Written by Glynn Davis
With several tangible financial benefits on offer, Glynn Davis asks: is CRM about to come into its own?
Customer relationship management (CRM) solutions have been around for many years and during their time numerous retailers have been disappointed with the results of investing in the technology. The problem is that CRM is a moving target - just when it was starting to gain some traction in the retail sector along came the internet and the rules of the game changed. Digital communication is proliferating and retailers are developing multi-channel propositions.
Wayne Usie, head of retail at JDA, says: "It's become much more complicated
for CRM solutions, with more channels now in the retail sector. When you think about capturing customer trends, it is much more difficult to collect data and to then leverage it. Managing the customer journey is tough for retailers and CRM is going to have to evolve to meet this challenge."
CRM providers continue to play the catch-up game against a backdrop of changing customer behaviour that is being driven by the adoption of new technologies. One of the major impacts the internet and new digital technologies have had on this sector is in taking it from being almost backward looking to instead looking forward.
Whereas it traditionally took PoS data from existing customers and used
this historical perspective to try and determine their future buying patterns, the situation today is that retailers expect CRM systems to use the likes of emails and websites to influence the future behaviour of new shoppers.
"PoS data was the CRM driver but nowadays there is a new driver (in digital technology). PoS was only an indicator but now retailers can actually see what shoppers are doing online and how they respond to emails," says Usie.
This is undoubtedly a major advance but the downside for retailers is the extra complexity it brings. Anamaria Chiuzan, senior marketing manager at The Logic Group, suggests it is making it even harder for retailers to achieve that most crucial and basic aspect of any CRM system: the collection of relevant data on customers.
"The relationship with the customer is increasingly dynamic and retailers have
not really got to know who they are. There are challenges to capture the
data in order to build these relationships," suggests Chiuzan.
Adding to this challenge is the task of integrating the numerous systems (from various providers) that are likely to be in operation in the typical retail organisation. Chiuzan cites e-commerce platforms, PoS solutions and call centres as all having essential data flowing through them that needs to be fed into the CRM solution.
She believes loyalty programmes are a good way of collecting data and in many cases are doing what CRM systems should: targeting consumers based on where they shop, why they shop, and what they buy. And Chiuzan reckons the technology behind loyalty programmes is often better at integrating this data than many CRM solutions.
Allan Davies, chief marketing officer at Aldata, suggests loyalty is in effect a form of CRM and has been used very effectively by high volume retailers such as Tesco which utilises its massively successful Clubcard, operated by customer insight specialist Dunnhumby.
The beauty of such systems, according to Davies, is that they operate on the basis of creating marketing campaigns for large groups (or segments) of customers and not on a one-to-one basis. This is a lot more cost-effective, but is only really possible for high volume retailers where people shop regularly.
Areas of interest
Davies believes the interesting area for CRM is with high margin retailers such as electricals and jewellery sellers, where consumers are willing to give up more personal information as they recognise they will potentially enjoy a greater
return. With this data the retailer can then build much better targeted
With more digital tools like email, text messaging and websites the opportunity to do this relatively cheaply compared with traditional marketing and advertising techniques is proving highly attractive. The take-up of such media represents another change for CRM systems and has led to the emergence of specialists in digital CRM.
Felix Velarde, managing director at eCRM specialist Underwired, says digital marketing has the advantage of being possible to implement from initially having very little customer data: "It could be just name and email. We then try to interrogate and observe customer behaviour by sending emails and tracking how customers respond and behave online."
Velarde says another benefit of digital marketing is that it is easily auditable, which is proving increasingly important as retailers now demand to know the effectiveness of their marketing spend. This measurability of existing customers provides retailers with the capability to also predict how other customers would react to marketing campaigns. This is where CRM crosses over into an acquisition tool as well as being great for retention.
Despite the obvious benefits of using targeted digital campaigns, as part of a broad CRM solution, Velarde says many retailers still continue to rely on blanket emails. "A lot are still doing it. They just send an email each day with an offer,
but it needs to be much more targeted," he says.
He admits that the hard part for retailers is linking their digital activities to their stores base. The one area that he is experimenting with is the use of digital barcodes that can be electronically distributed and then physically scanned in-store.
What is also proving hard to handle for retailers, according to Aldata's Davies,
is the impact these marketing activities are having on the supply chain: "Managing the outgoing communications is one thing but measuring the response and handling the supply chain is another. It's tough."
With digital communications and promotions so cheap it is not surprising that increasing numbers of retailers are getting involved, but in most cases they have not tied it into their supply chain and logistics infrastructure. This leads to the serious problem of out-of-stocks when demand for promotions is high.
"In the old days you just put products on the shelves but now it needs to be more linked in to digital promotions that retailers are increasingly sending to their customers," says Davies.
To help address this problem he says there is a growing demand for replenishment software, but to be fully effective this has to be integrated into the supply chain and CRM solution.
It is clear that CRM still represents a big opportunity for retailers who want to truly develop their businesses around their customers, but what is also still true is that the advance of technology and the changing behaviour of customers
mean developing solutions continues to be a challenge.