The challenge is to segregate good customers from those that don't add value to the corporation because they are revenue neutral or negative. For example, customers with minimal bank balances are dissuaded from using a bank through relatively high banking charges, while customers with large balances are treated to special perks. Similarly, customers with large balances would be answered on the third or fourth ring, whereas lower tier customers would be assigned to a pool of reps that might put customers on hold for five or ten minutes.

To learn more about CRM, we recommend the Essentials of CRM: A Guide to Customer Relationship Management, February 2002, John Wiley & Sons. Full of valuable tips, techniques, illustrative real-world examples, exhibits, and best practices, this handy and concise paperback will help you stay up to date on the newest thinking, strategies, developments, and technologies in CRM. "Once again, Bryan Bergeron proves that he is ahead of the curve when it comes to understanding the value of customer relationships. This remarkable book is geared not only toward corporate executives with mega-investments in CRM, but can also be successfully applied to the street corner vendor. His articulate and sensitive style brings this highly involved subject matter to a level we can all understand." -- Michael Cusack, author of Online Customer Care: Strategies for Call Center Excellence "Managing relationships with customers has become a critical organizational competency. Bergeron has done a superb job of presenting the breadth, complexity, and nature of CRM. This book provides a fabulous and actionable grounding in CRM for organizational leadership." -- John Glaser, PhD, Vice President and CIO, Partners Healthcare System

Fortunately, a variety of technologies are available that allow automated profiling of current and potential customers, based on demographics, income level, and other information that can be garnered from charge card and other transaction databases. Profiling technologies allow companies to provide segmentation of products and prices that suit the potential customer's expectations and ability to pay. That is, as in the airline travel industry, some customers pay more than others do for the same service. As long as customers have a willingness to pay, companies can maximize profits while providing a needed service.

In addition to automated profiling programs that support mass customization of services, there are technologies such as virtual customer service representatives that promise to bring a semblance of emotional connectedness to the company while simultaneously servicing thousands of simultaneous customer email messages. These virtual representatives or Bots (software robots) are being used by companies that need a cost-effective alternative to costly call centers.

One of the most influential developments in the field of CRM is the availability of data mining and profiling programs focused on employees -- so-called Employee Relationship Management (ERM). By treating employees as customers, companies can increase employee loyalty, reduce administrative costs, and increase efficiency. For example, companies such as Coca-Cola, CISCO Systems, Delta Airlines, and Ford use ERM portals that allow employees to select healthcare plans, arrange shifts and schedules, and obtain office supplies -- all without the overhead of administrative support.

As the U.S. shifts more into a service economy, the significance of CRM will increase. This is perhaps most obvious in the PC industry, where stellar rises in companies have been flattened as the hardware becomes a commodity item. With very little differentiation possible in the hardware side of the business, the primary differentiating factor is customer service. For this reason, DELL computer, for example, has been able to maintain momentum in the PC market by providing exceptional customer services though phone and Web-based systems. A customer can self-configure a custom PC without ever interacting directly with a customer service representative.

Clearly, managing the customer relationship is the key to profitability -- and perhaps even survival -- in the new economy. The challenge for accountants and financial managers is to become familiar with the more technical aspects of CRM to the point that they can base ROI calculations on realistic expectations, as opposed to the hype that vendors are pushing in the industry.

Bryan Bergeron is the author of the Essentials of CRM: A Guide to Customer Relationship Management, February 2002, John Wiley & Sons