CRM 2.0: a Loyalty Marketing Benefit of Web 2.0?
Here are several excerpts from a very interesting article: CRM 2.0: a loyalty marketing benefit of Web 2.0? (free registration required):
The concept of customer-centricity is evolving, and changes in the business and social world are already forcing businesses to change the way they approach management and marketing strategies, says Vladimir Dimitroff of UK-based Prism Consulting, who suggests that perhaps the advent of 'Web 2.0' technologies should naturally lead to the reinvention of CRM systems: 'CRM 2.0', in fact.For much more detail, check out the complete source article.
What began as awareness of age-old business principles, brought to modern-day marketing with critical help from technology, has now reached a stage where the technology-empowered, connected world is calling for new approaches in marketing and most other management disciplines.
The story so far:
The notion of customer focus dates from ancient times when the small businessman, unknowingly, practiced CRM in a most natural manner. In modern days, concepts like relationship marketing emerged in the early 80s but it was only in the mid-90s when technology propelled these practices into the mainstream and CRM became a recognised (and, for a while, much hyped) business discipline.
Since then, CRM has evolved considerably, if gradually. The software industry rapidly embraced it and made CRM a class of technology solutions, misleading many to believe that "CRM can be bought and installed".
Changes for the Customer:
'Customer' in CRM 1.0 meant it was critical to recognise the importance of customers for any business, and the fact that they are individuals, not a grey anonymous mass with 'typical' preferences (statistical averages) and 'common denominator' needs. The fundamental differences between 'the market' and the customers who inhabit it are yet to be understood by many business managers, including marketers and even academics. But today seeing them as individuals is not enough - they are intricately interconnected with each other, and with the business.
Changes for the Relationship:
It was originally important to recognise that relationships are two-way. In the pre-CRM model of 'broadcast' relationships (one-to-many) it was often said that the customer has a relationship with the brand. But that was not enough. CRM 1.0 did much to change this, not least with sales-oriented database technology. Today we recognise that not only our business has relationships with each customer, but they also are related to each other in multiple and complex ways.
Loyalty was (and remains) the ultimate mantra of customer-centric business. Almost separate from CRM, there is an entire 'loyalty industry', not to mention scholars and entire academic schools devoted to it. They keep proving that loyal customers are more profitable, while retention protects a market share that should translate into shareholder value. But in today's world of choices hardly any business can command the total devotion and unconditional loyalty of each customer.
Split loyalties:
There is a new breed of promiscuity, or 'split loyalty' whereby most customers persistently satisfy parts of their needs from 2 or more alternative suppliers.
Changes for the Management:
For the management of customers, CRM 1.0 dictated that they should be individually identified, their differences understood, and each one (or group of similar customers) treated differently from other customers or groups. This brought the discipline of customer segmentation - one cannot overstate the importance of understanding how this is different from market segmentation. Whereas in segmenting markets we distinguish between groups but are not aware of individual members, in customer segmentation each individual customer is known to belong to a particular segment - and, furthermore, is known to exhibit a set of attributes (with a very individual accuracy, usually a score) that qualifies him as belonging to a segment.
Good CRM dictates that this differentiated view is used not only for marketing and service levels, but in every end-to-end customer process, in planning and managing the operations and financial returns of the company. CRM 2.0 recognises the complexity and dynamism of customer attributes (even the same customer A may exhibit a different 'score' when interacting with his related customer B from the one displayed with related customer C). The streamlined dimensions of strategic segmentation (usually a value/needs matrix) become a multidimensional maze that, to make things even more complicated, pulsates in all directions as dimensions change with each interaction. To operate successfully in a networked environment, companies are learning and adopting micro-segmentation - and linking it to dynamic decisioning in their systems. The discipline of social network analysis (SNA) is also evolving and some amazing progress is happening as we speak, as always helped by technology.
With CRM 2.0 every stakeholder has become an intermediary - to continue the trend of coining 'clever' wording, I might call it poly-intermediation or multi-intermediation. In a viral or WoM (word-of-mouth) campaign a company has as many intermediaries as it has been able to reach through those all-important connected influencers.
Web 2.0 dies without CRM 2.0...
Dimitroff believes that the much-hyped Web 2.0 is the enabling platform but that it cannot be a successful model in itself unless it also embraces CRM 2.0 principles. Understanding this will make all the difference in the imminent shrinking of the 'Web 2.0 industry' at the tail of the hype cycle (perhaps not a dot-com-like implosion, but some correction is definitely to be expected soon).
In a press release about a recent acquisition of a UGC web site, a marketing executive declared "We enter the social networks arena because it's a powerful way to get our message across". But communities don't really want powerful messages. Instead, marketers should be inside the networks to listen, not to shout... and, just occasionally, to whisper in the right ears.
Dimitroff's advice to would-be CRM 2.0 practitioners is to keep building the remaining parts of CRM 1.0. But while they build, there's nothing to stop them from adopting low-cost (and low-risk) CRM 2.0 methods and techniques.