Can CRM Software Uncover Your Ideal Customer?

In Andrew Boyd's year-end recap for CRM Buyer, one of his top three tips for 2009 is to "profile both successes and failures." Digging a little deeper, he's really writing about understanding how to better identify the right customers for your team to be working with. And, by extension, he's challenging readers to think about their worst customers ever.

If you know what a bad customer looks like, you're more likely to avoid them the next time you see one. It can be tempting to use CRM software to start a customer profiling system that automatically alerts your sales team to cease working with potentially unprofitable prospects. Best Buy discovered this the hard way in early 2004 when it started labeling customers as "angels" and "demons" in an effort to weed out bargain hunters and return-prone shoppers. In 2008, leaked documents revealed a softer strategy that still used personas to identify good and bad customers.

Filtering customers after they're already customers often leads to challenging situations. Leaders at Best Buy found themselves explaining to both customers and the press a set of personas that some customers found condescending or oversimplified. For service providers, this process often means "firing a client," causing stress for team members and potentially damaging a company's reputation.

Instead, experts recommend using CRM systems to filter prospects before they can become customers. Web-based signup forms act as a filter to discourage "tire kickers" who may not want to be called upon by sales professionals. CRM software can interface with credit reports, partner profiles, or other databases to qualify prospects.

This strategy inherently works better for businesses that rely on agent-customer relationships, such as banks, mortgage companies, or service providers. In retail environments CRM systems are often more effective at inviting the best customers back, rather than trying to weed customers out.