Question for the day: As a consumer goods Retailer, how do you build a CRM solution when you don’t know who your customers are?

Back in my Oracle days, Larry launched Oracle CRM. Quite frankly I was a little slow picking up “front office” back then. My areas of focus were: banking, supply chain,  online stores, B2B businesses…. in all cases we knew our customers (although not always our prospects). At Citi we were much more focused in online acquisition and tuning the marketing funnel, we were able to improve performance 2x-4x by looking at where profitable customers were coming from and the costs to obtain them. Running sales teams helped me appreciate how wonderful a tool salesforce.com is… and of course  my partner Peter Burridge (former CEO of Seibel Asia) and friend John Buchanan (founder/CEO of Retek) helped fill in many other “gaps”  in my retail CRM understanding: demand planning, config management, merchandising, inventory optimization, behavior tracking, …

Customer Relationship Management “CRM” still has not clicked for me.. it is not an obvious “bundle”. Given $2.4T in retail sales, and $750B in US marketing spend.. isn’t it amazing that there is not more “structure” managing the customer in retail? Why? I believe itss primarily driven by a lack of KYC (know your customer). Not KYC the way bankers interpret it.. but just a basic understanding of who shops at your store. I was in a forum with the CMO of Gap and she said “I get at least 2 calls a week from start ups and I have bandwidth to do 2 things next year… one will be with someone big like Google… the other with someone that will help me use my data to better reach my customers”.

How can Retailers get to know their customers? The traditional solution has been loyalty programs (Colloquy is a great resource for industry data), however we are begging to see some significant innovation as the business models of Square, Google, Amex, MCX are all starting to shift to address this problem.

Example was given by Ken Chenault and John Hayes last month. Amex has a pilot going with Loyalty Partners (which it acquired in 2011) in Europe. Retailers contribute their line item data to Loyalty partners and then they are able to couple it with issuer data for both analytics and targeted marketing/incentives.

Targeting individuals based on hard data (ie beyond the website you visited), and getting feedback on marketing effectiveness (actual purchases) is the holy grail of marketing.  Don’t think of Amex’s activity as payments, think of it as helping retailers execute a CRM strategy. Card linked offers, prepaid offers are fundamentally broken.. they only solve a yield management problem … while destroying brand and pricing. At the end of the day CLOs and PPOs don’t build loyal customers and reinforce price as the central decision point.

By helping Retailers know their customers, Square/Amex/Google are tackling a VERY BIG problem. These are not the only companies.. my bet is that we will see a wave of participants:

• Banks work to extend payment networks,
• Retail CRM providers extend software,
• Loyalty systems (like Catalina) work to extend services, and
• Retailers build new ad/payment data networks (MCX)
• Advertisers extend to POS integration
• …etc

This is a VERY VERY big wave with tremendous implications for big data, marketing, advertising, enterprise software, privacy…

What should we call this wave? Enabling retailers to know who their customers are?  Would you give up your anonymity for real value? Would you allow an advertising agent to take bids to reach you? Think of yourself as a professional athlete.. sponsors lining up..  What is the price of your loyalty? Is this where Amazon Prime is today?

If retailers and CPGs could focus marketing spend ONLY on relevant customers, just imagine the impact to other advertising channels.. no more free TV? no more billion dollar Olympics?

Happy Thanksgiving.