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Harvard Business School professor Susan Fournier gave a recent presentation on the topic of putting the 'relationship' back into customer relation management. In a follow-up interview with HBS Working Knowledge's Manda Mahoney, Fournier explains how CRM has failed, and what can be done to make it more effective.
Mahoney: You say that an Information Technology (IT) mindset has hijacked customer relationship management—that the technology has become more important than the relationship with the customer. How did this happen?
Fournier: I think it's happened for a few reasons. The first reason is that by definition CRM is an information technology-enabled capability. It requires technology infrastructure to operate.
IT also became such a significant piece in terms of dollars and time. You have companies spending millions and millions of dollars, and spending a year-and-a-half to two years just building that infrastructure component…. IT ended up being the formative partner for quite a long time, to the tune of 80 million bucks.
| CRM systems are being defined in ways that are more natural for an IT mindset |
| — Susan Fournier |
Marketers appeared to have been watching from the sidelines. IT interface was not their everyday job. More importantly, they weren't exactly clear as to what they were going to be doing with all this capability. I think they felt that what they were going to be doing with the CRM system was somewhat contingent on what is built, as opposed to designing by objectives upfront. So marketers did not inject themselves into those early stages as much as they should have, and they dropped the ownership ball.
I think it was natural leadership of IT necessitated by the scale and scope of the project, combined with the marketing compatriot that wasn't as clearly informed as to why they were doing this in the first place, which created a slippery slope in terms of lost responsibility for the initiative.
Q: What are the implications of a "hijacked" CRM for company leaders? What could or should they do about it?
A: I think the natural consequence is that CRM is now hyper-identified with IT. As a result, the systems themselves are being defined in certain ways, and their capabilities are being thought of in ways that are more natural for an IT mindset, that might not be servicing the best or broadest needs of marketing managers.
This gets into the distinction between Information vs. Meaning. What IT is all about is information. What they are all about is simplifying all of the information to create bits of information that are manageable, and decomposing it down to find that out. Meaning is all about understanding the complexity and looking for big patterns. IT is just the opposite.
One of the implications is that we need to rectify the tension between building systems that are more aligned with information with what you really need to be doing—which is building systems that can help you manage the meanings in your customer relationships.
It has to be a partnership; marketers clearly need to work with it up front to design and build the infrastructure. I've worked with companies where they get these incredibly complex CRM system schematics on a piece of paper that cost $80 million to build. Then they ask the marketers what they want to do with them. It's such a late point to be asking that question. The partnership should be that marketers work much more up front to articulate what the goals and objectives are…appreciating context, appreciating details, as opposed to trying to whittle them away.
Q: How can companies measure the effectiveness of CRM?
A: This goes back to the bigger question of "what are the objectives of CRM?" I think there can be lots of them.
Depending on how those objectives are articulated you are going to have multiple effectiveness measurements. Firms have to sit down and say, "Why are we doing this?" To me, it's all about developing better relationships with your consumers. How do you measure relationships? How do you measure the strength of the relationship, and the depth, and the resiliency of the relationship, the form of the relationship? These are all things I think they have to figure out in order to decide what measurement systems they need in place, so they can gauge the impact fo the CRM effort on the bottom and top lines.
| I think marketers are really asking for a huge backlash coming down the road. |
| — Susan Fournier |
When they do that they can also be thinking about the fact that there is a relationship between the consumer and the firm, potentially between the consumer and the brand, and between consumer and consumer that CRM can be helping to enable. Like with respect to Harley Davidson, where they build a lot of their CRM to get riders in touch with other riders.
You have to measure the relationship outcomes on multiple levels as well. That's the kind of thing people need to be putting into place to measure effectiveness, not just things like cross-sell and increased share of wallet. I think this is where some of the biggest advancements can come in CRM, to really put the metrics in place, because I don't think anyone's really doing that. Specify them in the first place, and then figure out how to operationalize them.
Q: Do you have recommendations for how companies can get their CRM initiatives back on track?
A: Rethink why they are doing CRM in the first place. To really specify, in a very utilitarian way, what they are trying to accomplish by having CRM. This is going to help in the design and then in the operationalization that is going to lead to the measurement.
You hear that 70 percent of CRM initiatives are stalling. I think it's because of that gap. People don't know exactly what they are doing it for or how they can walk into that corner office and say, "Look it's working." They don't have that complete linkage there.
Q: What do you see as the future of technology in developing and maintaining customer relationships?
A: Technology changes every day, so it's hard to tell the future, or know what form new technologies will take.
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When I think about this, I think about capabilities we have now and how to maximize their utility. I see so much opportunity in hindsight. For example, take call centers. A lot of companies outsource their call centers, and don't take advantage of the data that is collected in that type of environment. I see information technology utility in harnessing the information from the consumer-firm context that we already have. Maybe that means making sure you capture my last fourteen calls to the phone company to fix some kind of mess they made.
It is a question of thinking more about capturing the interactions that are already taking place that by definition are building the relationship, and integrating them together so as be able to extract insight about how I need to be managed, as opposed to finding new opportunities for the technologies to create a new interaction that hasn't yet taken place. That's where I like to think of creating value.
Q: At some level, there is a connection between a company's approach to CRM and its attitude toward privacy policies. How should companies walk that line between gathering information to improve service, and invading a customer's privacy?
A: Very carefully. By definition, if you are going to state that a relationship is getting deeper over time, what you are getting at is that it is becoming more intimate. A deeper interconnectedness between the consumer and the firm is developing. So there is going to be increased information sharing, and increased interdependency.
As we do that, we increase the vulnerability of our consumers. What you end up doing in the business of building relationships is managing consumers' perceived feeling of vulnerability, and making then feel comfortable with the sense of intimacy. In that regard, I don't like the standard practice right now of opting out of a relationship with the firm. I know we all throw those mailings in the trash, these little handouts that say, "If you don't want us to be working with your data, or selling it to other people, check off this box and mail this back." I think the better approach is to recognize that relationships are voluntary unions. If you really want to have a relationship, people should stand up to be counted and say, "I want that." In that regard, opting in makes more sense to me.
I think that's a significant related issue. Clearly the marketers are taking the easy road here… I think that's really asking for a huge backlash coming down the road…. It just doesn't feel right to me.
Q: Do you predict a customer backlash?
A: It will probably take many forms. I think it is highly likely that people will target their energies toward the companies—they do get mad at the companies. I think some consumer groups will form to start lobbying, and create what will turn out to be huge nightmares for companies. Consumers definitely will hold it against firms once they truly grasp the collective costs and implications of their implicit "Yes, count me in if I can save a potential buck" acquiescences to CRM advances. To me, once they go to an advocacy group for help, it means, "I don't trust your firm." How can you repair a relationship after that?
Q: Along the same privacy theme, what do we as customers need to be aware of?
A: These mailings! I think you see the tip of an iceberg in terms of a consumer trend here. It has been isolated within what you might call the more extremist consumer-advocacy groups. I think it had reached enough of a crescendo that it is starting to turn into more of a mainstream phenomenon. People are starting to take notice. In Europe they are already in the next phase beyond us in all of this. It 's just a matter of time.
| I think some consumer groups will form to start lobbying, and create what turn out to be huge nightmares for companies. |
| — Susan Fournier |
As consumers you need to be aware of what the policies are, and realize that it's like healthcare. They are expecting us to take control. If you don't, it can really spiral. One firm sells your name to twenty other firms, and now you've got twenty firms to battle.
I think consumers are going to pick a small number of companies they want to have relationships with. I think that one thing customers could be doing now is thinking more judiciously about the resources they're giving about themselves in creating those relationships—way these opt-in things are phrased.
Q: What projects or research are you currently working on?
A: I'm starting a study with a professor at Dartmouth, Scott Neslin, and a professor at Columbia, Don Lehmann. We're doing a study that is a large-scale survey to try to catalog, in very quantifiable ways, the kinds of relationships that people form in their lives with firms. We're looking to create a typology of relationships.
You can see the utility for that. If we find there are eight types of relationships, companies can segment their consumers. What you should be doing as a relationship manager is managing each relationship according to its own contract rules.
I am also working on a study with Michael Solomon from the University of Alabama and Basil Englis at Berry College. We are working to create a system whereby you could understand and map out the meaning of a brand. I think CRM always comes back to meaning, so a system that could help people map out the web of meanings around their brands is a necessary first step. What personal and cultural meanings end up being attached to a brand? The whole idea about a relationship is that you can't have a relationship unless you are providing meanings that people need in order to live their lives. So understanding what that plate of offerings is can help you understand if someone is going to form a relationship with you.
Another study is with Jennifer Aaker from Stanford. We are trying to figure out how transgressions in a relationship affect the relationship over time. What we are looking at specifically is the role that brand personality plays. We learned that certain kinds of brands seem much more able than other brands to help consumers get over that. We found it's less about the category and more to do with the brand's personality. Just like people have personalities, brands have them too. What we learned is that those really color people's reactions.
Q: Any questions I haven't asked that I should have?
A: There is a crisis moment now, so the things we do immediately are going to be forever affecting where we can go from here. People tend to react like a pendulum. CRM has gone from being the hottest thing since sliced bread, to now where 70 percent of people are letting their projects fail. That's crazy, there's got to be some kind of happy middle.
I think that one of the big things is to rescope the problem and recognize that CRM is not the Holy Grail, but it is a better way to manage…. Let's not throw it all away. Ask why it's not working. Do you know how you are measuring it? Are your goals realistic? What did you think this would accomplish anyway? Did you do your background research? There are so many questions you could ask. I'd rather take pause here, rather than jump on the next fad bandwagon.