VideoMany pets already wear implantable biochips so they can be tracked. Will people be next? A search on the Internet yields a worrying several hundred finds, but a closer look reveals that most of these are websites maintained by overly sensitive souls who are bothered that the biblical "mark of the beast" might soon become reality. Others fret that a national ID card in America might one day be replaced by implanted ID chips.
It is unlikely that these kinds of tracking devices will soon become part of the real-time economy. But this does not mean that information about people will not play an important role. On the contrary: such data will be central to improving business relationships, be they with customers, partners or employees. In fact, "relationship management" software, in particular for customers (CRM for short), is among the few segments of the software industry that are still growing strongly. Siebel Systems, the market leader in this field, is weathering the economic storm better than most IT firms.
Relationship management is something of a fad, just as enterprise resource planning (ERP) was in the 1990s. Yet there is a real need as well. It is not much use speeding up your information flow if your customers defect to the competition, which they appear increasingly ready to do. And now that the supply chain is becoming more and more standardised and optimised, finding and keeping the most profitable customers and perhaps even dropping some of the loss-makers looks like the best way to improve margins.
The idea of relationship management is in some ways a throwback to a time when the world was still easily encompassed. A small-town shopkeeper, for example, knew that a certain customer always bought a bottle of beer on the way home from work, and could be talked into buying three on a Friday. He knew which farmer delivered consistently good-quality vegetables. And he knew which of his employees was good at dealing with which customers.
An Intimate Relationship
To recreate this intimacy, relationship-management software pulls together information from different departments of a firm. CRM systems collect data from any point where a customer "touches" a company (such as a store, a call centre or a website), and combines them with information from other sources (such as credit ratings or driving records). These data can then be used to improve a firm's service, for example by relieving people of the tedious business of having to fill in a home-loan application. More complex uses include giving customers different levels of service, depending on how rich they are: if they have only $100 in their account, they might end up being told a dozen times that "your call is important to us"; if they are millionaires, a real person will probably pick up the phone right away. The highest art of CRM is to come up with a personalised offer, say a combination of a home loan and a college savings plan, that a customer is likely to accept.
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.
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