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Customer Relationship Management (CRM)

Issues regarding communication and CRM: social issue, consumer privacy

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Field concerns and data collection: customer data integration
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Future of CRM: future, customer relationship marketing, McKinsey study

An emerging social issue that has potentially devastating consequences for CRM is that of consumer
privacy. The success of CRM is directly associated with an organization's ability to capture consumer
information and use that information to satisfy consumer needs. As organizations increase the capture
and leverage of consumer data in their marketing efforts, consumers' concerns of privacy invasion
have precipitated regulatory pressure. There are several laws in place which control how and where
certain consumer data can be used in the financial services and health care industries. Information on
children and marketing efforts directed toward children, have been regulated in the U.S. for some
time. For example, children "age" data may be kept only in the form of age ranges, such as 0-2 years,
2-4 years up to the age of 13.

In response to potential regulation, proactive organizations have attempted to police their respective
industries. Formal privacy advocates have been appointed within some organizations including the
creation of an executive Chief Privacy Officer. Such appointments help ensure that privacy concerns
are communicated throughout the organization, that an appropriate organizational privacy-sensitive
culture is in place and that the organization is adhering to their privacy policies as well as those of
their respective industry. "Privacy" conferences are beginning to grow in popularity as organizations
struggle to keep up with current legislation and industry "best practices".

Some Privacy Groups and Seals of good practice in the U.S. are:

  • TRUSTe
  • BBBOnLine (Better Business Bureau Online)
  • CAUCE (Coalition Against Unsolicited Email)
  • Bright Mail (Bright Light Technologies)
  • DMA (Direct Marketing Association)
  • AIM (Association of Interactive Media)
  • IAB (Internet Advertising Bureau)
  • CADM (Chicago Association for Direct Marketing

Methods such as Permission Marketing, Opt-in and Opt-out procedures and ethical business practice
enable an organization to adhere to legal and generally accepted privacy practice policies. Organizations
are starting to ask the consumer's permission to open a communication pathway. This path is a
means by which the organization attempts to understand and fulfill consumers' needs. Organizations
are finding this to be a competitive advantage, as consumers have less time for messages. An organization's
willingness to ask for permission to send messages is an indication of interest.

When an individual decides to grant permission to an organization, they are "opting-in". This means
they may be willing to let the organization market to them, use their data to learn more about them in
order to create more attractive marketing offers, or actually sell their data to someone else for similar
efforts. If they decide that they do not want to participate in any combination of the above, they will
"opt-out" of the respective option.

Opt-in or opt-out options can generate many permutations with respect to what can or cannot be done
based upon the individual's decision. Managing these options is difficult and is further exacerbated
when there are multiple touch points within an organization. The challenge increases when, other
members of the value-chain such as an agency, for example, are involved in the marketing effort.

Let's focus on a person who chooses to "opt-out" of a request from a certain area of an organization,
or a value chain member. If there is another marketing attempt being made to that same person from
another area of the same organization or a different value chain member who is not aware of the "optout"
but is using the same data, they have violated what the consumer saw as an agreement with the
organization. Similar problems occur when a person decides to "opt-out" via the Web. If the organization's
outbound telemarketing person is not aware of the "opt-out" and calls that individual, they have
negated the "opt-out" and are in breach of the agreement.

Another concern involves just what "opting-in" really means. When a person "opts-in", did they really
choose to "opt-in" or did they not understand the basis of their agreement? By using a "double opt-in"
method, the organization comes back to the individual to verify that they want to, in fact, "opt-in". If
the consumer responds with a "yes" a second time, the organization has reduced their risk of any misunderstanding.
Organizations will sometimes resist using this type of method at times, as they feel
they are making the individual too aware of what is happening and that they may change their mind.
Another problem can occur when a person "opts-in", time passes on and they then elect to "opt-out".
The organization must then suppress all future efforts made and in some cases may be asked to delete
all data captured to date. The latter is sometimes referred to as a "double-opt-out" and is very difficult
to process.

Management of "opt-in" and "opt-out" procedures are further complicated by timing. When a person
chooses an option, all other potential activity from an organization or value-chain member must be
coordinated with the decision before the next effort. Failure to know violates the agreement, lowers
the level of trust and may lead to a liable position. The latter possibility has started to spur some consumer
activity. Some individuals have taken advantage of an organization's inability to coordinate
multiple touch-points, have opted-out in one area and done every thing possible to subtly coerce the
organization in another area to solicit them for an offering. They then raise the privacy issue, along
with evidence of their "opt-out," and sue. Several individuals have won lawsuits through this effort.
While keeping the previous cautions in mind, an organization must not be timid in their approach to
CRM. They should ensure that they have integrated all consumer touch points to capture and report
activity in a timely fashion:

  • Their database strategy must archive relevant information and be secure,
  • They must keep abreast of privacy regulation for all relevant markets, and
  • They must ensure executive ownership of privacy.

The purpose of CRM is to better direct company communication to customers in the B2B and B2C
channels. CRM has also been referred to as continuous relationship marketing or the ability to improve
relationships through continuous refinement of customer and consumer contact. This marketing approach
to customers is not new. direct marketing , and direct mail in particular, have long practiced the
continuous refinement of product offerings to customers. Direct marketing has always relied on segmentation,
targeting, differentiated marketing and careful evaluation. What is new with respect to
CRM is the scope of customer contact, the information available and the depth of customer knowledge
utilized. New printing technology makes possible more appropriate products; e.g., PARENT magazine
selectively binds magazines based on the ages of children in the home. Fingerhut develops catalogs
based on past purchases. Data mining allows Nordstrom to have their representatives' call when appropriative
clothing lines arrive. Customers today are being cultivated to produce more profit and volume;
however, there are risks associated with this level of communication.

Within the CRM approach, as much as 74% of enterprise-customer interactions are phone calls,
while16% are e-mail messages. A sophisticated database is required to support this constant interaction
with customers. Further, systems must be in place to constantly enrich the database on a real-time
basis. In fact, consistent customization of communication is the key to successful CRM. Inconsistency
causes customer frustration, longer calls, higher customer service cost, customer service representative
frustration and a loss of cross selling opportunities. The net result of poor communication is customer
dissatisfaction and a loss of brand equity. When we consider that 20 % of customers comprise 80% of
an organization's total volume, this becomes all the more critical.

What constitutes effective CRM communication? Effective communication is founded on the ability to
engage customers in a dialog that results in greater satisfaction with the brand. Campaign management
is the process of developing, delivering and then measuring results of marketing efforts within a
CRM environment. Campaign management is focused on the successful achievement of customer
satisfaction, sales, profit and marketing cycle time objectives. Marketing cycle times refer to the time
it takes to field and evaluate a CRM program.

Formal customer communication programs typically contain variably valued and targeted customer
offers. Objectives for such programs include:

  • Customer retention,
  • Increase in purchase quantity, and
  • Increased buying rate .

The keys to successful CRM communication are to:

  • Develop communication with customers in mind,
  • Develop simple not complex communications, and
  • Make data collection transparent to users.
  • Provide the customer with value in addition to the offer carried within the communication.

CRM communication can enhance brand value through providing customers with information they
require, provide offers that add value to purchasing the brand and transparently facilitate the acquisition
of information to improve future CRM efforts.

  1. History and theory: customer relationship management
  2. Field concerns and data collection: customer data integration
  3. Issues regarding communication and CRM: social issue, consumer privacy
  4. Future of CRM: future, customer relationship marketing, McKinsey study