advertisement
advertisement
advertisement

Retail CRM: Does Data Create A Duty?

Written by Evan Schuman
July 12th, 2004

Pity the poor retail CIO who is a CRM advocate. In acts of backstabbing betrayals worthy of the ancient Roman coliseum, our hero finds himself having to deal with a host of villains:

Overzealous software sales reps, who conveniently forget to mention the money and person-hours the retailer will have to spend to make the CRM deliver. Installing?and, from the rep’s perspective, paying for?the package is only one-fiftieth of the battle.
Squabbling line-of-business, financial and IT managers?the very people our hero is trying to help ?who can’t agree on what answers they want the system to deliver.
CFOs, those grumpy, eyeshade-wearing number-crunchers who question whether the CRM-generated answers thus far are really that much better than the field-force-generated answers they had before. Ahhh, yes, the ever-present weapon of a chief financial officer: Question the ROI, which is the accountant’s version of FUD (fear, uncertainty and doubt).
As if our CRM-Advocating Hero needed any more headaches, news came last week of a lawsuit filed against a major retailer: $54 billion retail grocery chain Kroger.

Kroger’s sin? A grocery store group it owns, QFC, had installed an extensive CRM system but didn’t use it to alert specific customers that they had purchased contaminated and recalled beef. One of its customers?who did purchase the mad cow disease-infected product and was specifically and incorrectly told by store employees that her product had not been recalled?filed the lawsuit.

That customer’s QFC loyalty card did ultimately prove she had purchased the contaminated beef, but not long after, her family ate it. The argument: Had the retailer e-mailed the customer?and the other affected customers?as soon as the recall was announced, they would have been spared the often-fatal illness.

So, now the technology itself is posing the threat of legal and PR nightmares. Et tu, CRM?

“CRM has already been getting somewhat of a black eye as it’s not gotten the ROI expected. And now this?” lamented Marianne Gregory, vice president of CRM at ThinkFast Consulting.

The Kroger situation forces to the forefront an age-old problem with recalls. Typically, it’s the manufacturer?the entity that normally made the error?that has to go through the cost and hassle of a recall.

Often, though, the manufacturer doesn’t have a full list of who purchased the product as it sits with a retailer or distributor, unless the consumer sends in a registration form, which is only appropriate for a small percentage of retail products. (I personally like the idea of filling out a reg form for a bag of carrots, but I’m a masochist at heart.)

For items where a registration form doesn’t apply, retailers have also not traditionally had that information, so the manufacturers had to rely on media coverage and advertising to publicize a recall. CRM changes that, and it’s that unintended result that is causing the latest flap.

Is It Better Not to Know?

There’s also a customer perception issue at play. Some would argue that if a retailer sends a consumer an e-mail alerting them that a package of hamburger that they specifically purchased two days earlier was contaminated?and assuming it reaches the consumer before any family member has eaten the hamburger?that consumer might become the world’s most loyal lifetime customer of that retailer, praising them nonstop for saving their lives.

But some cynical retailers also argue the opposite, that the consumer would immediately blame the retailer for having sold them a tainted product and that they would lose that customer forever. Let’s call this the “Don’t Kill the Messenger” argument, or perhaps the “Damned If You Do, Damned If You Don’t” argument.

Of course, we can get into the moral issue about whether a retailer has an obligation to use this technology for humanitarian purposes, if possible. This is what Maxwell Smart would have dubbed the “CRM should use its genius for good instead of profit” argument.

Perhaps the most important?but least voiced?issue is technological pragmatism. There is a serious question about whether a CRM-powered retailer could alert customers quickly enough even if it wanted to, especially where perishable products such as hamburger is concerned.

In the Kroger case, the customer had to jump through several hoops before the store finally agreed to check her card’s records. They then quickly identified her purchases as having been on the recall list. But consultant and retail expert Gregory questioned how long it would have taken the retailer to have identified all of the customers who had purchased the recalled produce and then sent e-mails?or made phone calls?to them.

The exact amount of time would depend on the software they used, how many upgrades they had implemented and how many customers had made the purchases, but she estimated that it easily could have taken weeks. Checking one customer’s records is quite different than checking all of the records for a particular purchase, she added.

With this particular incident, it appears that the retailer didn’t do itself any favors. It put out no signs and made no attempt?not even cosmetic ones?to alert customers to the danger, said the customer’s lawyer, Nick Styrant-Browne of Seattle law firm Hagens Berman. He argued that the retailer should have contacted customers as a “matter of human decency” and is suing the retailer for not having contacted them in an attempt to prevent the consumption, thereby causing emotional distress.

Given all of the hardships associated with this case and the angst some retailers will have regarding it, there is an ironic note. The CRM feature that is potentially getting Kroger into trouble is the ability to quickly e-mail and call customers. And yet, few retailers today even use that marketing capability.

This prompted analyst Gregory to question whether some retailers were pressured into purchasing full-blown CRM systems when all they would likely use would be a lower-cost market basket analysis package.

If they want customer buying patterns?and have no need or desire to directly connect with those customers routinely?”they don’t need to spend all of those millions of dollars to understand who they all are.”

It’s a fair point. But it’s also important to note that CRM, when used properly, is an amazingly effective part of a full business intelligence system. Done properly, CRM will deliver a depth and sophistication of answers unlike anything that could be done without it.

But those answers will not come cheap. This is not a package to try for awhile and see if it helps. This is a package that requires full company commitment, in terms of dollars, training, policies and buy-in from just about every impacted unit (which is pretty much all of them).

Those kinds of direct, timely answers also come with obligations. If you want to say to a consumer that his dryer is 5 years old and here’s what the new ones can do, or that another customer’s favorite brand of peanut butter is on sale, you better be prepared to tell them that the hamburger they bought last week might be poisoned. At the very least, try.

There’s a classic quote from the Roman philosopher Cicero: “Inter Arma, Enim Silent Leges,” which loosely translates to, “In time of war, the law falls silent.” When it comes to modern-day CRM systems and retailers, perhaps an apt paraphrase might be, “In time of recall, marketers cannot fall silent.”


advertisement

Comments are closed.

Newsletters

StorefrontBacktalk delivers the latest retail technology news & analysis. Join more than 60,000 retail IT leaders who subscribe to our free weekly email. Sign up today!
advertisement

Most Recent Comments

Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

StorefrontBacktalk
Our apologies. Due to legal and security copyright issues, we can't facilitate the printing of Premium Content. If you absolutely need a hard copy, please contact customer service.