INTERVIEW: JIM ROSENFIELD TAKES ON CRM, THE INTERNET, THE DIRECT MARKETING ESTABLISHMENT, TELEMARKETING, AND MUCH, MUCH MORE! June 2001

Q. In a recent article you wrote for this magazine, you indicate that your life as a customer has become pretty much a dog's life. What does this say about Customer Relationship Management (CRM)?

A. CRM exists, but not in the way that it's sold - or oversold - in the trade press and at marketing conferences.

It's primarily used as an anti-customer tool, rather than as something that's good for customers. Forget "surprise and delight." CRM's function right now is to reduce expenditures on "bad" customers. That's not necessarily an evil thing, but I think it's quite problematical, both technologically and philosophically.

Q. Please elaborate.

A. Well, technologically, no one's good enough at database marketing to isolate "bad" customers who have the potential to become "good," or bad customers who are simply doing most of their business with competitors. So when these customers are subjected to typically hamfisted channel migration efforts, they'll leave, never come back, and say bad things about you. The latter, by the way, becomes extremely significant in the age of the Internet. Unhappy customers in the industrialized countries historically tell 15 people about their experiences. With one keystroke, you can now tell 150 or 1,500 or 15,000!

And it's troubling that most companies are still so clumsy at database marketing that they'll include profitable customers in their de-marketing efforts just because they're using such blunt weapons.

Q. "De-marketing?"

A. Yes. "Channel migration," which is sort of a sub-buzzword, is simply a code term for "let's get rid of these guys." It's an implicitly anti-customer point-of-view.

Q. Which brings you…

A. Yes! To the philosophical issue. I used to think that post-industrial capitalism, willy-nilly, would end up humanistic. After all, we learned in the '80s and '90s that customer retention is the name of the game, so being nice to customers would seem to be a reasonable approach. Customer service and customer satisfaction would have to become bywords if a business wanted to thrive.

Well, I guess I was naïve. I used to buy into Peter Drucker's idea that profits were the byproduct of satisfied customers. It just doesn't seem to be the case, though, at least right now. Americans hate their airlines, which are absolutely deplorable: Never on time, rude flight attendants, food that you wouldn't feed your dog. But the airlines have had record profits the last few years.

Part of this, of course, is the great economy we had until recently. And part is deregulation and consolidation, giving customers less choice. But the profitability feeds into what I think is a prime ideological facet of post-industrial capitalism, that customers are a necessary nuisance, to be exploited, and then gotten rid of when they're no longer of use. The information tools we have are being used to harvest, rather than nurture, and one would think we're in terrible danger of eating our seed corn. I guess time will tell.

But right now, for sure, businesspeople in America are seriously questioning the need for customer service and customer satisfaction. Voice Response Units for a while in the earlier 1990s were becoming more humanized - you could actually make contact with a human being without wading through a thousand menu options. Now, though, they're worse than ever. After all, the more difficult you make it to reach a human being, the fewer humans you need, and the more money you save.

What I'm positing is that post-industrial capitalism is actually a recycling of traditional old industrial capitalism. Rather than its 21st Century opposite or successor, it's the same leopard with only slightly different spots. Customers are there to be plundered, manipulated, managed, and migrated.

And look at the production end of it. Industrial sweatshops in the developed countries were eliminated in the early 20th Century, but now you have post-industrial sweatshops. What could be more killing to the spirit, more psychologically enervating, than working in a telemarketing center?

Q. You hate telemarketing, don't you?

A. Only most of it. We don't answer our phones at home any more, because chances are it's a junk call. We look at Caller I.D. or just let our answering machines pick up. At my house, we routinely get seven to ten junk calls every day. Think of the social dislocations this causes, and the stress. Example: My mother had some surgery recently, and every time the phone rang, we picked up the phone expecting a medical report. But of course every call was a junk call.

And then there's the most loathsome of all marketing technologies, predictive dialing. This enables telemarketing firms to rifle through an entire telephone exchange, including silent or unlisted numbers. The technology is quite sophisticated, and learns while doing. One thing it learns is that it's cost-effective to hang up after one or two rings and go to the next number. As a result of this, countless millions of people pick up their phone each day to find a dead line (abandoned call, in the trade). Think of how many people, especially elderly people, become afraid that their homes are being cased for burglaries.

This is simply an unacceptable social cost.

Q. Is the American Direct Marketing Association doing anything about this?

A. Last time I spoke with some people from there, they were hopelessly clueless. The only thing I can say in their favor is that I think they were sincere, and not disingenuous.
Their P.R. guy told me the DMA was looking for member telemarketing firms to commit to no more than 10% abandoned calls. Trouble is, the systems really trigger into cost effectiveness when you reach a 25% rate.

Q. Are they doing much about privacy, in your opinion?

A. Self-regulation is the mantra, something that's never worked in the history of the world. And for a while I was hearing about a big $50 million advertising campaign to be launched by the DMA and various companies to convince people that invading their privacy was good for them. I haven't heard anything about this lately, nor have I seen any ads, so maybe the money will be used for something useful.

Q. Getting back to channel migration, has it ever been handled exceptionally well?

A. Not to my knowledge, but I don't see everything. I wouldn't be surprised if it's well done sometimes in the business-to-business environment. But almost by definition, consumers will rebel, since you're either going to take away choices or charge them for things they now do free.

Banks have been the clumsiest at this. First Chicago, a now extinct big bank, generated terrible publicity a few years back by trying to drive certain customers out of expensive branches, and into cheaper cash machines. These customers were almost by definition poor, in areas that were primarily African-American. There was a great uproar, as indeed there should have been.

Bank of America several years ago started to charge customers if they called the toll-free 800 number too often. What kind of signal is that? No one is going to call Bank of America for the fun of it. People call because they're confused by their awful monthly statement, or because they don't understand something. This means that a large proportion of calls will come from less educated people, or from recent immigrants. So the bank ends up further disenfranchising an already disenfranchised group. No wonder people hate banks!

Q. Do you have any personal CRM experiences you'd like to share?

Well, I went through lots of negative experiences in my article a few months ago, so I'll tell you two positive ones.

I recently bought a Lexus, and their commitment to customer service and customer satisfaction is the real thing. Every transaction is followed up by a letter, a phone call, and a survey. The dealer experience is terrific. For example, they sent a mobile crew to my house to repair some torn fabric. I can't praise them enough.

Q. What about the car?

A. Well, it's perfect, but it lacks soul. Sort of the Miss America of vehicles, even though it's Japanese. Great sound system, though, and it does everything for you: turns the lights on, turns them off, adjusts the seat.

Q. Your second positive experience?

A. I have almost 5 million miles on American Airlines, making me one of their top passengers. This doesn't pay off on an everyday basis, which annoys me, but it does pay off when it has to, which is quite good.

I was flying from San Diego to New York a few weeks ago, and the plane developed mechanical problems on the ground. When the pilot allowed as how it was an "unusual situation," I figured nothing good was going to happen. Before I was able to take action, though, a Special Services person came aboard, grabbed me, walked me out of the plane, handed me a ticket for another flight, and sent me on my way.

That was good! And that was based on what CRM is supposed to be all about: Identifying your most profitable customers and giving them something that "surprises and delights."

Q. So that's a positive end result of the segmentation process, which is central to database marketing, which is the heart of CRM?

A. Yes, exactly.

Q. Why doesn't everyone do this all the time?

A. Well, aside from technology and philosophy, there's affordability and shareholder pressure.

As much as it pains me to say this, there's not much definitive evidence that good customer service and customer satisfaction lead to profitability. In fact, there's a lot of evidence that the opposite is true, because of the increased costs involved in satisfying customers. And then shareholder pressure on quarter-to-quarter earnings discourages long-term investments in customer service infrastructure. John Chambers, CEO of Cisco Systems, was quoted last year as saying that customer satisfaction leads to profits, but that there's an 18 to 24 month lag. He's probably right, but no one has that much patience. And he's no longer a high-credibility figure, given Cisco's problems.

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