MARK 7397
Spring 2007
Customer Relationship Management:
A Database Approach
Class 2
James D. Hess
C.T. Bauer Professor of Marketing Science
375H Melcher Hall
jhess@uh.edu
713 743-4175
Four Perils of CRM
1. Implementing CRM before creating a customer strategy
2. Installing CRM technology before creating a customerfocused organization
3. Assuming that high tech CRM is better than low tech
4. Stalking, not wooing, customers
1. Implementing CRM before creating a customer strategy
Potential
Repurchase
Frequency
High
Retention Strategy
-Loyalty rewards
-Communication
Personalization
Strategy
-Differentiation
-Operations
Low
CRM has low payoff
Acquisition Strategy
-Data Analytics
-Attract Angels
Low
High
Potential Degree of Customizability
2. Installing CRM technology before creating a
customer-focused organization
CRM-Forum 2001 study of problems with CRM
• Organizational change
29%
•Company politics
22%
•Lack of CRM understanding
20%
•Lack of CRM skills
6%
•Software problems
2%
Management often has “marketing myopia” (focus on existing
products rather than customer needs):
“We are in the business of selling filing cabinets”
rather than
“We are in the business of storing and accessing paper records.”
3. Assuming that high tech CRM is better than low tech
A customer bought a $45,000 Lexus and on the way how from the
dealer turned on the radio. He discovered his favorite classical
radio stationed was programmed on the first channel button. He
pushed the second button and it had his regular news station. The
third button had his daughter’s favorite rock station. When he got
home, he called the Lexus dealer to ask whether they were psychic.
“No,” said the salesperson, “We just had the mechanic note the
settings on your trade-in car and set the radio in the your new Lexus
for you.”
4. Stalking, not wooing, customers
Isn’t CRM just capturing names and addresses from customer
transactions and then up-selling or cross selling them in the
future?
Customers just want there lives made easier.
Customer Satisfaction
driven by the gap between the customer's expectation of
performance and their perceived experience of performance
American Customer Satisfaction Index
Declining Customer Satisfaction- Examples
90
Scheduled
Airlines
90
Household
Appliances
90
Commercial
Banks
P arcel Delivery
90
90
P ersonal
Computers
90
85
85
85
85
85
85
80
80
80
80
80
80
75
75
75
75
75
75
70
70
70
70
70
70
65
65
65
65
65
65
60
-8.4%
1994 1996 1998 2000 2002
-3.5%
60
60
1994 1996 1998 2000 2002
-2.7%
1994 1996 1998 2000 2002
60
-2.5%
1994 1996 1998 2000 2002
60
-9.0%
1994 1996 1998 2000 2002
(American Customer Satisfaction Index) with products and services
Source: http://www.theacsi.org, University of Michigan
60
P ublishing/
Newspapers
-12.5%
1994 1996 1998 2000 2002
Preventing the Premature Death of CRM
1.
2.
3.
4.
CRM from the Consumer’s Viewpoint
Too many trivial one-to-one relationships is untenable
Relationships are give and take
Companies focus on best customers only
Companies often create rather than solve problems for customers
Relevant Rules of Friendship
1. Provide emotional support
2. Respect privacy and preserve confidence
3. Be tolerant of other friendships
Does CRM court customer friendship?
The New Consumer Apartheid
 GE Capital: $25 annual fee for people that did not have at
least $25 in interest changes
 Schwab answers the phone in 15 seconds for Signature
clients with $100,000 assets
 Starwood Hotels ejected customers from rooms to make
way for “Platinum” club member
 Best Buy stocks merchandise that appeals to “angels” and
has cut ties to http://www.fatwallet.com/
What are some of your examples of delightful customer
relationships?
Flying
Billing
Lodging
Retail
Is this bad news for consumers?
What are Americans Concerned With?*
Loss of personal privacy
Healthcare
Crime
Taxes
56%
54%
53%
52%
* October 2001 Harris Interactive survey
Privacy is valued
To a Radio Shack clerk: My zip code's none of your business.
But so is identity
At a hotel reception desk: Do you know who I am?
Permission Marketing
92% of people surveyed in 2001 feel positively about
companies that ask permission before sharing information.
Opting In:
Opting On:
Opting When:
Opting Where:
Opting How:
Opting Now:
Can I send you stuff?
Will you agree to listen?
Will you tell me when you will listen?
Where do you want to listen?
How should I reach you?
Should I be “always on” for you?
How should companies interact with reluctant customers?
Martha Rogers
Adjunct Professor of Marketing – Duke University
Ph.D. University of Tennessee, 1983
With Don Peppers, Dr. Rogers co-authored The One to One Future (Currency/Doubleday 1993),
celebrating its 11th year in print, was named by Inc. magazine's editor, George Gendron, as "one of the
two or three most important business books ever written" and is widely acknowledged as the bible of the
customer strategy revolution.