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 / Spring 2004 / Issue 34(originally published by Booz & Company)


A New Window onto CRM Success

A concept from 1950s psychology can elevate contemporary customer relationship programs.

Illustration by Lars Leetaru
Customer relationship management (CRM) is one of the most widely implemented management concepts of the decade, yet after hundreds of millions of dollars in systems and process investment, most companies are still waiting to see its vaunted benefits realized — in customer understanding, customer satisfaction, and financial returns. Why aren’t firms achieving the customer intimacy they desire?

One answer is that companies have yet to apply some relatively simple lessons that derive from several decades of social science research into the dynamics of human relationships. Like the Prisoner’s Dilemma and the Nash Equilibrium, an element of game theory known as the Johari Window can help illuminate rules that guide the behavior of people involved in transactions with each other. Looking at CRM through the Johari Window can assist organizations that are reliant on customer interactions — which is to say, most organizations — in building more open, transparent, trust-based, satisfying, and mutually profitable relationships with their customers.

Customer Strategy
A CRM program should build on a well-formed customer strategy to improve penetration into a customer or a market segment, increase sales force effectiveness, and help a company build loyalty with its most valuable customers. However, successful CRM implementation depends critically on how the relationship challenge is framed.

Too often, CRM technology is focused on capturing customer information and distributing it within the company. By observing customers and annotating their activities at all interaction points with what amounts to a hidden camera, a typical CRM system grabs information for later playback, which may take the form of cross-selling suggestions and, sometimes, relationship “health checks,” such as the dinnertime “courtesy calls” placed by one’s bank or telephone company. From this perspective, the primary role of CRM is to capture relevant customer information, economically extract the most cogent meaning, and deliver this insight to the widest possible set of potential users in the organization.

To customers, this kind of CRM system is a black box: They are aware that information is being captured and recorded, but they are unable to see how it is used and may be only dimly aware of when and how it is being played back to them. If information is power, then the power in this relationship is with the supplier. Used without sensitivity, “black box” CRM can prompt customer concerns about privacy and lead to distrust.

An alternative approach is to take a broader view of CRM — to look at it not as an unseen, exploitative eye on customer activities, but as an opportunity to create and expand relationships between an institution and its customers. The challenges for companies are to create an open and transparent environment that encourages customers to contribute more, and to improve the accuracy of information that is shared. If this greater level of information-sharing demonstrably leads to improved service, trust will be enhanced, which in turn will reinforce the benefits and likelihood of future sharing and interaction.

Human Relations
The Johari Window — a highly influential framework from the social sciences that has been used to explain and facilitate the deepening and strengthening of interpersonal relationships — clarifies this alternative approach to customer–supplier relationships. Invented by University of California psychologists Joseph Luft and Harry Ingham in the 1950s (and labeled with a combination of their names), the Johari Window is a conceptual model of interpersonal communication developed through the study of individual relationships, which also had clear applicability to the understanding of group dynamics, including the relationships between individuals and organizations, such as schools, hospitals, and companies.

The window divides all personal data into four categories. (See Exhibit 1.) The categories concern whether the personal information is known to the individual or revealed to the world at large:

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