August 03 2007

Is CRM a worthwhile investment?

A special Internet Retailing exhibition zone and seminar area will be included in The Retail Business Show in London on 5 and 6 February 2008. Retail IT journalist Penelope Ody's is blogging in the run up to the event and her informative, provoking words will be reproduced on Internet Retailing.net. In the first of the series, Penelope asks whether CRM is truly a worthwhile investment for a sector where the offer and the audience are so broad.

Why do retailers have such a preoccupation with customer relationship management? Many have implemented expensive systems for which they still see little payback. Others wax lyrical about new technologies that can "close the loop" - feed back information about purchases and responses to special offers into the system to generate more focused marketing messages. But do we (and retail marketeers are included in that "we") as consumers really want that? "

Research - soon to be published - by Deloittes confirms that most shoppers shop where it is most convenient to do so. It's a finding which I remember Professor Merlin Stone (the doyen of CRM) highlighting a decade or more ago when he pointed out that retail loyalty had less to do with loyalty and rather more to do with planning laws. People shop at Tesco, not because they love Tesco but simply because Tesco snaffled up all the really good superstore sites so most people live within a few minutes drive time of one of their outlets. We shop at the stores we pass en route to work, school, the gym or wherever - not necessarily at stores we love. As Professor Stone put it - in one of those sound bites that you never really forget: "Do I want a relationship with my butcher, or do I just want to buy meat?" Most of us, I suspect, fall into the latter category.

The irrelevancy of much CRM theory was brought home to me the other day when I received a mailing from the local concert hall telling me that they were merging mailing lists with the local theatre's box office and would I give permission to transfer either my contact details or "my full booking history" to the new merged list. They plugged the "full booking" bit enthusiastically. This would, they said, enable them to send me only the information about the most relevant events that would really appeal to me.

But - like most of us - my tastes are wide ranging and variable. At the concert hall we've booked events ranging from Celtic storytelling to classical piano recitals. We've booked shows for friends and family, and the odd event which isn't really to our taste but where friends are performing and you have to be supportive. How can my booking history tell the new mailing list managers anything at all about what I really like?

It is just the same with shopping. We have vegans to stay for the weekend so it's a big hit on the ready made falafel and nut roast because my veggie repertoire is largely limited to cheese-based dishes. Or maybe I'm buying baby clothes and disposable nappies for a god-daughter with new offspring visiting from Australia - not for anyone closer. How on earth can these inputs provide meaningful insights into my behaviour?

Ask the CRM marketeers and they'll say such anomalous behaviour is ignored - but judging by the follow up mailings I'd disagree. How much of the junk mail onslaught - or, even worse those dreary spam e-newsletters and offers - are really relevant?

Harrods is certainly one that has found that a good customer database and accurate tracking pays off. They cut a promotional mailing from around 80,000 potential punters to 50,000, saved £12,000 in the process, and achieved a higher response rate, and all by analysing actual spend rather more precisely than the usual broad brush approach.

It took Harrods three years to get to that level of refinement. In the short term, how much better would be those systems which look at my shopping basket today and guggle up a nice relevant offer based on what I've just bought - regardless of whether they know my "purchasing history" or not. Lots of nibbles, cheese and French-bread - clearly a drinks do in the offing so how about an extra discount if I buy some of that special-offer wine conveniently placed next to the checkout?

And, if you must add in the history, as for that first time purchase of Calpol - well why not a money-off voucher for a picture frame as I just might have either a new arrival in the family or a rarely seen visitor? Give me an instant reward at the checkout and I may well think more kindly about a particular store. Bombard me with yet more trash for my recycling bin (collected fortnightly of course) and you're much more likely to go down in my estimation.