Smart cookies: Capturing customers - The battle for customers is on. In the next big software war the front office, CRM and the customer database are the heavy artillery

Smart cookies: Capturing customers - The battle for customers is on. In the next big software war the front office, CRM and the customer database are the heavy artillery - I'm going to need some jargon-busting. How about 'front office' for starters?

Last Updated: 31 Aug 2010

I'm going to need some jargon-busting. How about 'front office' for starters?

Front office means customer interaction and transactions - as opposed to back office, the behind-the-scenes production, logistics and administration.

It's a retail metaphor from the old economy: front-office bank tellers and shop assistants, versus back-office cheque processing and stock re-ordering. The metaphor extends to customer interaction via mail, phone or in-person sales and service. In the new economy, front office can mean customers browsing on the web, and e-businesses talking to them by e-mail and chat.

And 'CRM' and 'the customer database'?

CRM is very hot right now.

It stands for 'customer relationship management' - software that lets you automate the front office and make it more efficient, just like supply chain management in the automated purchasing and logistics of the 1980s.

To do CRM, you need a customer database, with details on who your customers are, when and what they've bought, when and why they've contacted you with problems, how they've responded to ads and promotions, and so on.

Ideally, you'd have this data on prospects as well as customers, and on their behaviour with competitors as well as with you.

Why is CRM so hot?

Three reasons: assets, competitive opportunity and the internet.

Your customer base and customer relationships are your company's most valuable assets. They are expensive and time-consuming to build. Customers fundamentally don't like to switch, unless given compelling reasons to do so. The easiest way to maintain and grow sales is to (1) keep your current customers and (2) sell something else to them. That's why mobile phone operators, AOL and BSkyB spend so much on customer acquisition, and why analysts focus on 'lifetime customer value'. And it's why McKinsey and Goldman Sachs partners have long lines of credit at the Savoy Grill.

That's the asset reason.

How about competitive opportunity?

Most businesses do a poor job of tracking and exploiting those customer assets and relationships, so there's a huge competitive opportunity if you do it well.

HSBC's First Direct spends millions on advertising, but in five years has never called me up to figure out how to increase its (20%) share of my personal banking and investment business and is unaware of my relationships with other bits of the bank. I get sales pitches from Cable & Wireless every other month, even though I became a subscriber a year ago, and when I talk to them they have no record of earlier conversations. When I was a partner in a big international consulting firm, I could be making a sales call on GE in the UK and have no clue that someone else from our firm had just sold them a dollars 3 million job in the US.

And how is the internet affecting CRM?

With the internet and e-commerce, a much greater proportion of customer interaction is captured and delivered digitally.

Take Amazon. You browse its web site, then order books and CDs using the web form pages, filling in personal and credit card details. Amazon's systems capture all this data. Then the company uses it to push recommendations at you based on your buying history, it sends you automatic e-mails on the status of an order, and it can mass-market its entire customer base in one second to launch a new service like auctions. If you're browsing travel books on Jamaica, it can flash up a recommendation for a Bob Marley CD, with one-click ordering. Amazon has a complete record of your e-mails and its own responses. It collects data on which promotions work and which don't. And all this data encapsulates 90% of its customer interactions.

Sounds like a sales-and-marketing type's wet dream.

In the past, bricks-and-mortar businesses (like Tesco or Barclays) would have died for this data, and for this instant automation of the front office. They knew bits and pieces about some customers, but not much.

They couldn't have Belgian chocolates popping up at the check-out just for you.

Now, even if you aren't a pure e-commerce play like Amazon, e-stuff is transforming the front office, the customer database, and the opportunity for CRM.

So, what about the new software war?

Who's going to be the Microsoft, or the SAP, of the front office? Will they be the first trillion-dollar market cap? Watch this space next month.

Andrew Wileman is a strategy and organisation consultant; e-mail:

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