Many marketing academics, however, hold a more sceptical opinion than the consultants who design and implement CRM programs. They are also questioning the effects of customer loyalty programs on company profitability. In this article, I will explain why.

CUSTOMER RELATIONSHIP MANAGEMENT

CRM had its origins in two unrelated places. One was driven by technology – most often developed in the US. 2 Here, customer databases have been developed and mined to provide insight into different purchase habits, responses to promotions, and the lifetime value of various types of customers. Under the direction of marketers, information technology and statistical algorithms are used to increase the efficiency and effectiveness of selling what the company makes. CRM systems such as call centres, customer service and support teams and loyalty programs manage the relationship with customers.

Technology-driven CRM has claimed significant improvements – especially by direct marketing firms. It has also experienced some problems, such as the high turnover rates of staff in call centres and the inevitable cost blowouts associated with

implementing new technology. The type of relationship, if any, that develops from this style of CRM is often quite one-sided. It starts with the seller targeting the customer, gathering information about them and then attempting to seduce them. 3

The second place CRM developed was in B2B marketing in Scandinavia and Northern Europe. The IMP( Industrial Marketing and Purchasing) Group has been instrumental in developing our understanding about the nature and effects of building long-term, trust-based relationships with customers. These are

typically managed by marketing and sales. They may be based as much on the structural ties between companies as they are on personal relationships among managers. Here, the emphasis is on understanding customer needs and then on solving problems or delivering benefits that create customer value.

While technology is important in this style of CRM, it is designed to support, rather than drive, the customer relationship. The types of relationship that develop here are often deep and meaningful – both for the companies and the people involved.

RELATIONSHIPS Very few practising marketers are prepared to stand up and say publicly that they don’ t want a relationship with their customers. On the other hand, many customers say that they don’ t want a relationship with most of the products and services( and thus the companies) that they buy. Test yourself. Do you want to have a relationship with the oil company that produces your petrol? Or your favourite television station? Or the company that makes your garden hose? Most people don’ t have the time, interest or the emotional energy to form relationships with the company that provides the products and services they buy.

Relationships are special. They involve two-way trust, commitment, the sharing of information, partnership, and so on. This is the model of a relationship that most people carry around in their head and their heart. Many people would like to have a relationship with the organisation they work for – but not with the lowinvolvement products and services that they buy. The problem with trying to form a relationship with your customers is that it does not correspond to the commercial reality of trying to make a profit by selling products and services to them.

Hence, commonsense indicates that relationship marketing will only be relevant for some companies and some types of customers. If you are Harley-Davidson selling big motor cruisers and the feeling of being free and somewhat rebellious, then forming a relationship with your customers makes sense. Here, much of what is being bought is social and psychological in nature. The motorbike is really a ticket to entry. Harley-Davidson creates much of the product with corporate imagery. They manage the customer

ILLUSTRATION: CAROLYN ARTHUR