Evolving Digital Links Maximize ROI

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The Internet has dramatically changed the rules of marketing. In the days of old, desired ROI was limited to consumer marketers with large customer databases. However, today, groups with substantiallly smaller databases can garner high returns.

It is already widely known that relationship marketing's been a cornerstone of the direct response strategy for the last decade. And, in the past, the application of relationship marketing has been mostly limited to those with large customer databases because only with significant print economies of scale could a marketer make the desired ROI.

However, now the rules have dramatically changed, yielding three new key benefits: Relationship marketing is a viable strategy for organizations with relatively small customer databases; the concept of customer-relationship marketing can be extended to prospects; and the frequency of communication - even potential ROI - can greatly increase.

Print economies of scale once drove the viability of relationship-marketing programs. In order to communicate consistently with customers, the cost of communication per customer needed to be low. Only in volume could a marketer justify the cost of printing and postage of a full-blown customer-relationship marketing program. Now with the Internet - and more specifically, e-mail - any organization with any sized of customer database can create, execute and reap the rewards of a strong relationship-marketing program.

Because e-mail has such extreme cost efficiencies, and because the materials used to deliver information are so cost efficient, digital-relationship marketing programs are extremely cost effective. Postage and printing no longer determine the limits of what a program can achieve. Now, the limits relate to integrating databases with Web pages and e-mail communication. While this limitation is not insignificant, it is possible to develop a small-scale program without enormous investment.

Typically, a relationship-marketing program focuses on customers - people with demonstrated economic value. This is the result of the inherent costs of communicating with an individual using paper and postage. Now, with the Internet and e-mail, the cost of communication can be so low that you can afford to execute a relationship-marketing program that includes complete strangers. The objective then would be to convert strangers into loyal customers. With e-mail, this strategy can be successful, even if the conversion rate is low. Unqualified participants take up hard disk space and bandwidth, which is very inexpensive.

Most print-based relationship-marketing programs are limited in size and frequency as a result of paper and postage costs. But with the Internet and e-mail, the cost per communication is greatly reduced, allowing relationship marketers to bump up the frequency. While no one wants to get bombarded by a program, having flexibility with frequency is a great boon to relationship marketers.

The key to justifying greater frequency is designing a program that prospects, and one that customers want to receive. This means that the combination of soft and hard benefits have to be translated into a digital medium in a way that makes sense for frequent contact. Often, this boils down to developing the strongest relevance in a digital-relationship marketing program, which speaks to the fundamental design of the program.

Technology, of course, is just technology, not a customer relationship. Using technology, you can just as easily disenfranchise your prospects and customers as you can make them loyal. Key to any digital-relationship marketing program are the ideas behind it, not just blasting out a bunch of e-mail. Fortunately, the concepts behind print-based loyalty programs still apply.

What makes digital programs so interesting? It's the fact that you can take print-based concepts so much further. Sure, you can easily give people points for purchases, but there is really no limit to the level of relevance you can build into a program because you are dealing with a medium that is unbelievably flexible. Relevance can come from a variety of sources.

Early digital programs relied on information, such as articles and tips. While this type of program content can have perceived value, it is very difficult to execute when you want a high degree of versioning. Ultimately, some of the strongest content for a digital-relationship marketing program will be information about the individual receiving it. This implies accessing and distributing some type of account information that goes beyond how many points someone has earned. While points-based programs can be useful, they do not necessarily have to be the premise behind a relationship-marketing program.

For some businesses, points-based programs may not even make economic sense. When the value of an individual Web site user is very low, it can be impossible to develop a points-based loyalty program where someone can actually redeem points for anything of value. For example, many Web-based businesses have a business model that revolves around servicing a very high volume of registered users, and each of these users has a fairly low value over the course of a year or lifetime. For these businesses, relationship-marketing programs can't afford to give away even low-cost goods in return for using a Web site. Instead, the relationship-marketing program must rely on delivering information that possibly leverages their account, or usage history, with the Web site.

The key enabling technology for the best digital programs is database-driven HTML e-mail. Just about any information in a database of prospects or customers can be leveraged in e-mail - and should be if the prospect or customer will see value in it. HTML e-mail is far better than text e-mail, both in terms of responsiveness and ability to communicate the program image you need.

This year will no doubt be the year that digital-relationship marketing programs really take off. Over the course of time, organizations will discover the types of program content that maximize ROI with this new medium. Certainly it will be a combination of what we already know to work, together with new insight and learning that can only result from experimentation. And that's what makes this the most interesting time to be involved with relationship marketing, of any kind.

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