Page 378 -

336 Chapter 12 • Customer Relationship Management

The second evolution of CRM began with the improvement in techniques of data gathering
and analysis. Organizations could get a true picture of the economic value of a relationship with
the customer, and it was sometimes contrary to the amount of sales attributed to an individual
client. A holistic view of a client’s sales may reveal that the cost of marketing, selling, and
servicing the client negates much of the profit realized by a sale. Likewise, companies utilized
the analysis results to customize processes for greater efficiency and effectiveness. For instance,
many scaled back call centers, as consumers opted to attain information through Internet-based
inquiries, resulting in cost savings for the corporation. No longer just “customer focused,” CRM
allowed for individual, customer-based measures of goods and services that, in turn, corporations
used to customize customer experiences. Automatic, personalized marketing (e.g., rewards for
purchases and customized promotions) became possible. Initiating sales contact, where, when,
and how the client likes to receive contact, and, finally, adjusting the level of customer service
according to customer need and profitability. Management had access to the CRM knowledge
and used it to understand more fully the past and current business environment and to forecast
the direction of their businesses. CRMs were fully integrated with enterprise-wide data collec-
tion and analysis systems.
In the 1960s, Lane Furniture Company used a unique analytical CRM system to predict
2
future sales of furniture. Lane’s goal was to predict the overall level of sales of furniture in the
U.S. market six months in advance. Through “data mining” on many industries that it purchased
and obtained from publicly available sources, the company’s statisticians (the data miners of their
day) figured out that the strongest predictor of furniture sales six months in the future was the
current month’s national, regional, and local new car sales figures. The relationship was a negative
one (i.e., the lower the car sales were for the current month, the higher furniture sales would be in
six months). Armed with this analysis, Lane consistently made the right decisions on their furniture
inventory and when to advertise to a receptive market. Lane used data from their CRM system,
broadly defined as a predictive tool that gave it an “insight advantage” over their competitors.
CRMs have also triggered consumer advocates due to the fine line crossed by these
systems on individual privacy. Profiling customers often involves data collection and close
observation that create a feeling of “Big Brother is watching.” Recent Internet technologies
have become very intrusive in collecting data without consumer knowledge. CRMs indirectly
encourage this behavior of collecting and tracking customers as they navigate through various
software and Web sites. On one hand, tracking and profiling are the key tools for effective CRM;
on the other, they create various negative feelings on the company image and brand in the mind
of customers. A good CRM strategy should therefore incorporate the privacy and ethical princi-
ples discussed in Chapter 10.

CRM Today
CRM software is continuously evolving. Globalization and ubiquitous connectivity are forcing
companies to reevaluate how to deliver value to customers. Globalization has leveled the playing
field for large and small companies to deliver similar products at low cost with an abundance of
options for customers. A Web-surfing customer today has much more bargaining power with the
help of the Internet and can change a vendor any time with a click of a button. To be successful in
this competitive environment, companies have to deliver both quality products and unique and

2 Stanton, A., and Rubenstein, H. (2005). The Discipline of CRM. www.CRMGuru.com (accessed December 15, 2006).