The Threat To CRM Is Not Privacy. It’s Apathy

Written by Evan Schuman
June 20th, 2007

A key division of the Albertsons grocery chain officially abandoned its loyalty card program on Wednesday, officially saying that it wanted customers to be relieved of the burden of having to show a card to get discounts. Unofficially, the program got pulled because grocery managers weren’t bothering to use the data.

To be fair, the decision for the Albertsons group that handles some 78 stores in Arizona, New Mexico and El Paso, Texas (Albertsons has any other groups for other geographies) was complicated. First, the chain’s 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 wasn’t being used.”

Unfortunately, this isn’t 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 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 nation’s second-largest grocery chain, with more than 2,500 stores. But the chain 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-don’t-use phenomena has nothing to do with Albertsons and is frighteningly widespread. The executives that are talked into buying these products apparently don’t 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 doesn’t 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 store’s 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, that’s not likely to happen, especially if those customers are also high-worth consumers. Instead of complaining, they’re more likely to see if other stores have it. If so, they’ll start shopping there and maybe move all of their shopping there. Such matters need to be identified before the product is stopped.

So why wouldn’t those grocery managers use an already-installed CRM system? Most likely, they’ve 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 can’t deliver.

Rarely does “did we truly integrate the package and use it as aggressively as we could?” enter into the discussion. Please don’t 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.


One Comment | Read The Threat To CRM Is Not Privacy. It’s Apathy

  1. Markg Says:

    without support from the very top, loyalty and crm programs can’t succede. albertsons mgmt is distracted and super busy and their loyalty program is third rate vs safeway and kroger so….their choice was either to make it great or kick it under a pile of dirt….in this case, dirt pile wins.


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