Seattle—According to Ernan Roman, understanding the difference between permission marketing and “consensual marketing” generated more than $300 million in incremental revenue for IBM during the past five years. The industry veteran and president of Ernan Roman Direct Marketing explained how during his morning keynote presentation at DMA World Seattle on April 6.
Permission marketing is what most of us think of as opt-in marketing: A company asks a customer or a prospect for permission to send marketing messages. But if those messages are not relevant or fail to meet the recipient’s expectations, they’re not likely to generate sales or retain buyers. “Customers’ expectations for relevance are not in sync with marketers’ practices,” Roman said.
To achieve a more satisfying, less passive relationship, you need to know much more about your customers’ needs. On a broad scale, studies by Roman’s firm have shown that customers feel that “the fastest way to be forgotten is to buy”—in other words, they’re disappointed with the lack of postpurchase follow-up. Another finding is that customers aren’t universally happy to be directed to the Web over other channels: “People are perceiving that we’re blowing them off to a low-cost channel that’s easier for us,” Roman said.
And because of the e-mail glut, “we’re seeing a greater interest in direct mail during the past 10 months than we had in the past 15 years,” he said. Which is not to say that buyers are eager for mailbox glut. By obtaining specific information about your audience, you can move to step two: “Engage customers in meaningful relationships.”
This entails persuading customers to tell you what they prefer and need in terms of media and products, and to provide you with detailed database information. “This is the richest, most valuable information from a database viewpoint,” Roman enthused, “and it’s proprietary.” Generally speaking, you can encourage customers to “self-profile” by offering them something of value—not discounts, but information, services, or other benefits.
Roman cited the example of the IBM Software Premier Club. The computer manufacturer wanted to stem defection of its largest accounts to competitors. Working with Roman, it found that customers wanted to receive far fewer, but far more targeted, communications from IBM. So five years ago it established the invitation-only loyalty program, offering try-and-buy software, registration for industry-specific events and Webinars, and information on demand to customers who provided relevant information, such as their specific industry, IT interest areas, job level, and job area.
Since then, IBM has generated $310 million in incremental revenue. Thirty-five percent of members made purchases they would not have otherwise considered. The average annual click-through rate is 19.7%, compared with an average among b-to-b merchants overall of 2%. And the number of leads that the field sales team converted to sales increased 21%.
Given that IBM’s primary goal had been to increase customer loyalty and retention, the revenue gains are especially significant. Which proves Roman’s closing point: “The less you focus on sales and the more on relationships, the more you’ll gain in revenue.”