Making customer relationship decisions: Analytics v rules of thumb

This article explores how customer management decisions are made in the leading Nordic retail banks and whether these decisions are driven by mainstream analytical approaches to customer lifetime value available through the banks' CRM systems, or by rule of thumb heuristics. The results indicate that the use of managerial heuristics is surprisingly widespread and, counter-intuitively, that rule of thumb heuristic-based decision making frequently outweighs measures such as customer lifetime value with regard to customer management decisions. The implications are considerable because if successful banks are making widespread use of heuristics, managers and academics would benefit from understanding the conditions under which heuristic decision making can be more successful than an analytic approach. This understanding, in turn, may highlight a limitation of CRM systems and point to a more flexible approach to customer management decisions in which experience-based managerial heuristics modify data from formal CRM systems.