VRM is vendor relationship management. Why does this matter? We all struggle with the balance required to be a good marketer. Today we are inundated with tools, information, and sales pitches regarding what we need to succeed in this difficult marketplace, but the reality is that we should always be looking to our potential consumers to determine what works best for “Them” in reaching them with messaging that is effective and useful for them to make decisions in their everyday life. If we start with the consumer first our success rate will go up.
VRM: The Next Step For Customers In Control
by Samuel Greengard
In a day and age where CMOs have access to state-of-the-art CRM, big data, and analytics tools, the challenge of building and maintaining customer relationships, ironically, continues to grow.
- A starting point for understanding VRM is that it is essentially the counterpart to CRM.
- Consumers are deliberately giving brands false data about themselves to protect their privacy.
- CMOs must ultimately create a higher level of engagement in both the buy cycle and the own cycle.
Research shows that throngs of consumers are turning to ad blockers, and many are also intentionally undermining and “dirtying” databases. They’re also ditching companies like never before. In fact, one recent studyfound that nearly a quarter of millennials say they would end their business relationship with a company after just one negative interaction.
“Customers are tired of having their personal data gathered by unwelcome surveillance, fed to big data mills, and then being subjected to personalized marketing messages that are wrong most of the time,” stated Doc Searls, director of ProjectVRM at Harvard University’s Berkman Center for Internet and Society, and president of consulting firm The Searls Group.
However, the problems don’t stop there. The industry is in the midst of a massive and permanent power shift. In the coming years, “Customers are going to become more independent and powerful on their own” and take control off their experiences and relationships, he told CMO.com.
This emerging concept is referred to as vendor relationship management (VRM). It’s rooted in the thinking that the customer experience (CX) ultimately belongs to the customer, who should have the tools and power to control the marketing experience. Within this model, a company and its customers are equal partners–and big data can sometimes serve as an abstraction layer that blocks true knowledge.
However, Searls, author of “The Intention Economy: When Customers Take Charge” (Harvard Business Review Press), said that when VRM is used effectively, it leads to “far greater loyalty and useful intelligence than marketing programs that rely on guesswork derived from fracted personal data.”
A starting point for understanding VRM is that it is essentially the counterpart to CRM. Searls said he believes that the approach relieves vendors of the perceived need to “capture,” “acquire,” “lock in,” “manage,” and otherwise employ the language and thinking of slave-owners when dealing with customers.
Moreover, VRM is considered part of a broader concept called life management platforms, which introduce a framework for managing personal data while enforcing privacy and security, noted Martin Kuppinger, founder and principal analyst at research firm KuppingerCole, in an interview with CMO.com. He described VRM and life management platforms as an “active” approach to matching the needs and desires of businesses and consumers.
Within a VRM framework, organizations provide consumers with the tools to manage relationships and data, make individuals collection centers for their own data, and allow consumers to dictate how a business shares and retains personal information. In the latter case, for example, a customer might request an organization delete his data when the business relationship ends. Although VRM remains in the nascent stages, Searls said he believes that in the future, “Just as vendors today are able to manage relationships with customers and third parties, customers will be able to manage relationships with vendors [through robust software tools and technology].”
In fact, marketers are largely to blame for the problem. At the heart of the issue: Industry spends billions of dollars on marketing and advertising that completely fails, said Jason Kint, CEO of industry trade organization Digital Content Next, which represents the business interests of large digital media firms, such as CBS, NBC, ESPN, and the New York Times. “There hasn’t been enough attention paid to the customer–and consumers, in general,” he told CMO.com. “People are now speaking out against the current system. They are opting out entirely from advertising with no real discretion about what or who they’re opting out from. It’s an unfortunate situation and an indication the entire industry needs to re-examine things.”
The problem–and the pushback–is growing worse by the day. More than 200 million consumers already use ad-blocking technology, according to a September 2015 article in Business Insider. By some estimates, adoption is rising at double-digit rates. All of this didn’t happen in a vacuum. “Virtually all the coverage about ad blocking misses a very basic point,” Kint told CMO.com. “[At a fundamental level], individuals have taken total control of their own experience related to advertising and tracking online–by simply turning off ads. Whereas the ‘Do Not Track’ initiative proved toothless, ad and tracking blockers [such as Ghostery] give people fangs.”
No less disturbing for CMOs is the fact that consumers are also deliberately giving brands false data about themselves to protect their privacy. According to a July 2015 study conducted by mobile marketing firm Verve, 60% of consumers intentionally supply incorrect information when submitting personal details, and one-third supply fake e-mail addresses. Said Anonella Mei-Pochtler, senior partner and managing director in the media practice at The Boston Consulting Group: “There is a totally different level of interaction and proximity to the consumer that needs to be learned and needs to be managed.”
Seals and others hope to reverse course and put VRM into play in the business world. He suggested that CMOs and other executives begin by migrating toward an opt-in data model, while providing greater flexibility and controls for customers. At the center of VRM is delivering simple and straightforward tools and technology for customers to manage preferences, policies, terms, and means of engagement, authorizations, requests, and virtually anything else that’s possible in a business relationship. Ultimately, VRM counterbalances CRM and, used effectively, benefits both consumers and businesses. Vendors must recognize that heavy-handed and one-sided systems do not work, Searls said, and it’s critical to earn the respect of customers, who are less and less bound to any particular company and free to bolt to a competitor at a moment’s notice.
As consumers gain greater power, business relationships must continue to evolve, Searls added. In the future, he said he believes consumers will bring their own tools to the table, and marketing methods, including loyalty programs, will undergo a massive change. For example, “With these tools, customers will run their own loyalty programs–ones in which vendors will be the members. Customers will no longer need to carry around vendor-issued loyalty cards and key tags. This means vendors’ loyalty programs will be based on genuine loyalty by customers and will benefit from a far greater range of information than tracking customer behavior alone can provide.”
For now, Kint suggested that marketers focus on building stronger and more direct relationships with customers–while putting trust-building at the center of the equation. It’s also important to ensure that an entire business network–as well as ad networks–manage relationships appropriately, and there’s no abuse of consumer data.
Ultimately, he said, success revolves around three core concepts: delivering a customer experience that matches consumer needs and desires, protecting privacy, and delivering robust security in order to avoid breaches. “The industry needs to educate itself and build touchpoints that lead to trust. Balance is critically important to preserving relationships,” Kint said.
According to Searls, CMOs must ultimately create a higher level of engagement in both the buy cycle and the own cycle. Within this framework lies a need to move away from a traditional “attention economy” and toward what he described as the “intention economy.” This requires organizations to standardize and normalize protocols–including the way code and data are used and retained–while clarifying terms of engagement. In addition, there’s a need to recognize when customers are signaling intentions, such as readiness to buy or the need for a new service.
CMOs must “learn directly from customers about what they actually want,” Searls said.