Companies like E.piphany (EPNY), Oracle (ORCL), Siebel Systems (SEBL), and Broadvision (BVSN) sell products that help build, develop, and hook customers into a relationship. They want deep knowledge about my buying behavior. In return, I get coordinated access to these companies via email, the Web, phone and whatever -- a true "one-to-one" experience.

Now, I like having various ways to access and interact with Schwab (SCH), MediaOne (UMG), and other companies that use CRM software. But is this a relationship? No, it's good service and that's what customers expect when doing business with these firms. Perhaps the software should be called CSM for customer service management, instead.

Relationships vs. one-night stands
Why do these companies want to engage in a long-term relationship with you?

Long ago marketing academics noticed that a company with close customer relationships has a great advantage, because the customer will buy from the company forever and is usually willing to pay higher prices. These have been called "lost for good" relationships.

CRM vendors promise that their software will help companies develop this type of relationship with their customers. As an example, E.piphany promises "unbreakable, lifetime customer relationships."

Some customer relationships, however, look more like a one-night stand (or a series of one-night stands). A one-night stand is also a "one-to-one" experience, but it's doesn't last very long. Customers in these relationships will buy companies' goods, but you can bet they won't devote themselves to one company forever.

Forever relationships show mutual dependence
So how do you get a lost-for-good relationship? Well, academic research shows that a lost-for-good relationship is one that is mutually dependent. That is, both parties perceive the other is dependent on them. The relationship is symbiotic. Think of a good marriage as an example.

Here's another example. For several years Dell (DELL) and Intel (INTC) have, to a large part, been mutually dependent since both have well-known brand names and, as a result, each needs the other to sell their products.

But in fact Intel can sell to a large number of box manufacturers, while Dell has traditionally bought only from Intel. So Dell is actually more dependent on Intel than vice versa. Research predicts that Dell might balance its dependency on Intel by looking around for other chips to use in its computers -- which Dell has done. So much for a lost-for-good relationship.

By the way, Microsoft (MFST) tends not be mutually dependent with its partners (many companies are more dependent on Microsoft than vice versa). These kinds of relationships are either neurotic or, if there is competition around, tend to result in the dependent company hoping a new potential partner like Linux shows up.

Is CRM really about relationships?
So am I going to be dependent on these companies that use CRM? According to the Meta Group, that's the purpose of CRM. CRM is supposed to raise customer switching costs, and to increase customer intimacy and retention.

But whose intimacy are they talking about? Obviously they're talking about having intimate knowledge of me. But do I have an intimate knowledge of them? No! No wonder some people are concerned about privacy with CRM.

Companies that use CRM say that knowledge will help them understand customer needs. That's great, but it won't create lost-for-good customers unless customers sense some mutual dependence. In fact, privacy issues might be less important if customers feell some mutual dependence with the company.

Credible commitments
Companies who are really interested in creating long-term customer relationships might heed the words of Thomas Schelling, who said strengthening a relationship between two parties is created by "tying their hands." What he means is that both sides become vulnerable.

It's obvious that customers are vulnerable, but what about the companies who use CRM?

I don't think companies are willing to tie their hands to their customers. One thing I've learned from working with companies is that they tend to like their customers being dependent on them, but not the other way around.

If Shelling and academic research are right, statements or promises that "we're really interested in making you satisfied" won't work -- that sounds like a one-night stand.

Instead you must use credible commitments that sounds more like, "Hey, we know you're dependent on us, so we'll be dependent on you -- and we'll put our money and resources where our mouth is to demonstrate our commitment." Striking a service-level agreement with very favorable terms to customers would be an example where commitments would be both present and credible.