Why some Companies succeed at CRM (and many fail) (page 1 of 5)

BR>Put a different way, how are companies like Enterprise Rent-A-Car, Pioneer Hi-bred Seeds, Fidelity Investments, Lexus, Intuit, and Capital One able to stay more closely connected to customers than their rivals, in ways that significantly influence these companies' profitability?

It's a question that formed the basis of 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 of these surveys and interviews appear in Day's latest research paper entitled, "Winning the Competition for Customer Relationships", which will appear in the Sloan Management Review's spring issue. The paper, among other things, suggests three distinct approaches to customer relationship management (CRM), 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.

Day cites Fidelity Investments' decision to invest in understanding and segmenting its customers as an example. In 1997, he says, the company switched from a "product-centered orientation, which meant pushing only their own funds and treating all customers the same way," toward a relational orientation "based on tailored education and investment recommendations." This included such things as expanding their offerings to include non-Fidelity funds and presenting investment recommendations tailored to each investor's needs.

What made the strategy "come alive," says Day, was Fidelity's ability to "vary the value proposition in systematic ways within each of 17 customer segments," which in turn were based on four larger customer groupings. These included the high value segment (with large complex portfolios that needed "hand-holding"); core customers (interested in investing but not actively involved in it); active traders (interested in "top-notch execution" of their trades), and institutions and small businesses offering retirement plans for employees.

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

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 ...