CRM Won’t Kill Database Marketing

Two years ago, customer relationship management began to take hold in a big way in the American business community. But the idea that companies need to be responsive to customer needs is nothing new.

Those who have been in database marketing since its early days will remember that “service quality” was the hottest topic in the banking business in the mid-1980s. Just as suddenly as it became an issue, it died about a year later. It was an idea whose time had not yet come, primarily because it was impossible to deliver cost-efficiently in an era when most banking transactions took place face to face.

Three things make it different this time. First, the concept gained widespread visibility and legitimacy when Don Peppers and Martha Rogers, founders of the Peppers and Rogers Group, a management consulting firm, published their best-selling business book, “The One to One Future,” in 1993. They envisioned a world where all customers are treated according to their individual needs, even to the point of personalized product design.

Second, technology has reached a level of sophistication that enables the vision. Sophisticated systems that can manage the myriad and complex interactions between a company and millions of its customers are available and deployable today.

Third, the emergence of the Internet as a communications medium has provided the rapid response required to deliver the service. This is a critical component of the customer relationship management landscape – it is impossible to satisfy customer needs without real-time interaction. “Internet time” has become the standard that customers expect.

As a result of the explosion in CRM, we hear industry pundits loudly proclaiming the death of database marketing.

I don’t buy it, and here’s why: CRM is a reactive methodology in a world that almost always requires proactive marketing. Except for a few retailers and a handful of pure dot-coms, I have yet to encounter a company that can afford to wait for its customers to initiate a selling opportunity. Most marketers have to proactively generate interest in their products and services in order to survive.

That’s what database marketing does best. It’s a “push” methodology in which the marketer uses database marketing techniques to find the most appropriate segments of its customer file (those most likely to want and need the product or service) and push its selling message to those segments.

The CRM technologies now dominating the business press and marketing trade shows are capable of delivering a rich interactive experience to the customer, but these tools all presuppose that the customer has initiated the interaction. The customer “pulls” information from the company rather than having information pushed to him. Here are typical scenarios that CRM software vendors use to describe their offerings.

• A customer logs on to the company’s Web site and clicks on a link that requests information about a product or service. The CRM engine checks the request against the customer information in the company’s data warehouse to verify that the customer qualifies to use the service or purchase the product, perhaps at a specific price point, by virtue of his other relationships with the company. Based on complex business rules established in advance, the product description and price delivered to the customer while he is on the site may vary significantly from that delivered to other customers with different relationships with the company. From the customer’s point of view, the experience happens in real time (the communication among the Web site, the CRM engine and the data warehouse takes place in nanoseconds) and is entirely relevant. He might be told, for example, that because he already has product A, he’s getting a discount on product B.

• A customer calls the company’s customer service toll-free number to complain about a service problem. As soon as the customer service representative identifies the customer to the CRM engine, the customer’s purchase history is extracted from the company’s data warehouse, so the CSR automatically knows that the customer’s product is still under warranty. The CSR’s script is tailored to the situation, making the interaction quick and convenient for the customer. After the call is completed, a follow-up e-mail can be automatically triggered, and the CRM engine might even use e-mail to notify a field sales representative that the customer had a problem so a follow-up customer care call can be initiated.

This is sexy stuff, and it’s not surprising that such advanced technology is getting a great deal of attention. Clearly, it is empowering companies to deliver a better and more personalized experience to customers who interact with the firm through multiple touch points, and there is ample evidence to support the idea that such personalization can cause the customer to look more favorably on the company and to buy more.

Does that mean CRM technologies will supplant more traditional database marketing efforts? I don’t think so. Few companies can afford to wait for the customer to initiate a dialogue that can create a selling opportunity.

The solution is a combination of push and pull. Database marketing proactively generates interest, and CRM reactively takes maximum advantage of the customer’s response, turning it into a selling opportunity. The two marketing methods work in concert to extract the maximum revenue from the customer base. Database marketing is not dead. In a very real sense, it is now more important than ever because it is a vital part of the overall CRM initiative.

• Richard N. Tooker is senior vice president of database marketing/CRM at DMW Worldwide, Wayne, PA.

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