CRM 2.0: a Loyalty Marketing Benefit of Web 2.0?

Here are several excerpts from a very interesting article: CRM 2.0: a loyalty marketing benefit of Web 2.0? (free registration required):

The
concept of customer-centricity is evolving, and changes in the business
and social world are already forcing businesses to change the way they
approach management and marketing strategies, says Vladimir Dimitroff
of UK-based Prism Consulting,
who suggests that perhaps the advent of 'Web 2.0' technologies should
naturally lead to the reinvention of CRM systems: 'CRM 2.0', in fact.

What
began as awareness of age-old business principles, brought to
modern-day marketing with critical help from technology, has now
reached a stage where the technology-empowered, connected world is
calling for new approaches in marketing and most other management
disciplines.

The story so far:
The notion of customer
focus dates from ancient times when the small businessman, unknowingly,
practiced CRM in a most natural manner. In modern days, concepts like
relationship marketing emerged in the early 80s but it was only in the
mid-90s when technology propelled these practices into the mainstream
and CRM became a recognised (and, for a while, much hyped) business
discipline.

Since then, CRM has evolved considerably, if
gradually. The software industry rapidly embraced it and made CRM a
class of technology solutions, misleading many to believe that "CRM can
be bought and installed".

Changes for the Customer:
'Customer'
in CRM 1.0 meant it was critical to recognise the importance of
customers for any business, and the fact that they are individuals, not
a grey anonymous mass with 'typical' preferences (statistical averages)
and 'common denominator' needs. The fundamental differences between
'the market' and the customers who inhabit it are yet to be understood
by many business managers, including marketers and even academics. But
today seeing them as individuals is not enough - they are intricately
interconnected with each other, and with the business.

Changes for the Relationship:
It
was originally important to recognise that relationships are two-way.
In the pre-CRM model of 'broadcast' relationships (one-to-many) it was
often said that the customer has a relationship with the brand. But
that was not enough. CRM 1.0 did much to change this, not least with
sales-oriented database technology. Today we recognise that not only
our business has relationships with each customer, but they also are
related to each other in multiple and complex ways.

Loyalty was
(and remains) the ultimate mantra of customer-centric business. Almost
separate from CRM, there is an entire 'loyalty industry', not to
mention scholars and entire academic schools devoted to it. They keep
proving that loyal customers are more profitable, while retention
protects a market share that should translate into shareholder value.
But in today's world of choices hardly any business can command the
total devotion and unconditional loyalty of each customer.

Split loyalties:
There
is a new breed of promiscuity, or 'split loyalty' whereby most
customers persistently satisfy parts of their needs from 2 or more
alternative suppliers.

Changes for the Management:
For
the management of customers, CRM 1.0 dictated that they should be
individually identified, their differences understood, and each one (or
group of similar customers) treated differently from other customers or
groups. This brought the discipline of customer segmentation - one
cannot overstate the importance of understanding how this is different
from market segmentation. Whereas in segmenting markets we distinguish
between groups but are not aware of individual members, in customer
segmentation each individual customer is known to belong to a
particular segment - and, furthermore, is known to exhibit a set of
attributes (with a very individual accuracy, usually a score) that
qualifies him as belonging to a segment.

Good CRM dictates that
this differentiated view is used not only for marketing and service
levels, but in every end-to-end customer process, in planning and
managing the operations and financial returns of the company. CRM 2.0
recognises the complexity and dynamism of customer attributes (even the
same customer A may exhibit a different 'score' when interacting with
his related customer B from the one displayed with related customer C).
The streamlined dimensions of strategic segmentation (usually a
value/needs matrix) become a multidimensional maze that, to make things
even more complicated, pulsates in all directions as dimensions change
with each interaction. To operate successfully in a networked
environment, companies are learning and adopting micro-segmentation -
and linking it to dynamic decisioning in their systems. The discipline
of social network analysis (SNA) is also evolving and some amazing
progress is happening as we speak, as always helped by technology.

With
CRM 2.0 every stakeholder has become an intermediary - to continue the
trend of coining 'clever' wording, I might call it poly-intermediation
or multi-intermediation. In a viral or WoM (word-of-mouth) campaign a
company has as many intermediaries as it has been able to reach through
those all-important connected influencers.

Web 2.0 dies without CRM 2.0...
Dimitroff
believes that the much-hyped Web 2.0 is the enabling platform but that
it cannot be a successful model in itself unless it also embraces CRM
2.0 principles. Understanding this will make all the difference in the
imminent shrinking of the 'Web 2.0 industry' at the tail of the hype
cycle (perhaps not a dot-com-like implosion, but some correction is
definitely to be expected soon).

In a press release about a
recent acquisition of a UGC web site, a marketing executive declared
"We enter the social networks arena because it's a powerful way to get
our message across". But communities don't really want powerful
messages. Instead, marketers should be inside the networks to listen,
not to shout... and, just occasionally, to whisper in the right ears.

Dimitroff's
advice to would-be CRM 2.0 practitioners is to keep building the
remaining parts of CRM 1.0. But while they build, there's nothing to
stop them from adopting low-cost (and low-risk) CRM 2.0 methods and
techniques.

For much more detail, check out the complete source article.