Wharton Report on Customer Relationship Management

A new report from Wharton asks what makes some companies so much better at managing customer relationships than their competitors. It is based on a survey that Wharton marketing professor George Day sent to senior managers in 342 medium- to large-sized businesses from the manufacturing, transportation, public utilities, wholesale and retail trade, finance, insurance and real estate sectors. (Day also conducted in-depth interviews with managers at 14 companies within the 342-firm sample, including Dow Chemical, Verizon Information Systems, GE Aircraft Engines and Ford.)

The results suggest three distinct approaches to customer relationship management (CRM) are in use, each with dramatically different results.

The first approach, Day says, is the market-driven one, which makes CRM a core element of a strategy that focuses on delivering superior customer value through such elements as exceptional service and a willingness to cater to individual requirements.

The second approach identified by Day’s survey is based on inner-directed initiatives aimed at better organising internal data to cut service costs, helping sales staff close deals faster and better targeting marketing activities – tasks that are usually assigned to the information technology group and have little connection to competitive strategy.

Wharton's write up says that 'CRM technology is frequently a focus of this approach, and indeed, CRM software programs remain the fastest growing area in customer management. But Day contends that CRM technology has been oversold, noting recent studies suggesting that close to 20% of CRM initiatives "actually make things worse... Suppose you have a system (for handling customer service) that has grown up over many years and that everybody understands. If you migrate over to a sophisticated CRM system that is hard to install, contains numerous software glitches, relies on people who aren't properly trained for the program, and lacks the necessary data to operate, then the level of service is going to go down." According to Day, the odds of disappointment with the inner-directed approach are "high, because the primary motivation is to solve the company’s problems, not to offer better value to customers."'

The third approach Day identifies is based on defensive actions – such as redeeming points in a frequent-flyer or frequent-buyer loyalty programme – designed to deny an advantage to a competitor.

The conclusion to be drawn is that superior performance comes from integrating three components of an organisation's customer-relating capability: an orientation that gives employees wide latitude to satisfy customers, information about relationships, and configuration – the alignment of the organisation toward building customer relationships.

The report on the Wharton site contains interesting detail about how some of the 342 companies approach the task. Though tangential to research undertaken as part of UCD, it is worth a read if you are looking for a more sensible view of CRM than the dominant 'which package should we buy' approach still doing the rounds.

Associated Link: Wharton: Why Some Companies Succeed at CRM (and Many Fail)

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