Getting Personal with Relationship Marketing

Nov 01, 2004 10:30 PM  By

It is time to face reality: Customers do not want to have a relationship with your company. Relationships require a commitment from everyone involved. Today’s hectic world leaves little time for most people to connect with their families, so how can we realistically expect them to connect with a company? ▪ That said, increasing sales to existing customers, which to many marketers involves establishing a relationship with them, is one of the two ways of growing a business. Acquiring new customers is the other way, but acquisition is painfully expensive and often unprofitable. So it is better to focus on defining and fulfilling the needs of current, quality customers. This will help you cross the line from providing generic product delivery to inspiring loyalty and commitment, increasing lifetime value and profitability along the way.

The best of the best

Successfully determining and meeting the needs of your best and potentially best buyers requires creative marketing, competitive pricing, stellar service, and consistent processes across channels. An effective customer relationship management (CRM) strategy will help define customers’ needs and expectations so that marketing and fulfillment plans are more targeted and profitable.

Traditional analytic methods group customers into segments based on past performance. That may be fine if you define success as a 1%-3% response rate. But legislation limitations, customer alienation, and marketing expenses require that we find more-effective ways to market to customers.

Significantly reducing prospecting, particularly when attrition can exceed acquisition, is a scary proposition. Investing hundreds of thousands of dollars in CRM technology without a guaranteed return is equally frightening. This is why creating a program that targets your best customers and tests multiple scenarios is an excellent way to design and implement a CRM initiative.

A successful strategy requires retrofitting existing analytics, processes, and services to create a customized service solution. That may sound daunting. But implementing a CRM strategy is much like creating a traditional direct marketing program: You identify your target group, test well, and roll out. A key difference is that an effective CRM strategy begins with the capture of transactional data available in every order management system (OMS). This wealth of information can improve every aspect of your business — if the information is properly managed.

The initial target group is your best customers. The goal is to cement the relationship you have with them, increasing sales and profitability. Instead of a series of individual campaigns, you want to create a sales and service program that will be measured by the total results. This program will ultimately need to cross channels for seamless sales and service, but for now begin with your current configuration.

Depending on your product line, you may need to segment your customers by level and type. For example, if you sell home furnishings, you might select the highest-value customers who purchase furniture and try to have them include accessories with their purchases. Once you’ve defined the objectives and chosen the test segment, review the data for distinctive buying patterns: Are the purchases seasonal? Are they tied to specific events? Do the same product combinations appear multiple times? Are there delivery challenges? What are the major service issues?

You are searching for any information you can use to enhance customers’ shopping experience and improve retention and sales. For instance, if you find customers who order the same time each year, schedule your marketing around that time. If you offer consumable products, create an automatic order program. This saves customers time and effort while guaranteeing a continuous supply, and it provides you with predictable inventory movement and cash flow.

After you develop a program for your best customers, you can then move to less profitable audience segments and create unique programs for them. Ultimately, you will have to include technology in the program to manage it on a large scale. By that time, you will be able to appropriately define the specifications.

The keys to customization

There are many challenges to designing a customized program. The process requires time, resources, and long-term commitment. Seven key points to consider:

  • Relationships begin with a genuine care for customers

    People do not want to be managed. They want to be inspired, educated, and entertained. Accomplish any or all of these objectives, and customers may move beyond their inertia to place an order. Continuously accomplish these objectives, and they may become loyal customers.

  • Data integrity is mandatory

    Every OMS has limitations. Companies create work-arounds to manipulate the software into performing the necessary tasks. But these solutions result in data being placed in unexpected fields. For example, most OMS’s have more address line fields than needed. Other information is often placed in these extra fields. A straight export from the OMS to other software will not address that variance.

    Inconsistent data entry is another challenge. Text mining seeks specific phrases and terminology to classify related groups. Consistent data entry improves the ability to appropriately classify information — a problem in free-form fields such as comments. Customer comments hold valuable information, but converting it into a usable format is challenging.

  • Data must have application to be valuable

    Investing resources in data analysis without application is wasteful. For example, it is interesting to know how many people visited your Website, but you can’t use that information to improve your business if you don’t know what they did while they were there. Which visitors popped in and out? Which ones shopped for 30 minutes before leaving without making a purchase? Where did they abandon your site? You can improve your conversion rates when you can track movement and identify ways to improve sales and service.

  • Use available tools before investing in new technology

    It may be tedious and time-consuming to use the report writers and spreadsheets available, but the pain will reap rewards by preventing the purchase of unnecessary technology. It will also ensure intimate analysis and understanding of the data, and it will help you develop the specifications for any new technology purchases.

  • Technology should complement the processes

    Develop the processes that work, and choose the technology to match. Ultimately, you want channel transparency so that customers can shop and interact with you at their convenience, which requires a long-term commitment. The planning and design must be tested thoroughly before implementation, or the results will be catastrophic. Last Christmas, the “buy it online, pick it up at the store” option looked great in the commercials. Unfortunately the long lines, the out-of-stock inventory, and the harried store clerks were not as attractive. It is much better to create a pilot program that works with existing operational limitations.

  • Focus on business opportunities

    The test stage is designed to identify business opportunities, not resolve all issues. The primary objective is to test the impact of specialized marketing and service to high-value customers. Start with the information you have available. Use it to find business opportunities and to determine any additional information needs. Looking at data in different formats often identifies patterns previously missed. You may find product classes that you can expand, customer segments that are underperforming, and inefficient processes.

  • Departmental integration is critical

    If the communication between marketing and operations is limited, you will never realize the potential of this business opportunity. Data acquisition, channel integration, and specialized service require complete cooperation from all departments.

If your company is suffering from departmental competition, first create an environment where everyone works together for the common good. This establishes the foundation for successful implementation of every CRM initiative. It also improves morale and service with minimal expense.


Debra Ellis is founder of Wilson & Ellis Consulting, a management, marketing, and operations consulting firm based in Barnardsville, NC.