when they go out of business. I’m not suggesting that’s a good idea, either.

    Again, the point of my post was simply that CRM (as commonly practiced, not what the gurus preach) doesn’t make me loyal. And I think loyalty is something that the board cares about, and I’d be delighted to make that business case. In my experience, senior execs are much more concerned about competitive differentiation, where CEM can play a critical role, than CRM automation which is relegated to the IT department or lower-level managers.

  10. Rick Ross December 10, 2011 at 6:52 pm (1 comment) #

    Bob,

    “Treat me as a person!” I couldn’t agree more. CRM systems have tremendous potential to improve customer service, but for a myriad of dubious reasons, implementations often fall short.

    It doesn’t have to be this way. But your right, it does require a new way of thinking. The automation paradigm has to be thrown out in favor of one that acknowledges what humans do best and what computers do best. With new ideas in place and the right aim, companies can astonish customers with unprecedented levels of service.

    Thanks for the thought-provoking post.

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