Tuesday, 13 March, 2007

Difference between loyalty and CRM

CRM, Loyalty, Database marketing, so on and so forth are most confusing to me. For one you have proponents of CRM saying it's beyond Loyalty; and the ones still 'left behind' in Loyalty explaining why it's so much more than Database Marketing.

After reading a few books though you start making simple classifications. If it puts you to sleep after the first two paragraphs, it's CRM; if it's full of morality tales, it's Loyalty; and if has interesting tables and graphs then it must be Database Marketing.

That gets the frustration out of the way. I suppose a useful way to look at CRM and Loyalty is as cause and effect, respectively.

CRM, to my mind, and the customers' perspective, is the things you do to make life better for your good customers, and difficult for your worse customers. (The latter is hardly ever spoken of or written about. It certainly merits more attention. All initial gains are likely to come from getting rid of bad apples.) That includes, of course, database marketing (the right offer to the right prospect) but may, indeed must, include facilities extended, exceptions made, discounts offered, SLAs (service level agreements), and so on.

It's common for database marketing companies and experts to extend themselves into advising and implementing CRM. I don’t understand why. The first demands a certain ruthlessness and devotion to numbers that may be counterproductive in CRM.

Second, CRM looks at, as I just said, a far bigger picture – at many more things – at the sum of the customers' interactions (an MBA word I hate with a vengeance) that constitute their 'relationships' (another MBA word that elevates buying coffee to keeping a mistress) with their companies.

Database marketing looks deep at what works and what doesn't in getting the cash register ringing. It needn't do more, though inputs and insights from the CRM's customer information are certainly welcome (97% of the customers who complained to sweet Mona responded to an offer within a month of doing so; while only 79% of those who complained to rude Tona did so).

Loyalty is the effect, the result, of CRM. And it is a misnomer.

Loyalty is the sum of what the customer does for the company (just as CRM is the sum of what the company does for the customer). It doesn’t stop at not buying from competitors (being loyal). It also includes other good behaviour, like not bargaining, paying your bills on time, recommending you to others, buying from more and more divisions of your company, and the rest.

Why do we do all three on our visiting card? Beats me. Probably I'm wrong, and they are indeed different things, instead of being parts of a whole. Or we don't want to take chances.

For example, when a person asks, “Do you do loyalty programmes?” He may mean (a) “Do you have the cards and computers which I desperately need to launch a programme by next quarter and tell my boss, 'Yes, we're doing customer delight too'?” (The loyalty solutions guy)

Or he may mean (b) “Can you become my database marketing consultant, so that we get some discipline in our marketing, and some numbers to aid our thinking, instead of being entirely dependent on gut feel?” (The database marketing guy)

Or he could mean (c) “I want to know exactly what my customers are doing: do their choices follow a pattern, what sort of facilities do they use, do their complains follow patterns (Group A complains amour xyz, but never about abc...). And the data you generate through the programme will help me do all that.” (The CRM guy)

Or he may mean anything in between these.Why take chances?

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