• Technology
  • The Economist

Always-On People

A big part of running a real-time enterprise will be managing relationships.

As the examples suggest, banks and other financial firms have again been the early adopters. But other industries are catching up fast, including some that may not look like obvious candidates, such as casinos. In fact, Harrah’s Entertainment, the world’s second-largest gambling company, was a CRM pioneer. As early as 1997, it started capturing data about members of its Harrah’s Total Gold programme, including their gambling behaviour.

This huge amount of information now allows Harrah’s Entertainment to predict how profitable a customer might be, even after only a few casino visits. The data are also an excellent basis for launching fine-grained marketing campaigns. For example, to counter the sharp drop in occupancy rates at its main Las Vegas hotel after the terrorist attacks on September 11th, the company sent out thousands of finely targeted e-mails to potential customers. As a result, its rooms quickly filled up again.

CRM systems also proved their worth to other firms in the wake of September 11th. They allowed Hewlett-Packard, a computer maker, quickly to compile a list of all its customers in the World Trade Centre, complete with the PCs, servers and printers they had bought, and match this information to the closest HP supplier with the equipment in stock. This gave HP a head start once Wall Street firms started ordering replacements.

Harrah’s, HP and others rely mainly on a technique called data mining—trying to find patterns in consumer behaviour by using clever software to sift through huge piles of historical data. But some CRM firms such as E.piphany now offer tools that analyse the data in real time. Customer-service representatives at Bell Mobility, the wireless unit of Bell Canada, can make instant offers based on a customer’s calling patterns, his age and the way similar customers have reacted to such offers.

On the minus side, CRM can cost a firm millions of dollars, and it is no panacea. Indeed, it is going through the same cycle of hype and anti-hype as ERP has done, only much faster. Only last year the trade press and market-research firms were celebrating this class of software as a godsend. Now the general mood is much more sceptical. One sobering study recently published by Gartner suggested that customers considered more than half of all CRM implementations a failure.

Such gloom may well be as overblown as the promises made by many vendors. But it is clear that CRM is at least as difficult to implement as ERP. And as with ERP, the biggest challenges are not technical, but organisational and political. Senior managers buy these expensive software packages without consulting their troops, who then refuse to use the system. And the marketing, sales and customer-support departments, which usually see themselves as enemies, often fight over the integration of their respective IT systems.

What is more, CRM is a process as well as a product. Firms must learn how to use the complex software. One clear danger is that they may alienate customers, who will welcome better service but may be more doubtful about uses of the technology such as finely segmenting the market or targeting customers individually. Amazon, a leading online retailer, has a cautionary tale to tell: in September 2000, after angry protests, it pulled a test in which it had charged different customers different prices for the same DVDs.

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