July 20, 2004

How Intimate a CRM Relationship Do Your Customers Really Want?

By Evan Schuman, eWEEK

To persuade customers to give up data, some retailers are considering using blind-taste-test third parties.

At the very heart of any robust retail CRM system are the benefits consumers—and retailers—receive when the retailer knows as much about a customer as possible. But what happens when the customer doesn't want such an intimate relationship?

Not unlike romantic relationships, professional ones need to be based on either trust or a more calculated, Templeton-like "What's in it for me?" Trust is often a balancing act, weighing "How much am I risking?" with "Do I have any reason yet to think this person/retailer will hurt me or be reckless with what I offer?"

The best example a retailer striking a good balance is Amazon.com. Amazon gives consumers plenty of "What's in it for me?" answers, identifying books they will like but have never heard of, saving them from typing in credit-card data and memorizing the addresses of themselves and of frequent gift recipients. They have also done an excellent job of minimizing security glitches getting into the headlines. Auction powerhouse eBay is another good example, with the keys to a million garage sales given only to those who share a chunk of personal data.

Is it a coincidence that neither of these retailers have physical storefronts? Flipping the question around, why is it that so many land-based (as opposed to LAN-based) retailers pay for CRM, and yet so few truly use its "reach out and upsell someone" capabilities?

Michael Richardson, chief technology officer at Smart System Technologies, is hoping he might have the answer. Richardson argues that retailers today are generally not offering especially attractive reasons for customers to cough up their personal data.

I think Richardson may have a point and, if so, it's a deliciously ironic point. When the Web was in its infancy a decade ago, who would have guessed that consumers would trust some faceless—but well-branded—Web site more than the huge retailer down the street, which has been there for 20 years and which also employs friends of the consumer?

Richardson's company hawks a service called PowerPay. It's a loyalty program that allows consumers to be aggregated and to receive numerous loyalty-program-like benefits, but the twist is that it's from multiple retailers and—most crucially—the retailers are never given the identifiable info about those consumers. This is intended to address consumer fears of being hassled by retail sales reps, which is perhaps overkill as so few brick-and-mortar retailers ever bother. To the consumer's mind, though, this is a poetic trade-off: aggregation to avoid aggravation.

"We are trying to do for the traditional brick-and-mortar what [Amazon and eBay] do with their browsers and cookies," he said.

Smart System started with sports arenas, where game attendees can buy an overpriced hot dog and a warm beer and get points that can be used at movie theaters or grocery stores. By making the transactions anonymous to the retailer, it addresses consumer hesitation.

More importantly, though, it delivers a strong multimerchant opportunity for the consumer, which in turn delivers a much more rich set of CRM-captured information for the retailer. If the retailer isn't going to use the actual name and phone number of the customer, why alienate some consumers by asking for it?

"Being able to know and recognize your consumer by profile, for example, gives you a much better opportunity as a marketer," Richardson said. "If you can segment and appeal to those segments, you can make more meaningful and powerful offers."

On a practical level, PowerPay is somewhat interesting as a way of sidestepping consumer privacy fears, but it has a much more practical—and cynical—value. Like many other outsourced CRM approaches, it is delivering the kind of cross-marketing and true CRM customer-specific marketing that many brick-and-mortar retailers should be doing, but aren't.

Think of it as a retailer's professional workout program. Sure, the argument goes, people could exercise on their own for a lot less money. That may be true, but if they're on their own, how many actually will?