Profit From One-to-One Relationships

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Sales and marketing executives have always searched for ways to create a one-to-one relationship with each prospect and customer. Why? Because understanding what your customers want invariably leads to stronger and more profitable relationships. Also, increased customer knowledge drives more informed and efficient business decisions that satisfy the market.


Today, with the explosion of e-commerce, it is even more important to create one-to-one relationships with your customers because if you don't, your competitors, who are only a mouse-click away, will. Consider these numbers: E-commerce is projected to account for $184 billion in U.S. sales by 2004, according to Forrester Research, Cambridge, MA, and 44 percent of U.S. adults recently surveyed by ABCnews.com intend to buy online this year.


The Internet enables consumers to tailor their relationships with information and service providers. It is up to marketers to harness the necessary data to more effectively acquire profitable new customers and better satisfy existing customers. Also, it is essential that marketers communicate with their customers and prospects through multiple channels.


Opt-in e-mail, banner advertisements and direct mail channels yield data that will help you construct a more complete picture of your customers. Tapping these channels for information will tell you who your buyers are, how you can reach them with your messages and where they will most likely buy your products. Also, by collecting and analyzing as much data as possible about your customers, you will be able to anticipate likely purchases and make relevant product recommendations, leading to more profitable relationships.


So far, pure-play e-tailers such as Amazon.com have been extremely successful in collecting and analyzing consumer purchase data to help customize product offerings to individual customers. For example, if you have purchased a book or CD from Amazon.com, it is likely that you have received a targeted e-mail from Amazon recommending a new novel coupled with a discount. Amazon understands what its customers value, which has led to better product development, more effective marketing messages and more accurate use of media to reach its customers with the right message at the right time.


To do this, you need to increase customer knowledge by mining your inhouse customer databases through legacy, enterprise resource planning, customer relationship management and e-commerce systems. However, these internal resources are not the only sources of customer information that you should tap. Truly successful businesses will learn to take advantage of many different types of data to form a complete marketing tool with which to communicate with customers on a one-to-one basis.


For instance, marketers have traditionally depended on demographic data such as household income and ZIP codes to target potential customers. But just because someone lives in an affluent neighborhood doesn't mean he's interested in buying a BMW.


Using richer pools of information such as transactional data has proved to be far more valuable for direct marketers than using demographic data alone. With transactional data, you can analyze the RFM value of your customers and prospects, which provides more relevant information with which to target your messages.


There are three steps to increasing your customer knowledge for one-to-one marketing online.


• Creating an internal customer database. This requires investment in hardware, software and staff to collect, manage and analyze your customers in a database. You can either buy software or develop a proprietary system. This data is ideal for targeting content and marketing to your own customers. However, more established merchants must deal with legacy systems in leveraging and integrating customer databases for online targeting applications.


• As with direct mail, you can also purchase data (such as demographic and transactional) from outside sources to overlay on your inhouse customer database or conduct statistical modeling analysis using an outside source for targeting online marketing efforts to your own customers.


• Use outside sources such as cooperative databases and list databases to access large pools of data for prospecting and enhancing your inhouse customer data. A cooperative database pools and manages data from a group of companies that have agreed to share their customer data. Joining such cooperative arrangements can provide you with consumer data and statistical modeling services for e-mail, direct mail and market research. Ad networks are building large anonymous consumer databases for targeting banner ads to relevant audience segments based on online behavior and intent.


Striking the right balance between these different sources of data is a goal you should strive toward, because the recipe for successful one-to-one marketing lies in combining sources. Furthermore, harnessing the power of this comprehensive data makes it easier and more affordable to create targeted Internet marketing programs through multiple channels. For instance, the overall cost per sale to acquire a new customer through a direct mail campaign is $71, whereas the cost per sale for an existing customer via e-mail communication is around $2, according to Iconocast, San Francisco, an information source for the Internet marketing industry. So the Web becomes a very efficient and economical way to maintain customer contact.


Also, with targeted Internet marketing, you don't have paper or printing costs to test an idea, so you can experiment more without getting burned and find niche markets that are smaller, but still make sense economically. You also can get results faster than through traditional direct mail, which will enable you to adapt your decision-making to the market quicker.


Only by using multiple channels will you be able to determine the most effective channel to reach your target customer, whether it is through e-mail, targeted banner advertisements, direct mail or a combination of the three. But, as you communicate through multiple channels and collect more customer data, you should remain attentive to consumer privacy concerns and communicate your privacy policy clearly to online customers to safeguard their information and ensure their comfort in doing business with you.


Although the Internet makes it more efficient and profitable to communicate through multiple channels, you should move carefully in order to avoid the risk of over-communicating with your customers and prospects. For instance, click-through rates for opt-in e-mail average 10 percent to 15 percent, according to Jupiter Communications, New York. With this success ad volumes will surely rise, but will customers start to tune out these messages indiscriminately?


The marketers that make their messages even more personalized and targeted will continue to create and maintain one-to-one relationships. But if you stop analyzing the data, your messages will become less relevant and your customers will click away to more attentive competitors.
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