The Customer Loyalty Solution : What Works (and What Doesnt) in Customer Loyalty Programs

CRM is, in general, a mirage, an illusion based on a nice idea (the right offer to the right customer at the right time) that does not work out in practice:

• One-to-one marketing, which sounds wonderful, may in fact not be possible in most product and service situations. We lack the information. The data about any individual that are available may not be sufficient to predict that individual’s behavior, although it may be sufficiently accurate to predict the behavior of the customer segment of which he or she is a part.

• Making the right offer to the right customer at the right time may be impossible. People make decisions based on personal factors that cannot be captured in a database. We can, however, profitably target segments.

• Companies cannot easily shift from being product-focused to being customer-focused. It sounds great, but few have actually done it. Most never will.

• Even if CRM were to work in theory, it does not work in practice because the increased profits are swamped by the increased costs.

• We must keep in mind that customer communications, which are triggered by CRM or a database, produce only incremental results. You are already selling something. You hope to sell more and keep customers longer by using the database and communications. The incremental sales are usually only slightly more than the sales you would have gotten without the database and the communications. You have to justify your CRM not on the basis of total sales, but on the basis of these incremental sales.

• Many marketers are doing database marketing and calling it CRM. They don’t have a warehouse or million-dollar software. They are marketing to segments and making money doing it. That is great. But it is not CRM.

• NCR, which sells the TeraData computer, has developed some very sucessful data warehouse applications for very large banks, insurance companies, and others; two of these are described in detail in this book. These applications are an exception to the general rule about data warehouses. NCR has succeeded where most other CRM developers have failed.