Will CRM Put You Out of Business?
Customers want to get from point A to point B as quickly, easily, and effectively as possible.
For the rest of the January 2005 issue of CRM magazine please click here
Remember how the airlines used to operate? Rewind to the 1970s: The air traveler was treated like a king (or queen), with lots of legroom, spacious facilities, and well-stocked pantries. Although the travelers paid a high price, there was no other method to arrive at their destination within the time frames the airlines then provided.
But more often than not, what the airlines were really offering their customers was high complexity. All a customer really wanted was to fly from point A to point B as safely, easily, and comfortably as possible. Customers may have seemed willing to pay the high prices in return for the perks, but only because they had no other choice. The industry turned upside down a decade or so later, with the advent of low-cost, more flexible, and notably perk-free alternatives like People's Express and Southwest. What happened? Many customers quickly embraced the newcomers that offered simplicity and low prices, even with the lack of certain amenities to which they had become accustomed. And the industry swung from high cost, high profit (good for the seller) to low cost, low profit (good for the customer). While overall industry profitability suffered immensely, demand accelerated tremendously as air travel became available to customers who had never been able to afford it--and many new-breed providers thrived by servicing these customers. There are two relevant ideas that can be taken from this brief history lesson. First, the airline industry provides us with a case study in how to misapply technology to customers. In the airline industry the first incarnations of CRM are often referred to as yield (or revenue) maximization applications. During the time when customers had no choice, these applications resulted in gloriously high profits for the airlines. But those "CRM" efforts were most definitely not aimed at enhancing customer relationships; rather, they were an attempt to extract every last dollar from customers who didn't have a choice. This is not to say those applications didn't provide value. American Airlines even created a separate business (called Sabre), which became quite valuable financially and was eventually spun off. These applications initially provided value to the airlines, but eventually customers turned them around to their own advantage. Those of us who comparison shop for travel online know how price discrimination is now something that we the buyer--not the airlines (the seller)--vigorously practice. In other words, the airlines' own tools have been turned against them. In one of the great case studies in unintended consequences, the application that had been Sabre and was deployed to the airlines' advantage is now known as Travelocity, and is commonly used for the customers' advantage. The second idea is also a warning--read through this article again, swapping the names of selected CRM vendors with those of the airlines. Whether it's air travel or CRM software, what customers want is to get from point A to point B--to achieve their business goals--as quickly, easily, and effectively as possible. When customers don't have an alternative they'll put up with a lot, and pay a high price. But when alternatives emerge that situation rapidly changes. What happened to the airlines in the 1970s is happening to the CRM industry today. The survivors will be those focused on delivering the most value to their customers. Those who don't will become tomorrow's Easterns and Braniffs. Change is clearly upon the CRM industry, and a historical perspective can provide the best guide to what's happening, why it's happening, and what to do about it. Chris Selland is vice president of sell-side research at Aberdeen Group. Contact him at chris.selland@aberdeen.com
Page 1
To contact the editors, please email editor@destinationCRM.com
Every month, CRM magazine covers the customer relationship management industry and beyond. To subscribe, please visit http://www.destinationCRM.com/subscribe/.
Popular Articles

Home | Get CRM Magazine | CRM eWeekly | CRM Topic Centers | CRM Industry Solutions | CRM News | Viewpoints | Web Events | Events Calendar
DestinationCRM.com RSS Feeds RSS Feeds | About destinationCRM | Advertise | Getting Covered | Report Problems | Contact Us