New directions in customer research and the issue of ownership

The term ‘customer’ is used here toinclude both business-to-business (B2B)buyers and consumers. Many consumermarketing companies, for exampleSeagram and Tesco, have implementeddirect marketing and relationshipprogrammes with their consumers,adopting many CRM principles. Inaddition, fast moving consumer goodscompanies may implement CRM with

INTRODUCTION

CRM: What is it?Customer relationship management(CRM) should be the application of agenuinely customer-oriented model ofmarketing by an organisation, focusingon understanding and relating to thecustomer as a means to improvecustomer satisfaction, loyalty and profit.

26 Database Marketing & Customer Strategy Management Vol. 11, 1, 26–39 � Henry Stewart Publications 1741–2447 (2003)

New directions in customerresearch and the issue ofownership: A marketingresearch viewpointReceived (in revised form): 16th July, 2003

Clive Nancarrowis an experienced market research practitioner, with nearly 20 years’ experience of working in the industry, including positionson the client side and as managing director of a market research agency. He combines his teaching and research work atBristol Business School with market research for many leading companies and also works closely with NFO WorldGroup.

Sharon Reeshas worked in market research for nearly ten years. She joined NFO in 1998 and is now a research director within theFinancial Services division. She has been responsible for managing projects relating to customer commitment and retentionresearch for clients in a variety of sectors including telecommunications, utilities, financial services and travel and tourism.

Merlin Stoneis Business Research Leader with IBM, where his role is to research customer management strategies, processes andsystems, and a director of QCi Ltd, an Ogilvy One company that provides customer management assessment services, andThe Database Group Ltd, which provides customer base management services. He has written over 20 books on marketing,CRM and customer service.

Abstract The growth of customer relationship management (CRM) has been dramatic,yet the CRM opportunity is rarely fully exploited. Reasons for this are described with, inparticular, an emphasis on opportunities for marketing researchers to become moreinvolved and help implement CRM effectively. The possibility of marketing researchersbecoming marginalised is discussed and the need for marketing researchers to considerthe role of principal guardian of all customer research is proposed. The importance ofunderstanding the CRM mind-set is emphasised and the ways in which marketingresearchers can contribute to CRM are discussed. These include significantcontributions in conceptual and operational definitions, quality fieldwork, model buildingand holistic customer and employee research.

Clive NancarrowProfessor of Marketing,Bristol Business School,University of the West ofEngland, Coldharbour Lane,Frenchay Campus, BristolBS16 1QY, UK.

Tel: �44 (0)117 344 3435;Fax: �44 (0)117 344 2289;e-mail:[email protected]

data/information would typically be:

— customer profiles— organisation-graphics (B2B)— demographics (B2C)— products purchased, when and value— customer behaviour, eg responding,

giving feedback, complaining andwhich channels used

— customer experience throughobservation

— informal feedback through salesand/or service personnel

— limited questionnaire feedback— if possible, competitor allegiances (and

so share of wallet/budget etc).

Most marketing and sales organisationsattempt to capture these themselves,though in some industries (for instanceinformation technology and financialservices) ‘database research agencies’collect and then sell this information tothe various players in the industry. Suchdata are used by sales, service andmarketing management personnel todetermine market size, trends andcustomer preferences including serviceand maintenance requirements. Researchconducted by Bristol Business School forthe Royal Mail by Aspinall, Nancarrowand Stone2 reveals that manyorganisations collect limited informationon their existing customers (and theauthors’ experience is that often theinformation is not completely accurate).The collection of relevant behaviouralinformation is an essential cornerstone ofeffective CRM activity.

CRM AND MARKETING RESEARCH:AN EVALUATION

CRM: A growth discipline ordiscipline unfulfilledThere are two reasons why CRM as aphilosophy has enjoyed rapid growth. First

intermediaries.Byatt, a member of the marketing

research community (NFO WorldGroup),provides a researcher’s perspective in hisdefinition:

‘CRM is a continuous process of strengtheningcustomer relationships by providing products,services and delivery systems that more closelymatch customers’ changing needs. This processis underpinned by an insight into precisecustomer requirements with an organisationaland operational structure that facilitates changeto meet ever increasing customer demands.’1

CRM involves identifying customerwants and expectations, managing them,closely monitoring the customerexperience, anticipating problems andtaking appropriate actions to foster andnurture relationships. Some of these areas(information gathering and management)seem to be the rightful territory of amarketing researcher.

CRM is sensitive to the type ofrelationship, if any, which the customerwants and to setting up realisticexpectations, depending on whether thebusiness model is transactional orrelationship-based and on the relativepower of buyer and seller.

CRM focuses on identifying fromdatabase analyses and market research thebest prospects for acquisition anddevelopment (up-sell/trading-up,cross-sell). Retention is an importantfocus, involving issues of customerservice and satisfaction. The identificationof potential defectors, based on analysisof defector characteristics, may lead tomarketing programmes designed toreduce defection, particularly amongcustomers deemed to be the mostimportant, because of their monetaryvalue or because they are influential.

Traditionally, organisations havedeveloped databases to capture customerinformation. The main database

� Henry Stewart Publications 1741-2447 (2003) Vol. 11, 1, 26–39 Database Marketing & Customer Strategy Management 27

New directions in customer research and the issue of ownership

on the basis of implementing it, andfinally, the tendency of management toassume what is planned is implemented(the management myth). An organisationcalled QCi that specialises in evaluatingCRM activities and identifying whereimprovements can be made (CMAT:Customer Management Assessment Tool)has regularly reported a fairly depressingpicture in terms of the gap betweentheory and practice for those withdatabases:6

— only one in ten use a lifecycle model— only one in five understand customer

lifetime value— only one in 15 has a game plan for

high-value customers— only about half use cross-sell triggers— only about half understand the

relationship between satisfaction andloyalty (see later).

Similarly disappointing observations aremade across many aspects of all the mainelements of CRM:

— analysis and planning— the proposition— customer management activity— people and organisation— measuring the effect— understanding the customer’s

experience— information and technology.

A marketing research heaven?While many researchers might applaudthe ‘listen, observe and learn’ ethos ofCRM, sadly the reality, as noted, oftenleaves much to be desired. This is notbecause of under-investment but rathermisplaced investment in many cases —investment amounts have been veryhigh and continue to grow.7 Often,however, management ‘delegates’ itsmarketing responsibility to CRM

of all, customer acquisition and retention,in particular, are increasingly the bases ofsenior management’s analysis of business.Management appreciates more and morethe value of the customer life cycle as abasis for planning (recruiting, welcoming,developing, preventing defection,winning back and, if needs be,orchestrating a happy separation).Secondly, the use and subsequentintegration of various direct marketingchannels (direct mail, telemarketing), andthe rise of e-business, e-communicationand the increasing use of the internet asa conduit for customer care and sales hasled to the growth of CRM but, at thesame time, has exposed a degree ofmanagement inexperience anduncertainty.3

In many increasingly competitiveenvironments where there is littleproduct or brand differentiation, CRM isregarded as a way for organisations togain a competitive edge. The financialservices sector, in particular, has movedtowards this belief, with retailing andtelecommunications following closebehind.4,5

While CRM should have a verypositive effect on branding by increasingresponsiveness, relevance and allowingcontrol, it can, however, have a verynegative impact if introduced tooquickly, at the wrong time or on thewrong customers. It is also easy to breakthe law or regulations through abuse —in areas such as data protection orspecific regulations about the conduct ofbusiness (in some industries such asfinancial services, utilities).

There are many reasons why CRMdoes not always lead to the much-vaunted improvement in customerrelations and profit. Reasons include thequality of the data collected anddatabases, the people who work withcustomers, either in using theinformation or in dealing with customers


Nancarrow, Rees and Stone

behavioural and attitudinal informationthat are available.

In many client companies, marketingresearchers should consider whether theyshould become managers and guardiansof customer information or at leastseriously involved with other informationhandlers. In research agencies, it may beincreasingly appropriate to consider howany non-database research activity fitsinto the bigger customer knowledgepicture. Some market researchers (clientand agency) will need to check whetherthey have developed a marketingresearch silo mentality that short-changesinternal or external clients.

Understanding the CRM mind-setWhat follows represents what should berather than what is. Many organisations,as already noted, that claim to haveCRM in place are in fact operating at asuperficial level.

Working to the customer life cycle andcustomer differences

There are many business models in thenew economy, some treating allcustomers equally, others favouring morevalued customers in different ways andbuilding relationships with these, somedealing with customers directly, othersthrough intermediaries. These modelsvary in the depth, duration and mutuality(in terms of commitment, exchange ofinformation, planning and value) of therelationship.10 Where there is likely to bea relationship rather than a one-offtransaction, the customer life cycle is auseful basis for research and planning.Customer life cycle activities are:

— recruitment— welcoming— developing (cross-sell and

trade-up/upsell)

software projects, not thinking throughthe strategic and operational issuesspecifically relevant to the managementof their customers.

This paper addresses a number ofkey factors that affect the quality ofcustomer understanding and indicatesthe opportunities for marketingresearchers.

True guardians and managers ofcustomer understanding andinsight?There are many sources of customerinformation — database analysts, reportsfrom those on the customer front line(sales and service personnel in particular),as well as internal handlers ofspontaneous customer feedback (plauditsand complaints), social and businessobservers and, of course, ‘traditional’marketing researchers. In a researchreport by the Chartered Institute ofMarketing, it is suggested that in manyorganisations traditional marketers are notembracing the new strategic e-marketing(and CRM reality) and so willincreasingly find themselves marginalised.8

The traditional link between marketersand client market researchers wouldtherefore suggest that market researchersalso risk becoming sidelined unless theyforge for themselves a new, more central,broader organisational role — not justworking with marketers but witheveryone who is monitoring andmanaging customers.

The greatest benefits of any CRMmodel are to be gained when employeesat all levels, in particular key players,who will subsequently be relied upon toimplement service improvements, arebrought into the process.9 All parties canthen work together to ensure any outputis actionable and tailored to mirror theinternal structure of the organisation,bringing together all sources of customer



possibility that users of differentcategories can be (too) costly to serve.For example, in B2B markets, heavyusers may also be very demanding usersin terms of special terms and conditions,perhaps even special prices. Conversely,in consumer markets, a commonproblem is light users (and therefore lowrevenue providers) who are verydemanding — high cost to serve canresult from users being inexperienced.Measures need to be refined to takeaccount of profitability and to becomparable (where possible). Mergingdata under Data Protection Actconditions is also a possibility. Fewcompanies (though a growing number)segment by customer profitability, due toproblems of measuring or estimatingcustomer profitability. On occasion, thiscan be derived by weight of purchasingor weight of use but these are far fromperfect measures. There is a need inmany organisations for the developmentof more sophisticated measures.

Loyalty, commitment and retention

Rather than customer profitability,another basis for marketing strategy is thedegree of ‘loyalty’ or commitment acustomer exhibits. The value spectrum11

combines value and loyalty as the basisfor segmentation and one marketingobjective might be to move customerswho are profitable up the loyalty ladder.

Loyalty ladders, however, raise anothermarketing research issue — how best tomeasure loyalty? Some may evenquestion the use of the term ‘loyalty’ inrelation to brands where there is nointerpersonal dimension. While brand‘personality’ discourse is useful andilluminating in some respects,13 the factthat a brand is not a person (nor rarely acause) means loyalty as metaphor forcommitment or disposition may bemisleading.

— retention (minimise defection)— win back lost desirable customers— amicable separation (when

unavoidable).

At each stage, it is essential to determinewho to target and customer differencesthat need to be taken into account andto understand how to achieve the desiredcustomer behaviour (responses, givinginformation, purchases) and to test andthen monitor the marketing activitiesdesigned to achieve this. The researchmay be qualitative, looking for freshinsights and/or quantitative with highlysophisticated statistical techniques todetermine what fosters the desiredbehaviour. All of this, arguably, shouldbe marketing researchers’ arena, giventhe fit with their knowledge and skillsset. Of course, researchers will need toadhere to relevant codes of conduct andthe Data Protection Act.

It was mentioned that customerdifferences should be taken into account.Aside from understanding customers’needs and wants, it may also makemarketing and marketing research sensefor an organisation to determine therelative profitability (actual and potential;current and lifetime) of individualcustomers and to analyse otherbehavioural and attitudinal data, perhapsby decile segments of these measures ofprofitability. Highly profitable customersmay need to be treated differently tothose who are not so profitable. Theremay even be a case for demarketing tonon-profitable individuals or segments.The customer’s propensity to deal withand buy from the company is alsorelevant, as in the end this leads to thecompany achieving different share ofwallet.

Marketing researchers, of course, areused to sampling to ensure a goodrepresentation of heavy users for analysis,but they should also consider the



their organisation or sphere of operationhad an agreed definition of customerretention, and if so, what this definitionwas. Interviewers were instructed toencourage the respondents to state thedefinition ‘as fully as possible’.

Only a quarter of the sample claimedthat their company had a definition ofcustomer retention. At the same time, 20per cent of those with a claimeddefinition stated that they did not knowwhat it was. Among those who knew,the majority gave behavioural definitionssuch as ‘keeping your customers’, ‘repeatbusiness’ or ‘respond to an activity’.

Clearly, marketers need to focus onwhat precisely they are trying to achievein terms of buyer behaviour and attitude.Indeed, there is an argument thatmeasuring both attitude and behaviourprovides particularly useful insights.

Dick and Basu clearly define loyalty asa two dimensional construct —behavioural and attitudinal and on this

There are of course both behaviouraland attitudinal measures of commitment.Indeed there can be a confusing array,see Table 1 for examples.

There is still much to do in terms oforganisations having clear definitions andappropriate operational measures.Aspinall, Nancarrow and Stone surveyedhow managers and directors responsiblefor the marketing from a customerdatabase(s) within their organisationdefined customer retention and measuredit.14

This sample was highly focused oncustomer retention. Over half of thesample (54 per cent) considered customerretention to be more important thanacquiring new customers (only 12 percent mentioning the latter). Thirty-twoper cent thought both were equallyimportant. Given the apparent focus onretention, it was disappointing to seehow few in the sample could defineretention. Respondents were asked if



Figure 1: The value spectrum12

Table 1: Measures of commitment

Behavioural measures Attitudinal measures

Recency, Frequency, Monetary value (RFM)Share of budget/walletRecommended brand/product to othersLoyalty card schemesBuy across range/trade-up

Brand preferenceWillingness to pay a premiumDeclared intent to consider/purchaseDisposition to recommend

Loyalty

H M L

H

Value of customerM

L

customer retention or did not knowwhat benchmark (if any) was used.

The main criterion against whichretention was measured was acomparison with past performance (anintroverted perspective). Only a fewcompared performance with competitors(external perspective). Other externalbenchmarks used appeared to be morechallenging such as ‘comparison with thebest’ or ‘against national qualitystandards’ (See Table 2).

Clearly, there is an opportunity formarketing researchers to provide usefulconceptual and operational definitionsand, indeed, to measure the total market,not just customers on the database. Asidefrom setting targets for retention andmonitoring these, a major preoccupationof CRM is establishing what fosterscustomer loyalty or commitment. Thereare a variety of models that determine

basis developed a potentially usefulmatrix for loyalty classification (seeFigure 2).15 The Dick and Basu gridhelps marketers understand who is to berewarded (NW quadrant), who isvulnerable (NE quadrant) and who offersan opportunity (SW quadrant).

Variables and measures of retentiondiffer in relevance and importance fromproduct category to category. Finding thebest definition and measures is essentialfor an organisation to evaluate itsperformance and link this performance toactions in the market. In the study byAspinall, Nancarrow and Stone, whilerelatively few managers claim to have adefinition of customer retention, 58 percent stated that their organisationmeasured customer retention (either onthe database or by means of marketresearch). The larger the organisation andthe bigger the database, the more likelythey were to measure retention. Theresearchers probed the nature of measuresused and were instructed to seek precisedefinitions. Examples were given at thebriefing as well as for the analysts codingthe answers. Once again, behaviouralrather than attitudinal measures wereused more often. Many measures werebasic rather than sophisticated (see Table1). Among those measuring retention, 38per cent either did not have abenchmark against which to measure



Figure 2: Attitudinal x behavioural loyalty/commitment16

Attitudinal commitment

High Low

Behavioural commitment High True loyalty Spurious (inertia)

Low Latent loyalty None

Table 2: Benchmarks used to evaluate customerretention17

Benchmark %

Comparison with past performanceArbitrary target set by the authorsLevel of salesComparison with key competitorsComparison with best availableAgainst national quality standardsOtherNoneDon’t know

271414745

141523

Base: all measuring customer retention (180)

Using the Retention Index, one caninfer statistically the factors that seem tolead to a good retention level. Of courserespondents can also be asked to rate theimportance of various attributes.Respondents, however, often rationaliseand minimise the importance of factorsthat may seem trivial but in effect arenot. Respondents also exaggerate theimportance of other factors such as price.In many markets, however, (eg personalbanking) price is not the maindeterminant of customer retention.Although, respondents claim that a highinterest rate is an important factor, fewswitch banks because of it. There aremore important service factors. Fewcustomers can quote the rate of intereston their accounts.

Using both approaches (asking what isimportant and inferring it statistically) canprovide useful insights. The researcherneeds, however, to be sensitive to thepossibility that an important criterionmay not register on the basis ofstatistically derived importance analysis ifbrands on the market are seen to be thesame.

An organisation’s performance onattributes in the motivator quadrantneeds to be better than average, givenboth their recognised and actual

statistically the link between how acustomer rates a product or service onvarious attributes and commitment to theproduct or service, eg that of NFOWorldGroup. Its single measure ofcommitment (Customer RetentionIndex) is based on four other measures:18

— overall satisfaction— likelihood to repurchase— likelihood to recommend— competitive advantage.

Overall satisfaction is by itself a poorindicator of commitment. Customers thatare satisfied can defect to a perceivedbetter offering. Commitment based on acomposite of the above also reflectscurrent and future disposition. Byattstates that the attitudinal Retention Indexhas been a good indicator of subsequentcustomer behaviour. Having used thismethodology for a number of years aspart of a CRM strategy, Pauline Williams(Senior Controller Market Research,Nationwide) concurs:

‘Having attached this information to realcustomer data over time, we have found thatthe Commitment Index is highly predictive ofloyalty, increased spend and increasedcross-selling.’19



Figure 3: Importance: Action Grid20

High Low

High

Motivators Hygienics

Low

Hidden

opportunities

Potential

savers

Claimedimportance

Derived (real)importance

less cooperative. Nancarrow, Pallister andBrace have discussed this problem, whichhas become more acute with the adventof internet-based research.21

Other measures of customerimportanceThe potential of segmenting customersby profitability and commitment wasnoted earlier. There are, however, manyother bases for segmentation (productsbought, benefits sought etc). Also, theinfluence some customers have shouldnot be forgotten. Opinion leaders existin both business and consumer marketsand there is a tradition of research in thisarea. Methods to identify consumeropinion leaders are by self-designation(self-ratings), observation andsociometrics. Similar methods are possiblefor business customers. The sphere ofinfluence (number of others that couldbe influenced) is rarely established,although research has shown that thesphere of influence, the number ofengagements in a period and likelihoodof a customer making recommendationscan be measured.22,23 Recommendersmay be important to new initiatives andmay warrant special marketing attentionto ensure they become effectiveadvocates of a brand. A similarobservation was made by Oxley andNancarrow with respect to identifyingpotential innovators and early adopters,who, because of their importance anddifferent characteristics to late adopters,may require a different marketingprogramme.24,25

The focus of research: Customersand staffCRM researchers clearly wish tounderstand their customers, test activitiesand evaluate these when rolled out.Some of the preoccupations have been

importance. Positive perceptions ofproduct and service delivery is all that isrequired of hygienics quadrant attributes,which are claimed to be important butdo not seem to foster retention. Thehidden opportunities, as the namesuggests, represent the opportunity tomake the attributes the property of thebrand and draw attention to this. Finally,an organisation should check there is notan over-investment on attributes in thepotential savers quadrant.

The customer experience and timingof researchWhile the research on customercommitment and loyalty highlights theimportance of a valid measure ofcommitment and its determinants, it isimportant to cover all the ways in whichan organisation ‘touches’ a customer.Ideally, research should take place at theclose of the transaction orconsumption/experience. Qualitativeresearch with customers and discussionwith frontline employees and first-linemanagers can help identify the differentways in which an organisation touches itscustomers. It is not easy, however, toensure the research is conducted at the‘moment of truth’ for everyone,especially in some B2B markets wherethere is a constant stream of suchmoments for many buyers. Trackingstudies in some markets may offer asolution, but in others it just has to beaccepted that only some of the samplescan be experienced and related tocommitment models like NFO’s. So,marketing researchers need to considercarefully the timing of researchinterviews or establish the time intervalbetween transaction and interview.

One further issue relevant tomonitoring customer experience is that itis possible that some customers willbecome over-researched and, in the end,



problems as well as opportunities. A scanof the Market Research Society’sDirectory reveals many marketresearchers claiming to have theemployee research credentials so relevantto successful CRM operations and so,hopefully, are meeting this opportunity.

Research cultureThere is undeniably a strong quantitativeresearch culture in CRM. This maycreate the impression that the CRMresearch-management platform is ‘If youcan’t measure it, you can’t manage it’. Ofcourse, this is not the case — manygood managers work by feel andproduce better results than their peerswho feel exposed without measurement.Indeed, a policy of managers themselves‘staying close to customers’ and ensuringthat staff do the same can be just aseffective as measurement-drivenmanagement. Many of the biggestdatabase-driven marketers, such as DellComputers, spend a fair share of researchmonies on qualitative research, to getbeneath the metrics. What is measurablemay provide a distorted picture of themarket. This distortion may be due toclassic research biases or simple omissionof key influences or factors because ofproblems of measurement.

Where the value of qualitative researchis not appreciated, organisations may findthey are moving towards a quantitative,data-rich culture that is perhaps not‘information rich’. What data arecollected often depends on what havealways been collected or what are easilycollected. Both may lead to a seriousdistortion in an organisation’s view of itscustomers.

Another tendency in some CRMdatabase-driven operations is to baseanalysis on the measures available ratherthan trying to collect vital missing datafrom customers. Some customer metrics

noted above. Employee research orinternal marketing research is alsovaluable however. Research intoemployee attitude and behaviour (just aswith customers) during theimplementation programme, helps to:

— identify strengths and weakness— identify and evaluate training and

support needs— move towards improving results.

It has been noted that customermanagement research suggests a highcorrelation between having the rightpeople and people programmes in placeand achieving results. This may explainwhy some successful managers extol themantra ‘the customer comes second’,meaning that where there is internalfocus on employees, they in turn will beable to understand customer needs andmanage relationships effectively.26

Furthermore, given that service elementssuch as the telephone contact experienceoften play an important role indetermining a customer’s overallcommitment towards a provider (and,clearly, customer-facing employees oftenhave a great influence in this area),companies depend on motivating theiremployees to deliver the required servicelevels.

Sears implemented a set of totalperformance indicators using the ‘soft’measures of employee satisfaction andcustomer loyalty that enabled them toestimate their effect on financialperformance and to set targets foremployee and customer satisfaction.27

‘Every 5 point increase in [employee]satisfaction is related to a 1.7% increasein customer loyalty which in turn isassociated with a 3.4% increase inearnings’. So it is evident that researchingemployees is highly relevant to businesssuccess with service-oriented categories.Employees can provide early warning of



CONCLUSIONSWhile both interest in CRM and CRMactivity continue to grow apace, CRMpractice often fails to match expertprescription. It has perhaps been easierfor new e-commerce ventures to adoptthe new discipline than for establishedorganisations to adapt. In addition, toomuch reliance has been placed onsoftware solutions rather than on makingthe necessary changes in culture, people,organisation and customer research andits dissemination. The evidence is,however, that where CRM isimplemented well, it does pay off.28

Despite the roll-out of CRM practicebeing generally weak, there is a risk thatclient-based marketing researchers whodo not adapt to the new customerinformation reality will be sidelined.Marketing researchers should considertheir role in the organisation and theneed for someone to pull all thecustomer research together to see thebigger picture, maximise insight anddisseminate this throughout theorganisation. To achieve this, researchersneed to understand the mind-set andculture of those in CRM. Key bases forCRM strategy include the customer lifecycle, acquisition and retention, historicaland lifetime value of customers. Manymarketing researchers have the skill sets,aptitude and techniques that can addvalue. New lines of research on opinionleadership, word of mouth and networksalso seem highly relevant, suggesting newbases for targeting influential customers.Sophisticated models of commitmentbased on more meaningful, compositemeasures of commitment that identifywhat fosters commitment will provideactionable findings. New ways ofassessing the relevance of what isimportant to customers can also be veryuseful. For instance, NFO WorldGroupcross-reference direct questioning ofcustomers on the qualities they deem

being used — such as customer numbers,churn rates and customer satisfaction —are useful, but on many occasions can bemisleading. A focus on customernumbers normally results in a strategy to‘acquire at any cost’ and the acquisitionof many unprofitable, or evenloss-making, customers. A focus oncustomer satisfaction, as typicallymeasured by large companies, givesmisleading results, as customers whorarely transact with the company, andspend little with them, are asked whatthey think — and their views dilute theviews of heavy users and loyalists. It isthe satisfaction of the most valuableand/or most loyal buyers that counts. Afocus on customer churn is misleadingbecause (1) CMAT results show that it israrely defined or measured accurately and‘received wisdom’ is the norm. Thus,any figures put forward by companies arelikely to be doubtful. And (2) the reallytelling figures may be the churn of heavyusers and loyalists.

All of the above problems and issuesspell opportunities for marketingresearchers interested in CRM to bring tobear their understanding of customersacross many issues and studies and, ofcourse, their research expertise. Someusers of CRM, however, believe that salesor service personnel make good researchinterviewers. The authors’ experience isthat is often not the case, as training rarelytakes place, let alone the problem ofcompeting interests (selling versusresearch). A conversation with a managerin a major blue chip organisation revealedthat the telesales administration of aquestionnaire had been disappointing.Questions were skipped or wronglyadministered, such that the subsequentanalysis lacked credibility. The originaldatabase proved not to have the data on itto allow meaningful predictive potential(who would be recruited, who wouldbecome a good customer etc).



Assessment Tool,30 it is possible to seehow developed CRM is within anorganisation, in particular

— what stage of maturity it has reached— how well it makes strategic and tactical

use of information about customers’contact and experiences with theorganisation and its competitors

— what needs to be done in terms oforganisational culture, planning,targeting, practices, measurement andfeedback.

For many organisations the challenge istough, requiring changes of leadership andculture, and with major resourceimplications. Companies with poor trackrecords of change in marketing andcustomer service need not apply.

Marketing researchers must be preparedto shift from the often ivory toweroperation, to think not just strategicallybut tactically and, perhaps just asimportantly, to champion the customerand bring together managers involved inthe customer experience. They will behelped by a much stronger focus in themarketing profession on ‘customerexperience management’, which includesmanaging the relationship but alsoincludes other aspects of the customerexperience, eg in a retail store, what it islike to visit and buy.

Researchers need to make sure thatthey are discovering what experiencecustomers receive and what they wouldlike to receive, and make sure that thosewhose actions affect the experience ofcustomers understand what the researchsays. To ensure acceptance of this kind ofresearch, it is essential that those whosecustomer management activities are beingresearched are involved in the researchfrom the beginning. This can be achievedby proper consultation with internalstakeholders, at all levels of theorganisation, at all stages of the research

important with what is revealed asimportant through statistical inference.This analysis yields actionable insights interms of what to major on, what needs atoken presence and what can berelaxed.While CRM practice is far fromperfect the evidence is that where it isexecuted intelligently and sensitively itmakes a real difference to businesssuccess. Some barriers to its successinclude poor research focus and poorproblem and concept definition as wellas unsophisticated measures and models.This is territory in which the client-sidemarketing researcher should at least beinvolved and the agency researcherprepared to act as consultant andresearcher.

At the heart of the CRMimplementation problem often lies a lackof appreciation by senior managementthat for CRM to be implementedsuccessfully, a company needs to take adifferent approach, not just to customerservice and marketing management, butalso to people and operationsmanagement. For customer contacts tobe managed better, those managing thecontacts need to be trained, motivatedand supported with all relevant customerinformation. They also need to beconfident that other parts of theorganisation will provide the necessarysupport and deliver to expectations. Toensure that this happens, the connectionsbetween employee satisfaction orengagement, operations, customer serviceand customer acquisition, retention andprofit need to be understood andmonitored so that corrective action (andemployee reward) can be planned andimplemented. Burke’s Enterprise ValueManagement Model provides just such aconceptual framework and statisticalmodel for researchers to monitor theripple effects through an organisation.29

Using this type of framework and, say,the QCi Customer Management



participant observation is increasinglyregarded as a very important part of thebattery of techniques used to understandthe customer experience.

RECOMMENDATIONSRather than end on a traditional sectionof recommendations, a call to action ispresented in the panel below.

References1 Byatt, N. (2000) ‘Want to retain your customers?

Then listen to them!’, International Journal ofCustomer Relationship Management, Sept–Oct.

2 Aspinall, E., Nancarrow, C. and Stone, M. (2001)‘The meaning and measurement of customerretention’, Journal of Targeting, Measurement andAnalysis for Marketing, Vol. 10, No. 1, pp. 79–87.

3 Evans, M., Nancarrow, C., Tapp, A. and Stone,M. (2002) ‘Future marketers: future curriculum:future shock?’, Journal of Marketing Management,Vol. 18, No. 5–6, pp. 579–596.

4 Stone, M. and Foss, B. (2001) ‘Successfulcustomer relationship marketing’, Kogan Page,London.

process, in the form of workshops,meetings, one-to-ones and e-mail,newsletters, suggestion boxes etc, asappropriate. This also ensures all businessand customer issues are identified andcovered in the research. The marketingresearcher with good research skills canlead in the research design of internalsurveys of employees to determinestrengths and weaknesses in theorganisation’s customer management,particularly where these involveconnections between differentcustomer-facing functions. Finally, it isworth noting that although questionnairesare still a prime research tool (seeAppendix for a typical customer-focusedquestionnaire project), they may not beenough to ensure understanding of howchanges to customer managementstrategies and processes affect customersand the staff who manage them. Properlyconducted mystery shopping and



The call to action: Questions to be answered by client and agency researchers (based on this paper)

Client researchers where CRM or database marketing is practised

1. Are you involved in all customer research and knowledge management?2. Should you be the guardian and manager of all such knowledge? Or at least work more closely with

those who are?3. Is the optimum set of data collected from customers in order to manage them effectively and

profitably?4. Do you know what your company collects?5. Have you been involved in efforts to correlate market research-based measures of the quality of

customer management with the outcomes, eg sales, profit?6. Do you identify best customer prospects in terms of value, profitability, influence?7. Is the customer life cycle relevant? If so, how, and what research is needed to understand how it

affects what and how customers buy and respond at different stages of the life cycle?8. What is the relative importance of acquisition and retention for your organisation? How is this reflected

in marketing research activity?9. How are retention, loyalty and commitment defined and measured?

10. What in an organisation drives these (see Burke White Paper Series31)

11. What benchmarks are used to evaluate, say, retention activities?12. How do you determine what drives/fosters commitment and what is really important? How does this

apply to customers of different net profitability to your company?13. Do you distinguish between claimed importance versus inferred importance?14. Are you involved in relevant CRM employee research?15. How would you evaluate the organisation’s CRM activity?

Agency researchers

1. Do you know the answers to the above for your clients?2. What value could you add against the above?3. Does your organisation successfully implement CRM?4. Do you check this?5. How?

16 Adapted from Dick and Basu, ibid.17 Source: Aspinall, Nancarrow and Stone (2001)

op. cit.18 Byatt (2000) op. cit.19 Personal communication with NFO WorldGroup,

2000.20 Source: Byatt (2000) op. cit.21 Nancarrow, C., Pallister, J. and Brace, I. (2001)

‘A new research medium, new researchpopulations and seven deadly sins for internetresearchers’, Qualitative Market Research: AnInternational Journal, Vol. 4, No. 3, pp. 136–149.

22 Oxley, M. and Nancarrow, C. (2002) ‘Managingthe diffusion of innovation: A new researchconcept and new marketing tools’, ESOMARCongress Barcelona.

23 Oxley, M. and Nancarrow, C. (2003) ‘Spreadingthe word: Fast-tracking new products to market’,Admap, February.

24 Oxley and Nancarrow (2002) op. cit.25 Oxley and Nancarrow (2003) op. cit.26 Stone and Forss (2002) op. cit.27 Norquist, M. et al. (1987) ‘A great place to shop,

work and invest: Measuring and managing theservice profit chain at Sears Canada’, Journal ofInteractive Marketing, Vol. 3, No. 3, pp. 255–261.

28 Woodcock et al. (2002) op. cit.29 Burke (2003)

http://www.burke.com/whitepapers/white_papersbscg.cfm

30 Woodcock et al. (2002) op. cit.31 Burke (2003) op. cit.

5 Stone, M. and Foss, B. (2002) ‘CRM in financialservices’, Kogan Page, London.

6 Woodcock, N., Stone, M. and Foss, B. (2002)‘The customer management scorecard’, KoganPage, London.

7 Ibid., chapters 15 and 16.8 Chartered Institute of Marketing (CIM) (2001)

‘The impact of e-business on marketing andmarketers’, this research was commissioned by theChartered Institute of Marketing from BristolBusiness School, UWE. A summary version waspublished in Stone and Foss (2002) op. cit.,Chapter 5.

9 Woodcock, Stone and Foss (2002) op. cit.,chapters 8 and 30.

10 Stone M., Machtynger, L. and Woodcock, N.(2002) ‘Customer relationship marketing’, 2ndedition, Kogan Page, London.

11 Boussafiane, S. (1996) ‘Exploiting data analysis incustomer loyalty’, Journal of Targeting, Measurementand Analysis for Marketing, Vol. 5, No. 1, pp.11–19.

12 Source: Boussafiane ibid.13 Fournier, S. (1998) ‘Consumers and their brands:

Developing relationship theory in consumerresearch’, Journal of Consumer Research, Vol. 24, pp.343–373.

14 Aspinall et al. (2001) op cit.15 Dick, A. and Basu, K. (1994) ‘Customer loyalty:

Toward an integrated framework’, Journal of theAcademy of Marketing Science, Vol. 22, No. 2, pp.99–113.



APPENDIX

Table A1: Typical customer insight research project schedule

Stage 1 Thorough pre-proposal briefing to ensure proposed approach fully meets needs andrequirementsStage 2 Provision of written document and presentation of proposal to ensure full buy-in from

research team to allow them to champion approach within organisationStage 3a Staff workshops — across all areas of the business from back-office to customer-facing staff

— highlighting staff perceptions of customer service and internal problems that could impacton customer service delivery

Stage 3b Audit of existing research to provide additional learnings to help shape current programmeStage 4 Depth interviews with customers (using different channels and products) and, if appropriate,

intermediaries, to ensure that findings not only useful for quantitative questionnairedevelopment but also providing actionable feedback even at this stage

Stage 5a Qualitative debrief and initial discussions about quantitative questionnaire developmentStage 5b Client taking forward actions from qualitative findingsStage 6a Quantitative benchmark with each customer and introducer audienceStage 6b Qualitative research with prospectsStage 7 Debriefs from stages 6a and 6b — including input from initial qualitative findings where

appropriateStage 8a Wider dissemination of benchmark findingsStage 8b Action planning workshopStage 8c Shortening of questionnaires for tracking purposesStage 9 Quantification among non-customers to provide competitive contextStage 10 Continuous monthly tracking of key audiencesStage 11 Findings from monthly tracking provided quarterly, for tracking data, showing trends and

effect of ‘events’ such as advertising, publicity, competitor activity so that changes inperformance can be cross-referenced with other activities

New directions in customer research and the issue of ownership

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