At many firms, technology obscures CRM

March 18, 2002

BY MICHAEL KRAUSS

Technology is supposed to help improve customer relationships. The entire customer relationship management (CRM) phenomenon is all about improving customer relationships. But more often, technology simply gets installed as a cost-reduction device, not as a relationship-building tool.

Even a technology's inventors can get fed up. Consider the late Gordon Matthews, creator and patent-holder of voice-mail: Recent newspaper and television news articles reported he frequently cursed the misuse of his creation, and who could blame him?

Last summer, when I tried to get customer service at a (here unnamed) long-distance carrier, I found endless delays, messages and several disconnects. Then, after waiting through lengthy queues, the agent who came on couldn't resolve the situation. Only old-fashioned letter-writing techniques managed to get my account properly credited.

In that case, technology hardly improved my relationship with the phone company. The technology interface was an obvious cost-reduction ploy, and you can bet I reduced my reliance on that phone company after I received my credit.

"Companies spend millions on CRM and the evidence is terrible," says Robert Blattberg, co-author of Customer Equity: Building and Managing Relationships as Valuable Assets.

Blattberg, a marketing professor at Northwestern University's J. L. Kellogg Graduate School of Management, in Evanston, Ill., isn't just your casual observer of customer relationships; he's spent much of his academic career studying the subject and is the creator of the concept of the "lifetime value of the customer."

In a recent interview, Blattberg explained that companies often fail to see their customers as assets. Despite the fact that more data is available on customers than ever before, and more computing technology available to manipulate that data, management still misses the opportunity.

"It's not like the tools don't potentially do it," Blattberg says. "The technology is embedded in the wrong place in the organization. Top management doesn't understand CRM; they think it's a technology solution."

There are certainly examples of companies doing the right thing. Wal-Mart is one of the most sophisticated users of technology to manage the business; its use of computer systems to support purchasing and procurement is legendary. At the same time, Wal-Mart remembers that the most important technology is the human greeter at the front of the store.

Blattberg likes to ask whether Northwest Airlines or Southwest Airlines is closer to the ideal envisioned when we think about CRM: The answer, of course, is Southwest.

Says Blattberg: "Southwest has figured out the 'R' in CRM. They've set the customer's expectations that, 'You're going to get peanuts and you're going to pay peanuts,' (and) that, 'The flights won't be luxurious but they'll generally be on time.'"

While Northwest offers first-class service, it can't be a great experience when passengers walk into the airport and face long lines and surly people behind the counter.

"They don't understand that CRM is not about whether they can track my name. It's about how . . . they use information to create a relationship," Blattberg adds.

Here are my thoughts on the solution:

• CRM is not a technology solution -- You can't achieve the aims of improved customer relationships simply by slapping in some software.
• Organizational change -- The hardest part of becoming CRM-oriented isn't the technology, it's the people. The organizational change is more critical than the technology installation.
• Focus on the "R" -- Remember, a relationship is what CRM is all about.
• Audit the experience -- Measure your effectiveness in CRM. Establish goals for being relationship-oriented and audit your progress toward those goals.
• Know the relationship friction points -- The most important person in a Ritz-Carlton hotel is the doorman; he's the customer's first point of contact. Is he the most motivated and best-paid employee?
• Establish pilots and test beds -- CRM should pay off financially for a company. If your management is skeptical, run pilots and analytical tests to prove the benefits of improved relationships.
• See customers as assets -- Some companies pay more attention to maintaining their machinery than their clients. Recognize that your customers are assets even more valuable than any others on your balance sheet. Maintain them with at least as much care as you would your best plant and equipment.

This does not mean that technology is less valuable now than it used to be. Technology -- or rather, the smart application of technology -- can yield a tremendous advantage.

We can use technology the way my phone company did last summer, to cut costs and keep the complaining customer at arm's length. But if we do that, the customer asset might simply disappear, leaving only the cost of all that technology on the income statement.

And maybe that's why so many phone companies are in trouble.

Michael Krauss is a partner with Chicago-based DiamondCluster International. He can be reached at michael.krauss@diamondcluster.com or news@ama.org.