The adoption of CRM as a core business strategy hinges on proving success - but first marketers must figure out how to define success.
A major packaged foods company was recently mulling over whether customer relationship marketing made sense for them. While their flagship brand had long enjoyed a huge category lead, the syndicated trend data was showing a worrisome slippage in the share of requirements, suggesting consumers were beginning to stray.
The circumstantial evidence pointed to aggressive promotional pricing by competitors - mainly, private label brands - as the crux of the problem, inciting value conscious consumers to trade off their brand allegiance for cost savings. In a category with flat to declining growth, the company could not afford to see any of its heavy users switch over to the competition. So in order to meet its fiscal targets, brand management was fighting back in the grocery aisles with point-of-sale discounting of its own. But all of that promotional skirmishing had created a circular loop: it was training consumers to buy on deal and heightening their price sensitivity, pushing them further away from the brand.
Yet in the market research department the outlook was decidedly less bleak. Skeptical of the syndicated data, the research staff trusted more in their own custom data which told a cheerier story: that, in fact, the brand's share of requirements had actually risen slightly over the previous year. So who was right? Or, more precisely, which set of data reflected what was actually going on? At stake: a major shift in budget dollars to solve what might be a spurious crisis.
Fuzzy data has always been the nemesis of marketers. No other area of business has so many ways to measure success - and so little success at measurement. Share of market, share of requirements, share of wallet, share of mind - the list goes on; yet most marketers will admit that figuring out return on investment is purely a speculative exercise for them. For one thing, intangible assets like brand equity defy monetization; on top of that, there is no single accepted measurement of marketing performance.
That's why a lot of the time marketing spending decisions can seem capricious. They get made out of habit ("It's always worked in the past"); on blind faith ("This is a breakthrough idea"); or out of boredom ("We have to try something different"); seldom is the decision the logical outcome of a bottom-up computation. And that's not because marketers have an aversion to calculus: it's simply because the measurement tools they have to work with are so blunt. No one has come up with a credible method of proving marketing payback; as a result, marketing strategy is usually a homemade mix of "educated guess" and gut feel.
The precise appeal of CRM, on the other hand, is its measurability: the idea that what truly matters is the growth velocity and asset value of the customer base. But those metrics can be difficult to fathom even for companies squatting on terabytes of transaction data (like grocers, telcos and general merchandisers). Many managers - particularly marketers - suffer these days from what Richard Saul Wurman labels "information anxiety", a phobia he describes as the "black hole between data and knowledge" - between the knowledge that is needed and the information actually provided. The irony is that after a generation of information deprivation, marketers are now faced with information overload. And so they lack the experience working with customer-level data to know the right questions to ask (or even the mere point of asking them).
To complicate matters, there are often competing measurements within a company. Should management worry more about product quality scores, service satisfaction ratings or brand equity strength? Yet asking the question "misses the point", according to the authors of a new book called "Improving Customer Satisfaction, Loyalty and Profit". The writers argue that, "These factors form a chain of cause and effect, building upon each other so they cannot be treated separately".
Stephen Shaw is vice-president of strategic services with The Kenna Group, a full-service customer relationship management company. He can be reached at 905-361-4046 or via email: firstname.lastname@example.org.