In Twitter, Wal-Mart, VRM and the Future of Retail, Broadstuff (blog of Broadsight) says this:

To entice the customer into what is probably a slightly longer supply chain, they will need to offer a discount, and get a better idea of what the customer’s requiremens are upfront – is get the customer to hand over data ideally at point of, or even in advance of ordering. That also has the benefit of further dropping end to end transaction costs.

The time honoured way to do this is to scrape data and mine via the CRM systems, but customers by and large are resisting this where it becomes too apparent (think Facebook Beacon). The answer of course is to make them want to do this.

Which is where Vendor Relationship Management (VRM) comes in – the VRM logic is that the customer keeps a large tranche of retailer relevant data themselves, which is handed over as part of a conversation that could happen before, during and after purchase. Clearly there would nbe a major opportunity to offer sufficient data for retaiulers to take just-in-time benefits from the “last link” part of the supply chain.

This is good.

We have definitely made progress when we see the customer as the last link in the supply chain rather than a bucket below the end of it. We also need some tweaks in language and perspective here. VRM is about more than customers harbouring data and ‘handing it over” to vendors. That sounds like customers just got caught with something that doesn’t belong to them. (I’m sure the author didn’t mean it that way. Just talking here about how it sounds.)

To see the essence of VRM, you need to come at it from the customer side. So, instead of looking at the supply chain, look at the demand chain.*

VRM starts the demand chain.

VRM is about making better customers — on customers’ terms, and in better ways than any vendor makes available today. To be fair, vendors can’t do that — not just because they’re not customers, and don’t wear the customer’s shoes; but because they’ll all want to do it differently, in their own exclusive ways. VRM tools will work the same ways across multiple vendors, rather than different ways for each vendor.

To get the idea, imagine that you have only one loyalty card, able to engage many different stores with which you have relationships. Right now it’s the other way around: you carry many loyalty cards for many different stores. Which would be better for you, as a customer — one card, or many? How about if you were able, within your own loyalty system, to express global preferences, such as “no junk mail” and “paper, not plastic”? How about if that loyalty system allowed you to gather and keep your transaction records, for your own purposes, and not just the stores’? And how about if your loyalty system allowed you to publish, just for favored sellers, your shopping lists? How about if your loyalty system allowed you to cut off any vendor that abused their privileges with you? How about, when you change your address, you could do it once for all of your vendors?

First, you would have independence from these vendors — one way of dealing with all of them, rather than many ways for all of all of them to deal with you (each assuming that they have “acquired” you — as if you were a slave).

Second, you would have better ways to engage these vendors. This would be good for them as well as for you. They would have better information, and everybody would suffer less friction betwen multiple systems that don’t get along (beyond the equal burden they all put on you to carry around their cards and key fobs).

Better information makes better markets. VRM gives customers ways to contribute better information to makets, making markets more intelligent, responsive and functional.

Bottom line: Free customers are more valuable than captive ones — both to vendors and to customers themselves.

VRM is an independence movement for customers. It’s about setting customers free — and improving free markets in the process.

* “demand chain” is barely more than a stub in Wikipedia. And “demand chain management” turns out to be nothing more than another name for “supply chain management”.