Albertsons Learns the Legal Dangers of CRM

When the grocery chain charged drug companies to make phone calls to its pharmacy customers, the privacy alarms blew loud. But Evan Schuman argues that interpreting a bad use of CRM as an indictment of CRM itself is a really bad idea.

An oft-heard complaint about retail CRM programs is that they are a waste of money when—as happens frequently—the retailer never uses them to connect with customers or even uses individualized information at all.

The naysayers who said privacy resistance could backfire were given a lot of ammunition recently when $40 billion grocery giant Albertsons was sued for trying to make money off of those CRM names.

The essence of the accusations against Albertsons—which has about 2,300 stores in 31 states operating under the names Acme, SuperSaver, Shaws, Savon, OscoDrug and Jewel-Osco—is that it called and wrote personalized letters to many of its prescription drug customers.

Those communications referenced specific drugs they had been using and encouraged them to either refill them or to switch prescriptions. The letters presented themselves as written by the patients pharmacist, and the callers said they were either the pharmacist or a "pharmacy technician." The consumer rights group that has filed the lawsuit against Albertsons—a group called the Privacy Rights Clearinghouse—posted copies of the pitch letters and telephone scripts that they said Albertsons used.

So whats the problem? First, the callers and letter writers were not those customers pharmacist or a pharmacy technician. They were marketing staffers with either Albertsons or an agency.

Secondly, the communications were pitching drugs that made more profit for the drug companies, but may not have helped—and might have been less effective—for the patient.

/zimages/6/28571.gifHow intimate a CRM relationship do your customers really want?

The communications also didnt reveal that the drug companies were paying Albertsons to send those communications, at a rate of from $3 to $4.50 for every letter and from $12 to $15 for every phone call. In addition, Albertsons received an incentive payment for subsequent and increased sales of the drugs being marketed, according to the lawsuit.

The 18 drug companies—including GlaxoSmithKline, Eli Lilly, Merck, Novartis, Wyeth and AstraZeneca—provided screening criteria to gather certain kinds of patients from the chains records, and drug company employees either wrote or approved the content of the pitches, the lawsuit said.

Albertsons isnt talking to reporters about the accusations and issued a statement that famed onetime Washington Post Executive Editor Ben Bradlee would have called a non-denial denial. Albertsons issued a statement that denied something they had not been accused of and didnt address what they had been accused of.

"We highly value and respect the privacy of our pharmacy customers and do not sell, nor have we ever sold, their private information," Albertsons said in a statement. The only problem is that they werent accused of selling the private information. They were accused of using the private information at the behest of drug companies and of being paid for it.

/zimages/6/28571.gifAs much as CRM can be a cautionary tale, being too hesitant an IT innovator is just as bad. Read "Pity the Retail IT Pioneer."

Even if the accusations are true, its unclear whether any Albertsons customers would have been medically harmed by the deception. All that customers could have done was go to their physician and ask for a new prescription. In theory, the doctor would have considered the patients circumstances and made the best decision, despite what the patient had been pitched to seek.

As a practical matter, though, a lot of physicians will tend to give the persistent patient a requested drug—unless there is strong evidence that it would be harmful—and the drug companies know that. Otherwise, patients tend to do what in the industry is known as doctor-hopping: the practice of consumers simply going to another doctor who will write the desired prescription.

Next Page: The CRM trust factor.