Are e-tailers developing close relationships with their customers these days? According to a recent report by Digital Idea, customer loyalty is very low and DataMonitor reports that customer service needs significant improvement, with almost 4 times as many online transactions abandoned than are completed
Maybe these e-tailers need Customer Relationship Management (CRM) software to turn things around. Not so, according to a recent study by the Gartner Group, Inc. (IT and ITB). Despite the pronouncements by purveyors of Customer Relationship Management software (CRM) like Oracle (ORCL), E.piphany (EPNY), Siebel Systems (SEBL) and Broadvision (BVSN), "CRM on e-tail sites", according to the Gartner Group, "amounts to little more than lip service".
This isn't surprising to me. In an earlier column ("Is CRM really about relationships") I argued that CRM was not likely to create its promised unbreakable, deep customer relationships, no matter how technologically advanced the software. E-tailers had to share information with and make credible commitments to customers, rather than just using the technology to get more information from them. I doubted they were willing to do this.
In essence, CRM customers require a radically new mind set, rather than just new software.
The Gartner study indicates it may be worse than even I imagined.
According to the press release, "only 10 percent of sites surveyed allow customers to track inquiries through to resolution. Only 6 percent offer a feature asking the retailer to call the customer. Some 24 percent have instant messaging, and only 28 percent will even acknowledge that an e-mail inquiry was received."
No matter how superficial your definition of a customer relationship, these numbers could barely be considered a casual fling.
My own recent experience with Buy.com (BUYX), which E.piphany touts as a CRM customer on its own web site, bears this out. After ordering a Palm Pilot that Buy.com's web site clearly stated was in stock (my receipt confirms this), I found out days later that it had been backordered - a practice that I believe is highly unethical. Attempts just to contact corporate personnel to get a reasoned explanation went unanswered. Sharing information with a customer that may improve the customer's negative point of view was evidently too much. Bye-bye, Buy.com.
CUSTOMER INFORMATION AS POWER
The real problems with CRM lie deep below the technology glitches. E-tailers may not only have trouble sharing information with customers; they also may not be willing to share information within their company.
One way to examine this is by applying Gresham's Law to customer-relevant information. Here, the idea is that information with high intrinsic value - as we might expect customer information to be - will be hoarded. It was Gresham's Law that gave rise to the phrase "Information is Power."
There is a natural tendency in companies to hoard information. Could this happen to e-tailers and other companies who implement CRM? Of course.
Customer information to the salesforce, for example, is often a source of power in an organization - at least academic research indicates. The same is likely true for people in the customer call center, product managers, marketing managers, and executives.
Wouldn't the various people who are supposed to make CRM work in a company look for some quid pro quo when sharing customer-relevant information? Could this really be at the root of the Gartner Group's findings?
CRM REQUIRES CULTURAL CHANGE
To check out the idea that CRM success is more about changing the information mind set of a company, rather than giving it technological advances, I recently spent some time talking with Norman Guadagno, Vice-President Worldwide Marketing for Primus Knowledge Solutions, Inc. (PKSI), a provider of eCRM software. Norman spoke candidly of the implementation problems that all firm face with CRM.
According to Guadagno, for CRM to work inside a company, it must be open to letting their customers see inside the company and must be willing to share information between various departments.
In essence, in contrast to the old model of thinking about the customer as a differentiated object on the outside of a company's business, organizations have to think about restructuring themselves with the customer inside the organization.
Guadagno confirmed my presumption that CRM necessitates a cultural change for a company and that was it's biggest obstacle for success. He pointed to some companies, like EMC (EMC) that had the right attitude towards sharing information across the enterprise, but then again EMC is in the business of storing and sharing information. This attitude is not the norm for most companies.
DO ONLINE-ONLY E-TAILERS GET IT?
One point made in the Gartner study is that pure online retailers can make CRM work better than so-called brick and click retailers. Christine Ferrera, an analyst at Gartner, said "It's easier to build CRM entirely on the Web with no offline component."
I asked Guadagno about this point. His view is that while it's true that online e-tailers were founded with different ideals that their brick and click counterparts, over time and as they grow, they tend to get ossified in their thinking about internal processes and are prone to hoard information. This is entirely consistent with what academics know about how organizations become more and more bureaucratic as they grow.
I'm still not that convinced that CRM can help e-tailers build unbreakable, deep customer relationships. I see it more as a tool for improving customer service, but not relationships.
In fact, when I recently asked a Stanford University executive program audience whether they had such a "relationship" with any online e-tailer, not one person answered yes. While this is a problem to be sure, the bigger problems for e-tailers may actually be establishing deep relationships within their own companies.