Steve Cone Weighs In on CRM

Steve Cone has never been shy about voicing his opinion. And that trait came in handy when we sat down with him to discuss his views on CRM. For starters, Cone doesn’t like that acronym because it can stand for “just about anything.” And he thinks that many firms fail to practice what he calls right-time marketing.

Cone should know. He led Key Corp. from Stone Age to Cone Age, as one writer put it, and has made similar contributions at American Express, Fidelity, Citigroup Global Wealth Management and the service bureau Epsilon.

And he has now distilled the wisdom of his 30-year marketing career into a book titled “Steal These Ideas,” published by Bloomberg Press, New York.

It’s an easy read, and it does more than provide tips: It also tells what’s wrong with marketing today.

Cone, who now serves as managing director and head of advertising and brand management at Citigroup, was happy to tell us what’s wrong with CRM, and to answer one question that had nothing to do with that subject.

The 1960’s radical Abbie Hoffman wrote a book called “Steal This Book.” Did Steve read Abbie’s book?

Yes, but he didn’t steal it.

The CRM Loop: In Chapter 12 of your new book, you write: “Forget complicated clusters and demographics.” You might get an argument from the service bureaus on that.

Cone: Of course I will because they’re in the business of being complicated. Beyond that, it gets very esoteric, and often unnecessary: Having spent millions of dollars trying figure out who people are, and we know who they are.

The CRM Loop: But don’t you need to know certain things about customers?

Cone: The key is to keep track of every interaction you have with them, and to throw them into basic buckets: People that are very loyal to you vs. people that occasionally respond vs. people that only seem to respond to a special offer. Or people who have had a bad experience or don’t even know they are a customer. I do believe predictive modeling is a good tool. You look at customer behavior and focus on a few—just a few—key attributes to understand the likelihood of a person buying a particular product or service.

The CRM Loop: Like what?

Cone: The best prospect for a product or service is someone who just bought it. At Key Corp., for example, we created a system so that when a person had three months left on their car loan, that triggered a letter thanking them for being a customer and paying down their loan, and offering them another with very little hassle. We found that people who pay off their loan generally go out and buy another car. How many institutions thank you for borrowing their money?

The CRM Loop: Do you subscribe to the one-to-one philosophy espoused by Peppers and Rogers?

Cone: I suppose. I’m not sure exactly what their philosophy is. I think guys like me at Epsilon created that philosophy long before they were in business. Our whole premise was building databases so that an organization could communicate directly with a specific customer or a donor about their relationship with the organization.

The CRM Loop: Even when you’re not trying to sell them something?

Cone: You’re always selling, aren’t you? Even when you’re apologizing, you’re setting the tone for how you treat customers when something’s gone awry. I cite my wife’s experience with American Airlines. American has this database where they would send out very nice personalized apology letters for screwups on a monthly basis. But if you missed the last-day cutoff, you didn’t get a letter for five weeks. That’s what happened to Faye. She was delayed flying into Dallas because of the weather. She knew it wasn’t American’s fault. Five weeks later, she got this very nice letter apologizing, and telling her they were sticking an additional 2,500 miles into her AAdvantage account, all of which was very nice, except her response was: “They’re four weeks too late.”

The CRM Loop: How do you account for that failure?

Cone: The failure was that they should have spent the money to do a daily update so they could punch out the apology letters on a continuous basis, not once a month. It has to do with being cheap. Or maybe it was ignorance, giving them the benefit of the doubt. In the commercial world, we call it “post-purchase anxiety.” When an event, positive or negative, occurs, the organization needs to respond within a day or two, not a week or three or four or five.

The CRM Loop: Who does it well?

Cone: The TV evangelists operated on a continuous-stream system. You sent in a letter asking them to pray for you whatever the three or four or five things you wanted them to pray for you about, and four days later you got a letter back telling you they were praying to those issues. Very impressive. That’s why you sent them money. We were doing this in the ‘70’s. You don’t need sophisticated modeling to set up daily triggers that generate a response. In the online brokerage world, we respond on an immediate basis. Most services today show a real-time look at market prices for the client—not what it is for six hours or 12 hours but what it is right now. I don’t know if CRM addresses those issues—I think it’s a term that means just about anything.

The CRM Loop: Speaking of financial services, you said eight years ago that “the only thing that’s changed in banking in 200 years is electricity.” Do you still feel that way?

Cone: I think we’ve evolved from dinosaur times. We’re much more access friendly, and much more mindful of selling the right product to the right customer at the right time. And we do have systems in each business that keep track of the entire customer relationship. But I still think the industry as a whole doesn’t do the kind of right-time marketing I talked about when I was at Key.

The CRM Loop: How does Citigroup shape up in that regard?

Cone: Citi does a good job in certain areas. I don’t think other financial institutions really do. The Internet is terrific for clients doing transactions. They can do it all themselves. They don’t need to deal with a person, which can be a hindrance or an annoyance. That’s one thing that’s changed since my days at Key Corp.

The CRM Loop: What kind of database do you need to serve customers across multiple channels in many nations?

Cone: There’s no such thing as a master database for a global company like ours. There are country specific laws in pretty much every country that prohibit moving data from one country to another in many cases, or even from one business to another. There are certain applications that do cross borders, where they recognize you on a local basis because your affiliation—like the use of ATMs. That’s probably the best example. In fact, it may be the only one. It doesn’t rely on moving data back and forth but on an authorization system that connects to certain data centers around the world.

The CRM Loop: Are you active in all channels?

Cone: We try to operate on the philosophy that all channels are accessible, and that customers make the choice. You contact us the way you want to contact us—by phone, by Web, in person, at the ATM. That’s really the whole ballgame: 24 by 7 access. Most financial institutions have always tried to be that way. We were certainly a pioneer in the ATM world, providing access for many years now on a worldwide basis wherever you happen to be. We started the technology many years ago of making sure that you never lost physical contact with your card, which at the time was absolutely radical. Every other machine forced you to stick the card in the machine, and the card disappeared and you wondered whether you’re going to get the card back.

The CRM Loop: How did an entrepreneurial guy like you end up in financial services?

Cone: The reason I like financial services, which I know sounds a little pollyannaish, is that it’s a noble calling. After your health, the No. 2 issue for families around the world is financial security. And we are in financial services are in the business of providing ways to achieve financial security for all levels of affluence.

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