The Threat to CRM Is Not Privacy, Its Apathy
To be fair, the decision for the Albertsons group that handles some 78 stores in Arizona, New Mexico and El Paso, Texas (Albertsons has other groups for other geographies) was complicated. First, the chains history has been marked by a strong and consistent resistance to any kind of CRM/loyalty program, with Albertsons being one of the last of the major retailers to launch a loyalty program when it tried it out in 2003.
The chain is now going to try and push its new lack of a loyalty card as a reason for customers to shop there. But the truth is that the chain never saw a viable return-on-investment from the program. Why? As one Albertsons official—who asked to remain anonymous because of a fondness for a continuing paycheck—said on Wednesday, "The data was being collected but it wasnt being used."
Unfortunately, this isnt a new story. For years, retailers in general and grocers in particular have embraced the concept of CRM and loyalty cards and even backed up those intents with serious dollars by buying sophisticated CRM programs. But somehow after the installation, little happens.
Privacy advocates had targeted Albertsons. It seems an odd choice, given the huge number of other retailers who have been pushing CRM a lot more aggressively. But perhaps protesters sensed the ambivalence that Albertsons had for CRM.
Albertsons was once the nations second-largest grocery chain, with more than 2,500 stores. But it was hit hard by competition and sold out last year to a group including grocery chain Supervalu and pharmacy group CVS. A new executive team in 2001 that had orchestrated the late-to-the-party CRM embrace had instructions overturned by the new owners.
But the buy-but-dont-use phenomena has nothing to do with Albertsons and is frighteningly widespread. The executives who are talked into buying these products apparently dont invest the time in explaining to store managers why they need to use it.
After-the-fact discounting (customized coupons handed to the customer after payment) has had limited purchasing impact. Besides, it doesnt require CRM, as it can be based on an immediate examination of the purchases.
The best advantage of CRM for now—electronic personal shoppers and smartcarts could potentially change this, say by about 2010—is in making intelligent purchase decisions. A grocery manager, for example, is assessing purchases at the end of the month and sees that 108 products are selling at too low a level. Before deciding which products to discontinue, that manager wants to be flagged if any of those purchases are favored by the stores top 50 customers. Killing a favorite product is the best way to send a customer into the arms of your rival down the street.
One grocery manager played down the risk, hoping that those unhappy customers would complain to the store, giving an opportunity to repair the problem. Unfortunately, thats not likely to happen, especially if those customers are also high-worth consumers. Instead of complaining, theyre more likely to see if other stores have it. If so, theyll start shopping there and maybe move all of their shopping there. Such matters need to be identified before the product is stopped.
So why wouldnt those grocery managers use an already installed CRM system? Most likely, theyve been insufficiently trained on the system and they are overworked and understaffed as it is.
The strategic problem with all this is the IT self-fulfilling prophecy. CRM is resisted. Vendor promises huge benefits. Products are purchased and benefits never materialize. Conclusion: CRM cant deliver.
Rarely does "did we truly integrate the package and use it as aggressively as we could?" enter into the discussion. Please dont get me wrong. CRM vendors lie and distort and hype as well as anybody (better, in many cases, but no need to bring SAP and Oracle into this). But for CRM in grocery, the fault may lie elsewhere.
Retail Center Editor Evan Schuman has tracked high-tech issues since 1987, has been opinionated long before that and doesnt plan to stop any time soon. He can be reached at Evan_Schuman@ziffdavis.com.
To read earlier retail technology opinion columns from Evan Schuman, please click here.
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