In a keynote address at the EMAC conference, Michael Haenlein (Professor at ESCP Europe) argued that most CRM (Customer Relationship Management) strategies are no longer relevant. In other words, companies are using obsolete customer loyalty strategies. This obsolescence stems from the way CRM software is designed. The idea is provocative, and I comment on it in this article.
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- It’s simplistic to think that CRM software is a panacea for customer loyalty. Building customer loyalty over the long term is much more complicated than simply sending emails and making phone calls.
- The mechanics of CRM software are based on customer segmentation, on purchases made. However, a customer’s importance is not necessarily linked to their volume of purchases.
- The customer’s actions around the brand or its competitors must be analyzed holistically to assess their potential. Comments, their nature, and frequency, for example, indicate the customer’s present and future interest.
- Customer value must not be analyzed solely in terms of purchases. A new conceptual framework is needed to ensure that a customer’s non-monetary value is also considered.
Is CRM the key to customer loyalty?
Companies always believe they can keep their customers forever and go to great lengths to care for them, whatever the cost. Yet some black sheep deserve to be weeded out, and some interesting customers fly completely under the radar. Blame it on the data used and the mechanisms put in place to build customer loyalty.
Thanks to an astute comparison between customer relations and marriage, Hänlein had this wonderful quip about CRM managers:
“[These companies’ marketing managers] are trying to flirt using the strategies their grandparents used 80 years ago”.
That said, loyalty is only the logical consequence of customer satisfaction. The best CRM software won’t be able to conduct anything to retain a dissatisfied customer.
The best CRM software can’t do anything to retain a dissatisfied customer.
Customer relations have changed, but CRM practices have not
Customer relationships have changed dramatically over the last decade, yet companies need to catch up to the new challenges this (r)evolution presents. According to Hänlein, CRM software developers are at fault because they design their products on obsolete principles. He implies that CRM software vendors, with their outdated vision of customer relations, are contributing to the perpetuation of practices from another age and preventing the evolution of the customer relations sector.
This may be a little strong, but there’s some truth in it. CRM software publishers design products based on well-standardized mechanics and well-defined data. But the most interesting customers are those with the least need of a standardized sequence and whose data is the least easily exploitable.
A well-known vlogger could be your most important customer, even if he buys little or nothing. His value lies in his ability to influence others, and that’s why he deserves special attention.
Customer scoring: not just about purchases
CRM solutions use a scoring system to “classify” customers and trigger the most appropriate sequences. Scoring is based on customer segmentation. The most traditional segmentation is based on the recency, frequency, and value of purchases (RFM). But there’s much more to customer relations than just purchases.
Consider, for example, the comments left by customers on the products or services they have purchased. This practice is now the subject of much scientific research, indicating a certain behavior. Some customers are unhappy with customer reviews. Yet customer reviews should be considered in customer scoring, even though they tell us a lengthy story about the customer’s psychology.
Traditional CRM calculates a customer’s lifetime value (CLV) based on all future purchases. But what should we conduct with people who are not necessarily customers but write comments galore without necessarily being excellent customers? Amazon, for example, has a group of customers who are particularly active in writing product reviews. They enjoy a particularly strong aura among other customers, and their opinions are therefore worth their weight in gold. And what about bloggers or vloggers who, without necessarily being customers, are listened to by tens or hundreds of thousands of Internet users?
These examples prove that customer relationship managers need to consider much more than just purchases when determining the value of their customers. A well-known vlogger could be your most important customer, even if he buys little or nothing. His value lies in his ability to influence others, and that’s why he deserves special attention.
Conclusion
The traditional view of customer relationship management, partially influenced by CRM software developers, must be updated. Companies need to understand that there are many more parameters to consider than just purchases and that not all customers deserve to be retained at all costs. Some must be eliminated from the customer portfolio because they represent a high risk. If you would like to learn more about the challenges of customer loyalty, don’t hesitate to contact us.
Posted in Marketing.
