“The most important challenge in CRM is financial accountability”

Roland Rust
Roland Rust

Prof. Rust, as an acknowledged marketing expert: How has CRM changed marketing?

Rust: CRM has changed marketing by providing automated ways to address individual customers. The old style of marketing is mass marketing, that comes from the manufacturing tradition and focuses on the product rather than the customer. CRM is one-to-one marketing, drawing from the service marketing tradition, and focusing on the customer, and relationships rather than individual transactions.

What are recent trends in the field of CRM?

Rust: The existence of improved systems and software is an important trend, but also an important trend is expanding the notion of CRM to include a more holistic conception of the relationship with the customer. The most important aspect of this is the idea that CRM is good not just for automating processes and reducing costs, and not just automated cross-selling, but also using these systems to actually improve service quality, resulting in higher levels of customer satisfaction, customer retention, and customer lifetime value. Also new is the idea of managing the company strategically based on customer equity, the sum of the customer lifetime values across the customer base.

Are there simple factors for CRM success?

Rust: CRM success can be broken down into

  1. personalized marketing interventions,
  2. interactive communications,
  3. databases containing customer histories, and
  4. models for analysing these databases.

The most advanced factor seems to be factor three – customer databases. Significant improvement can still be made in the other three factors.

What about customer lifetime value: Which are “good” customers and what is the true value of a (lost) customer?

Rust: In general “good” customers are those who will produce the most profits for the firm. This is a very active area of current research. My own work has developed a new model of customer lifetime value that takes into account brand switching patterns. For example, the true value of a lost customer may be different depending upon how likely it is that the customer can be regained. I am also currently working on models to predict how customer profitability changes over time. These areas of research will advance significantly in the next couple of years.

What is the key to have a long term relationship with a customer?

Rust: There are three keys, and their relative importance varies by industry. The three keys are Value Equity, Brand Equity, and Relationship Equity. Value Equity refers to such things as quality, price, and convenience. Brand Equity refers to the subjective aspects of the brand, and Relationship Equity refers to things that increase customer switching costs. It is important for each company to identify the key drivers in its industry, and then focus resources where they will have the greatest impact. Our recent book, Driving Customer Equity, discusses this in detail. For example, Value Equity is especially important in B2B, Brand Equity is especially important in consumer packaged goods, and Relationship Equity is especially important in continuing services.

In your opinion, how can software solutions contribute to a good relationship with a customer?

Rust: Software can enhance personalization of marketing interventions, facilitate interactive communication, make it easier to build customer databases and link those databases to the relevant decision makers, and provide models for analysing customer databases.

Do you see any software enhancements within the last two years or a major breakthrough ahead?

Rust: The most important developments will be models that make the software systems smarter, for example developing systems that learn more about the customer over time, and systems that can truly personalize the company’s marketing interventions. Ultimately this is an information business, and processing and analysing information more intelligently is the most important success factor.

What do you consider to be the biggest challenge in customer relationship management?

Rust: Probably the most important challenge in CRM is financial accountability. That is where I have focused most of my attention. Every company has a long list of things that it might do to enhance customer relationships. The key is to figure out which of these will generate the best return on investment. Major advances are currently being made in this area in academia, and many of these are being applied in practice. For example, I know that my approaches to financial return, based on the measurement and monitoring of customer equity and its drivers, are currently being applied at at least three of the world’s ten largest corporations.

What does the future hold for CRM?

Rust: Probably the buzz word will go away, because CRM will become a mainstream activity of every organization. CRM, by whatever name, will be even more important 10 years from now than it is today.

What is your personal motto?

Rust: “Products come and go, but customers remain.”