Editorial: The mirage of CRM
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According to the Gartner group, half of US customer relationship management (CRM) projects and more than 80 per cent of European CRM projects are considered failures. These massive failures have cost millions of dollars per company. What’s gone wrong? The basic idea behind CRM was to collect a great deal of information about customers, prospects, products, promotions and other data, and put them into a giant in-house data warehouse. To access and manipulate the data in the warehouses, very sophisticated software costing at least a million dollars the first year, was installed. There are really two basic goals of CRM:
based on information that can be collected about them — customer and prospect behaviour is heavily influenced by timely and relevant offers — companies can shift rapidly from being product focused (employee bonus based on the level of sale of particular products) to being customer focused (employee bonus based on the level of sales to particular customer segments, regardless of what products they buy) — introduction of CRM has a positive return on investment (ROI) by increasing sales and profits by more than its cost.
— build and maintain a relationship with prospects and customers based on knowing lots of relevant information about them, and using the information to guide marketing and sales strategy — use that information to make the right offer to the right customer at the right time, thereby increasing sales and pleasing the customers.
Let us see why none of these assumptions proved to be correct. In the first place, why do customers and prospects decide to buy anything? Marketers can come up with lots of answers, but the key answer is that they decide that owning the product or service at a particular time will make them happier than not owning them. What happiness consists of is defined by the person who is trying to possess it, and varies from person to person, and from time to time. I like Big Macs, but not all the time. Sometimes I like fish, sometimes chicken, and quite often I like home cooked vegetables. There is no way that a marketer can accurately predict what I want to eat next, unless they know what I ate last, how hungry I am, where I am
Achievement of the goals was based on four assumptions, all of which proved to be invalid in practice: — one-to-one marketing is an achievable goal given the right information and software. Stated another way, customer and prospect purchasing behaviour can be predicted accurately
102
Journal of Database Marketing
Vol. 9, 2, 102–104
䉷 Henry Stewart Publications 1350-2328 (2002)
Editorial
at the time, who I am with, how much money and time I have available right now for eating. There is no way that any data warehouse could ever collect such timely and relevant information, or that someone besides the customer himself could accurately weigh the importance of each fact. Besides my eating habits, the same principle applies to predicting my interest in taking a trip, buying clothing, buying a car or an appliance, or taking a college course. Some
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