Can Retail and CRM Co-exist?

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I started my career in the mid ’80’s in database marketing. In the mid ’90’s CRM emerged as a new (but old) business philosophy, discipline and strategic practice. I embraced CRM with a passion and as they say, “the rest is history”.

For the next ten years, I worked for large corporate organizations in communications and telecom, building their respective CRM strategic business plans and enabling technology road maps.

In 2005, an opportunity with a large retailer was presented to me, so looking for another industry in which to ply my craft and in need of a new challenge, I ventured into the wacky world of retail. I thought retail would be a logical match for CRM, given that CRM’s roots are in the old, local neighborhood shop keeper who knew all his customers by name and as well as their needs and wants. He would even anticipate his customers’ needs in advance by having their usual order in stock and practically ready for their next trip to the store. Well, it’s been almost 3 years since my foray into retail and my hypothesis about it’s co-existance with CRM has been disproved thus far.

It would appear that retailers are not as customer-centric as they say (or think) when it comes to embracing the virtues of CRM. Let’s face it, the marketing department in a large retailer is mandated and structured to communicate with the mass consumer, rifling the market with weekly flyers, newspaper ads, and a smattering of broadcast and other media intended to build awareness and drive store traffic. Sure, these media help generate top line sales, but retailers don’t have any sophisticated means by which to effectively measure which media is driving the sales or ROMI. Direct mail and e-mail also exist as direct channels of customer communication; however, from what I’ve seen, they are no more than extensions of mass media since they tend not to be highly targeted and generally contain offers that also exist in mass. The other interesting observation is that the merchant and marketing groups tend to pay more attention to external market statistics like market share, market growth or decline in a commodity, as well as syndicated research reports than the wealth of information they have on their existing customers generated by CRM.

So, my question is, “Can retail and CRM co-exist?”. Based on what I’ve witnessed, I have my doubts, but I’m open to others’ points of view as well as any tips on how to overcome retailers’ traditional product-centric and mass marketing mentality.


Phil Olivieri
December 9, 2007
Can Retail and CRM Co-exist?

Since making my post 4 days ago, I’ve noticed that it’s had 62 reads, but no one has submitted a comment, positive, negative or otherwise. I’m interested in hearing others’ perspective on this matter, so please feel free to comment.


Bob Thompson
December 9, 2007
CRM is not just about targeted marketing communications

Phil, you ask a good question. My answer is, of course Retail and CRM can co-exist. There are plenty of examples like Tesco, Best Buy and others where retailers use “CRM” techniques successfully.

But, it seems that your examples are mostly about targeted communications. Isn’t there more to CRM than that?

Personally, I define CRM as a customer-centric business strategy that strives to deliver more value to the customer in return for more profitable growth. Providing an outstanding in-store experience should be part of CRM thinking, in my view, although it seems that most consider this to be Customer Experience Management.

As I’ve commented elsewhere, CRM means many different things to different people. Perhaps the way CRM was defined at your company was too limiting. Surely there were other ways that CRM could be of value besides precision marketing.


Phil Olivieri
December 10, 2007
Can Retail and CRM Co-exist?

Thanks for your comment Bob. I’m familiar with Tesco and Best Buy’s successes in CRM. I also agree that CRM is much more than targeted communications. I define CRM as a corporate philosophy, discipline and strategy enabled by people, process and technology that strives to engender a profitable relationship between a company and its customers based on a mutual exchange in value delivering increased customer loyalty, company profitability and shareholder value. I should have posed my question as being more specific to my organization where I have encountered challenges with the marketing department not understanding the value of CRM as a whole. In my original posting, I mentioned that marketing (and the merchants) tend to pay more attention to external market statistics (market share, market growth/decline in a commodity) than the wealth of information we provide on our existing customers, i.e., behavioural segments including life stage, lapsed, attriting, profit segments, RFM, avg. spend, avg. visits, avg. profit. Marketing also is more focued on driving traffic (and net new customers) to our stores vs. growing, maintaining and retaining our best customers. Do you have any advice on how I can influence and modify their mindset? This is the issue.


Bob Thompson
December 10, 2007
Customer-centric marketing leadership is key

Phil, it’s been my observation that when a company or its industry segment is going through a rapid growth phase, CRM thinking is hard to come by. In this world, it’s a race for market share and any customer will do. The cell phone industry is a classic case.

It’s only when markets mature or the number sour that attention turns to retention, and to maximizing profit per customer.

If that’s not the case at your company, then my other observation is that a mindset is established through the leadership of the organization. Unless the head marketing executive is a champion of a new way of thinking about customers, not much will change.

So, if you feel there is true value in a more customer-centric way of operating, you’ll need to sell the top executive and have that person lead the change. Other successful customer-centric retailers can help show what is possible with a customer-centric approach.

Bob Thompson, CustomerThink Corp.
Blog: Unconventional Wisdom


Phil Olivieri
December 11, 2007
Customer-centric marketing leadership is key

Bob, retail in general, and our organization specifically, are not going through a growth phase. In the market, we see YOY increases in top line sales of ~5%, on average, and slightly higher in certain key and seasonal commodities, but by and large, the it is not growing rapidly. I’m also only too familiar with telecom having worked in this industry for 5 years and faced the same hurdles. It is more likely a question of changing the mindset of senior leadership; however, whenever I present compelling customer facts, figures, and opportunities, I’m asked if have I socialized them with my peers to get buy-in and traction. Here’s where the rubber doesn’t hit the road. It’s my peers in marketing and to a greater extent, in merchandising and store operations, that don’t understand CRM and often toss me “red herrings” as a means by which to derail the subject or issue. These peope are classic dyed in the wool, traditional retailers, with many having lifetime careers at this one company. They have no external perspective and are quite insular. Herein lies my challenge.


Bob Thompson
December 11, 2007
Change is tough

Phil, you have a very tough situation. Hopefully some others will chime in with some suggestions.

In my experience, when things are going along “ok,” management isn’t likely to make a radical change. Why fix what isn’t broken?

Often times, it takes a dramatic downturn and/or a change in leadership for a new course to be set. If there is no “burning platform,” what is going to cause people to leap?

All that said, and trying not to be too negative, change can only come about when some people are willing to change the status quo. I remember reading the story of Tesco; it wasn’t an overnight success either.

I interviewed Clive Humby who was involved with the Tesco Clubcard program; Scoring Points is a good read (maybe a Christmas present for the big boss at your company :)?) and explains that it took years for leadership to embrace a new way of doing things. Here’s an excerpt:

>>
Bob Thompson:
The story in this book is that the executive that was sponsoring this loyalty program eventually launched it in 1995. He had spent several years trying to convince the board to go in this direction, to make this investment. If it’s so obvious that customer insight is going to drive better business, why was it so hard for him to get Clubcard approved?

Clive Humby
Well, it wasn’t obvious until they found out. What happened was that they were used to looking at top-line numbers—”what are my sales this week? what are my sales last week?”—etc., and that’s the way they measure things. If you look at that level, you can’t see the impact.

Tesco brought us in to analyze the data, and we sat down in their boardroom—we obviously had done quite a bit of work before this—and we told a story, as we thought they would want to hear it. “Did you know that 5 percent of your customers accounts for 40 percent of this?”—which they didn’t know—and we then looked at some of the long-term issues. “Did you know that when you do this promotion, one customer in five comes into that department and starts buying and that’s new money into your business?”
>>

Full interview available here:
www.customerthink.com/interview/clive_humby_tesco_shines_at_loyalty

Maybe the Tesco approach (now being copied by Best Buy and others) is not the best approach for all retailers. But I’m betting the future leaders of retail will blend excellent in-store customer experiences with an analytical approach to what is sold and where, and how promotions are targeted.


chakradhar gooty
December 11, 2007
I agree with the author and

I agree with the author and it completely resonates with my thinking on Retail (please see my blod – CRM in Retail an eyewash ) as i have consulted few frims in this space and still the business case is to be validated. However the very fact some retailers are thinking about cRM is a great step in the right direction


Phil Olivieri
December 12, 2007
Bob, thanks for your insight

Bob, thanks for your insight and suggestions. I agree change doesn’t happen over night; however, that said, CRM has existed as a functional enablement and support group at our company since 1991 (I arrived in 2005) and although we have made some small in-roads over the past 2 years, we are not where I think we should be.

The interview with Clive Humby regarding the Tesco Clubcard Program is quite relevant to our current state. The decision makers in our business are accustomed to looking at top-line numbers, i.e., “what are my sales this week?, what are my sales last week?”, etc. In addition, as I mentioned ealier, they also look at external market statistics like market share, market growth or decline in a commodity, etc. The fact is none of these metrics tell a story about the customer and their impact on the business.

My group is the “external consultant” that has told the customer story to the business time and time again, i.e., “Did you know that the top X% of our customers account for Y% of this KPI?; Did you know that we lose X% of our best customers every year which translates into $X in lost sales and $Y in lost margin?”, etc. One would think that this type of compelling and impactful information about customers would resonate with a business as it presents a new and different perspective and allows for better decision making.


Martin Reilly
December 14, 2007
Can Retail and CRM Co-exist?

Phil – very interesting initial question – and subsequent dilemma you have.

Doesn’t it seem like Retail should be the best, easiest, and even ideal place for the very best in CRM? And yet here you are expressing something we have seen often – even with some very good brands. What is wrong here? Doesn’t Retail have the privilege of the transaction data, the privilege of face to face contact, the privilege of controlling the shopping experience? Stuff that packaged goods, or even online retailers would kill for?

Your experience, and we feel your pain through some very parallel experiences, is all too common. Yet there are retailers who “get it” – take one like Helzberg jewelers for example, but you don’t hear much about them because they keep their considerable expertise in this area a very closely guarded “trade secret”. They absolutely print money hand over fist thanks to their reportedly very sophisticated CRM expertise – and regard themselves as the most profitable jeweler bar none.

On the flipside, there are examples like Service Merchandise, who had a very similar internal scenario in the late 1990s to that you describe in your story– and we got to watch them implode (from close-up), largely because they ignored the power that a CRM approach and Core Customer approach could have provided.

Don’t both you and Bob sort of touch on a big Retail “marketing” paradigm that is so predominant – that is “Discount” promotion as the main “Marketing” lever? Isn’t the whole retail promotion world geared up to constantly train the consumer to buy on price? Isn’t this the extent of the Merchants’ game – the Sales flyers and ads and now emails? Both retailers of outside manufacturers’ products and retailers of their own exclusive products pursue this with the same degree of fury. How can continually training the consumer to buy on price be productive?

Isn’t this the antithesis of the pure concepts of Branding and Marketing – unless your position is as the solid low-price leader?

Phil, both you and Bob have a common key word in your CRM definitions, “Profitable”. Phil, if you have your hands on the data, perhaps in the process of “socializing” with your peers, and creating value for your senior management, you could “play” with some customer profitability models rather than just revenue models. This can quite often be very powerful. An unusual, but often powerful ally in this can sometimes be the CFO. There are some intriguing ways of approaching these models.

Phil, when you describe your situation in your notes here, I can’t help but think two other things: First, “Sheesh! While not impossible, his mission into the headwind of that ol’ legacy thinking and legacy practices may be more than can be pushed up from below the senior management.” And two, “here’s a guy who really gets it, and wow, aren’t there some other retail chains who would really love to have this guy?” Deep Database, CRM, and Retail experience? Yes Sir!

I think that Bob has given you some very good insights and suggestions with regard to approaching and influencing the senior managers. If you think you are able to reach out to them, I would offer up some thoughts as stimulus for you that are on our website at www.helpmewithrm.com under “Power Strategy Thought Starters”. My hope would be that some of those would help you think through how to make an approach or presentation that could open the door to accomplishing some of what you obviously want to do for your company. Our very best wishes.
Mark Taylor
December 17, 2007
CRM

Good insight thank you. On defining CRM, my company (Wunderman) has long used Customers Really Manage and that the role of CRM is really to give the customer the tools necessary for her to manage her relationship with the brand.


scott rogers
December 17, 2007
Phil – Welcome to the wacky

Phil – Welcome to the wacky world of retail. Having been in retail most of my career and, from what I see in CRM conferences with colleagues, is that, all to often CRM in retail is really about CUSTOMER relationship MANIPULATION. Even when done “well”, it is often no more than “targeted” mass communication.

Lost in this is the customer. The image of the old neighborhood shopkeeper who knew his/her customers and what they wanted, has been replaced by the best practices of “targeted” mass communication (still a one-way dialogue) and micro-merchandising store assortments, based on local demographics. There is an inherent disconnect, in most of retail, to the individual customer and the actual store experience, face-to-face. In other words, the “relationship” is often missing. Relationships are two-way interactions, and shouldn’t be entirely based on detailed metrics concerning how well the Pavlovian response was to X versus Y campaign. That is short-term thinking.

I agree with Bob Thompson about looking across to the pond to Tesco, and saw a great presentation a few years ago by Debenham’s, a department store chain in the UK and EU, about their efforts. Seemed to consider far more than chains in the US the connection between CRM efforts at corporate and the customer experience at the store. (Have to disagree somewhat with Best Buy as a best practices example, primarily because of my personal experiences with customer service/store employees at the store level).

I agree with a number of the previous comments that change needs to come from the top, that CRM is more than just the new generation of marketing, and an important part of our job is to get that point across to top management.


Graham Hill
December 18, 2007
Learning By Doing CRM Experiments

Phil

I don’t think your problem is limited only to retailers. I have seen it personally in many other industries, including financial services, telecoms, automotive and airlines. That means you shouldn’t have to reinvent the CRM wheel to start to move things forward.

In similar circumstances I have experienced, providing endless facts & figures, business cases and logical what-not to marketing management is necessary, but not sufficient to make progress. If you have spent all your working life successfully doing, say promotions & offers, it is very tempting to do more of the same, only with more concentrated effort, in the forlorn hope that a breakthrough will happen. New-fangled approaches like CRM or social media are alien and thus perceived as risky. And who is going to risk something new when tried & tested tools will probably work with more concentrated effort?

Here a few simple steps you might like to take. None of them are difficult and they don’t require hardly any resources to get started. And getting started is the key.

1. Identify a big business problem that you (your company) are struggling to respond to. And then identify the real reasons why it is a problem and why you have struggled to respond to it. Problems might be falling sales per square foot, increased costs per sale or falling repeat custom. It doesn’t need to be the biggest problem, but it does need to be big enough to be worth resolving.

2. Review what CRM capabilities – what customer data, customer-facing processes, CRM systems & technologies, customer-facing staff, etc – you have available to you without requiring much additional effort or spend. And then identify who controls their deployment. Capabilities might be knowing who your best customers are, effective email marketing or something that creates tangible value. Knowing what CRM activities you can already do and who needs to be involved in doing them is critical to getting started.

3. Set an achievable but challenging target for the problem to be resolved. The target must be ‘interesting’ for marketing management otherwise they will just want do continue with what they have always done. And the target must be in-line with their own targets otherwise they will struggle to make the link. The target might be increasing sales per foot by 5%, reducing costs per sale by 10% or increasing repeat customer by 15%. The problem you choose should allow you to hit your initial targets within three months, at little additional cost, with largely existing capabilities.

4. Only now that you know what the problem is, what CRM capabilities you have available to tackle it and you have set yourself an achievable but challenging target, should you work out exactly what you will do to resolve the problem, who you need to involve to solve the problem, how it will be made to work and what might block it from working. Don’t make the mistake of identifying what you will do before you set your targets. That is a recipe for under-delivering. And make someone, a single, respected person responsible for seeing the problem through to resolution. Hopefully that person will be you.

5. Set out the problem, the causes of the problem, the solution, implementation plans, measures, future activities and most importantly, the names of all those who will be involved in implementing the solution, on a single sheet of A3 paper. Don’t prepare a big, fat 50 pager of waffly powerpoint slides; nobody has time to look at them. Then walk the A3 sheet around the involved individuals one by one to discuss what you want to do with them, to get them to sign-up to what they must do and to sign the sheet in front of all their named colleagues. The emphasis is on tackling a known problem, through using existing CRM resources better, whilst integrating in a non-threatening way with their other marketing activities and making them personally more successful. Only when you have all their signatures on the single A3 sheet of paper are you ready to get started.

6. Get started with low profile but focussed activities as described in your A3 and with the full involvment of all the parties you identified. The key is highly focussed, simple activities which deliver rapid results that don’t require large changes. All organisations have plenty of them that are just waiting to be done, but where everyone is so busy doing everything else to actually do. And keep a look out for the ‘blockers’ you identified earlier so you can overcome them before they slow you down.

7. Once you start delivering early results, share them widely within the organisation, be generous in attributing success to others. Use the experience you gain doing them to prepare for the next activities you should be doing to build upon your early successes. And continuously improve and adjust what you are doing in light of what you learn from doing it. There are always improvements that can be made. Toyota made over 20 million of these little improvements to its business over the past 40 years.

It sounds simple and it is. I use this approach everyday in my consulting and my Interim work. It is not retailer specific, but rather a CRM-oriented way to drive value yout through robust problem solving and collaborative solution implementation. It worked for me in automotive retail, mobile telecoms retail and other industries too. And as I am nothing special, it ought to work for you too.

Contact me on graham(dot)hill(at)web(dot)de if you want more details of the approach, or an exanple of an A3 sheet.

PS. Oh and one last thing. Never forget that marketing is an inextricable part of CRM, just like sales and after-sales service. Don’t be tempted to separating marketing out of CRM and then only focus on one or the other. You will only win when the success you have in focussed marketing leads through to more sales and fewer mis-calls into the service centre. And when you can share insights learned in one activity across all other CRM activities in an integrated way.


Graham Hill
December 18, 2007
Sounds Familiar?

Phil

Does Hudson Bay, Sprint Canada and Direct Response ring a bell?

Graham Hill
Independent CRM Consultant
Interim CRM Manager


Alan J. Zell
January 13, 2008
Can CRM and retail co-exist?

Can CRM and retail co-exist? It has but not in the way we think of CRM today. In the days when selling was seen as a profession rather than a job, it was a common practice. Using my experience in over 25 years in retailing, here is an example of how CRM was done . . . and that was before we expected computers to do it:

* Salesperson kept a file or marked their flip calendar to follow-up on sales as noted when a customer would use it/wear it for the first time.

* Card files by customer in each department listing what each client had purchased

* Item cards with lists of who bought the item.

* Bridal and new home registration dard systems were used to remind newly marrieds and family to add to what was not purchased as gifts

It was what real relationship selling was meant to be and not just a catch phrase used in today’s business environament.

With due respect to what great things computers can do, what they did that was negative was to take out the personality of products and out of relationships. Merchandise became a SKU, customers became a statistic with general information and not specifics. Notes on what was wanted or needed or suggested did not fit the computer system. Salespeople lost track of who bought what because it was sent to the computer to be used by others for such things as CRM.
As CRM and like programs grew, it was thought(?) that hiring and paying real professional salespeople was relegated to calling clerks “sales associates.”

Where CRM and retailing has missed the mark is that the “old fashioned” systems were seen by management as being, now that a CRM program was in place, unnecessary and not worth the time and effort should it be required of salespeople.

CRM as applied to retailing should, in my mind, be oriented towards selling current and new products/services to past, current and prospective customers. Can it be or is it able so customized that the right products/services be presented to the right customers in the right format versus being a one-size-fits all presentation – better known as “untargeted marketing” i.e. throwing up a whole bunch of buckshot and how some birds fly into it.

In real retailing where professional selling is the norm (if there is such a place) CRM can be a great adjunct to good relationship selling and visa versa. Not only can it be, it should be!


dave_ekstrom
January 23, 2008
Any Relation?

hi there, are you related to Peter Zell?


Owner of Allnorth Consultants?
Guest
April 17, 2011
Hi Phil

Hello Phil,
Went through your conversation with Bob and it was mighty insightful. I work at a store in India and have been into retail for about 2 yrs now. I would say “Yes, CRM and Retail CAN Co-exist”. The reasons are as follows:-
1) If retailers do not embrace change in terms of accepting the pivotal role that CRM plays, they are well headed towards their doom.

2) Understanding your customer and his/her needs should be the Vision, Mission and Motto of any retailer. Or else dont term yourself as a retailer. (hehe)

3) I agree with Bob when he said that it is the TOP GUY who needs to set the ground rules and it is the same guy who needs to be convinced.

4)Guess, people across the globe are averse to change and seem to be quite ok living and working within their comfort zone. This is a concern when it comes to the Indian retail scenario as well.

5) Also, affecting postive change is a daunting task and one cannot affect change with a cynical mindset (not saying you are).

6) Guess presenting figures projecting the losses the company is making does’nt seem to have done much for your company to affect positive change. I dont know if you guys have done this but if you present stats for say a period of 6 months to a year and therein you show the actual / net losses made by the retailer then that should shock them beyond comtemplation.

7) Lastly, if a comparitive study can be done wherein, your study be compared with the Retailers’ marketing team’s efforts and effects therein, maybe that should put things in perspective. (People only wake upto shocks) hehe.

Regards,
Prem K

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