The Great Myth About 1-to-1 MarketingDespite all the corporate movement from product profitability to customer profitability and a customer focus, one-to-one marketing today remains more hype than reality. As companies rush to implement customer relationship management strategies, they should understand where one-to-one tactics fit and where they don't.
Personalizing messages and offers to individual customers and prospects is clearly a desirable practice that can create strong customer loyalty and increase customer profitability. So I am in no way disparaging renowned consultant Don Peppers, who I hold in high esteem. As the co-author of "Enterprise One to One: Tools for Competing in the Interactive Age," he deserves the credit for leading us in that one-to-one direction. However, Mr. Peppers and I agree that one-to-one marketing is not practical, or even desirable, in many instances.
While direct marketing efforts move closer to communicating with the customer on a personal level, a one-to-one communication should not be made without first assessing its economics. A company must gauge whether a customer provides enough current value, or potential value, to justify the investment in service and personalized treatment needed for a one-to-one interaction. A client with a hefty bank balance may warrant a personal visit from a branch manager. Even a customer buying one box of cereal and a quart of milk may warrant personal attention if we understand that he or she spends $1,000 monthly on groceries. Thus, we can point to early successes of personalized grocery shopping clubs such as Peapod and Home Runs. But an airline passenger who takes one flight annually -- and only if it's a super-saver fare -- becomes less of a one-to-one target.
The 1-to-1 litmus test. With advances in technology, the costs of communicating with customers will continue to decline, broadening the scope of one-to-one communications. But even as costs drop, the one-to-one litmus test must still be applied. Companies will have to employ both technology and business practices to ascertain current and potential customer value.
If the economics do not warrant a one-to-one connection, companies may find that marketing campaigns focused on highly targeted customer segments present a much more efficient and cost effective way to communicate. These segments contain customers who share similar profiles (behaviors, demographics, interests, profitability, etc.).
According to Peppers, the key ingredient for growing customer loyalty and retention is the ability to learn about and understand customers. By that logic, companies who can quickly test different direct marketing value propositions and capture information that helps them understand how customers like to be treated across customer touch points gain competitive advantage.
Any phone company, for example, can offer $100 to a customer for switching long-distance service. But that company's competitor can offer a similar value proposition to get the customer to switch back. Nothing much has been learned about the customer outside of his or her consumer savvy. The trick, obviously, is to produce campaigns that cannot be easily duplicated by competitors, that yield proprietary knowledge about customers that a competitor cannot see.
This notion brings us to a very important concept -- marketing velocity. Marketing velocity is the speed of cycling through the marketing process -- of executing the numerous steps involved in planning, building, executing, assessing and improving direct marketing campaigns. By accelerating marketing velocity, companies not only shorten direct marketing cycle times but speed their understanding of customer behavior and customer interests. Marketing velocity, therefore, plays a large role in helping companies move their marketing campaigns closer to one-to-one marketing.
Marketing velocity speeds capture of customer knowledge. By accelerating marketing velocity, a marketing organization will:
* Increase an its ability to deliver tailored messages to customers and prospects ahead of competitors.
* Dramatically improve campaign effectiveness, since each cycle "turn" presents another data point in which to assess and refine campaigns and learn about customers. For example, an organization that can make five cycle turns in the time it takes a competitor to make one has many additional opportunities for learning. Rapid cycle "turning" has a compounding impact on ROI and moves a company closer to the ultimate one-to-one level.
In conclusion, true one-to-one marketing will exist only in niche applications until the costs of treating each customer independently drops dramatically. In the interim, companies should focus on improving segmentation strategies and building marketing campaigns that provide the "illusion" of a one-to-one interaction.