CRM-based consumer segmentation comes at a cost. Data has to be collected, behavior analyzed, and segments identified before offerings can be created and messages communicated. Implementation can be complex, involving building multiple bridges to islands of information. Ongoing data collection, plus the resources required for sophisticated analysis, can put CRM out of the reach of small and mid-sized companies.

As a result, the CRM report card is mixed. An AMR survey of 190 IT executives in 2007 found that 29 percent of CRM projects fail. Forrester Research reported that fewer than half of 94 businesses surveyed were fully satisfied with their CRM implementations. And gauging the return on investment from CRM is so difficult that only an estimated 20 to 30 percent of firms that use the technology have even tried.

A better alternative is now available: The rise in social networks and online communities, combined with the new era of the Web-empowered consumer, makes it possible for companies to reap the benefits of consumer segmentation without many of its costs or complications.

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