Ad Agencies Need CRM to Survive Online

The inevitable shift to the e-commerce/transactive marketplace will place much emphasis on creating a virtual retail shopping and service environment., for example, stays current by surrounding customers with opportunities to interact beyond books and CDs – in effect, by moving into the wider e-commerce arena.

Strategic understanding of brand affinity in the online environment is being linked with database expertise that tracks customers and captures transactional data. Fused together by strong digital design, this space has been the domain of Web-based front-end thinking, although it is fast becoming a process driven from the customer right through to the back office.

The interface between the Web and customer is where total convergence of e-mail and the telephone for customer service is about to take place. This is the “intellicenter,” where customer information is aggregated and where all customer relationship management processes will soon be directed.

People who understand customer data will be in a very strong position, and those who own them will be unassailable. All of which suggests added competition for customer communication through the management processes of the bigger research companies. For example, Andersen Consulting sees the process as auditing a company’s current position, gauging the customer’s trapped value potential and managing everything from process engineering to sales campaigns. Now that any Y2K fears have passed, the bigger software organizations and platform developers also are set to burst onto the CRM scene. As the stakes get higher, it’s touch and go as to who is best positioned for the long term.

The e-commerce revolution moves customers from analog to a digital cross-platform environment. The big news in this arena will be the emergence of Web television, allowing viewers to interact with programming. During a television spot for a particular garment, for example, you’ll click for further details, including colors, sizes, prices and accessories.

Local Insights, Global Commerce

Your own information will already be digitally stored in the memory of the television set – actual body measurements and clothing sizes, along with a photograph, so that it will be possible to picture yourself in that specific garment and virtually “try before you buy.” Comparisons also may be available on a national or even worldwide basis. Local insights will be gleaned from the Web, which has recorded the transactional habits of similar, like-minded people across the globe. These will compare your own selection rates with those of other customers who have chosen that same accessory or any other item. You’ll even find out which garment is being picked by your counterpart in New York, Paris or perhaps Buenos Aires, Argentina.

This sort of Web-site information locks into a company’s legacy system, from payment structures to the handling of returns. This means that customers ordering over the Web get what they want, when they want it. So when a customer orders from a company’s Web site, the inventory for manufacture is updated all the way to the back end – even to reordering raw materials from the supplier – in an unbroken loop.

But advertising agencies in general are in grave danger of being cut off from the benefits of the loop in this new area, which is far beyond the majority’s skills and competency. “They’re not structured or equipped to deal with the Internet,” one pundit has declared. “The days of the 30-second ad are dead.”

Online communication companies like NetRatings Inc., DoubleClick Inc. and 24/7 Media Inc. seem to be further up the “click” food chain than the agencies’ media departments. Competition for management of customer information excludes most agency media departments but includes all direct marketing companies, with SAP, IBM, EDS and Andersen Consulting walking tall in this fast-growing sector.

Alex Hamill of George Patterson Bates Advertising said companies like his are prime takeover targets because the higher-value-exchange management consulting companies are better placed to earn revenue than the agencies themselves. Possibly this is because they are delivering across the business as a whole, and while brand-building is important, customer-building and retention are equally so.

Into this information arena have slipped the big media companies, like PBL with its Acxiom joint venture, also after a piece of the action. A huge slice of the media communications pie – previously the territory of the ad agency – is also being taken away as a result of connected customers communing via hubs where e-commerce and new models for producing revenue such as auction sites and barter are evolving.

Data Are Key

Just as supermarkets own the transactional information of the customer through loyalty schemes, online customer information is captured by the transacting company, the Web site and the portal. The analysis of online user information and their e-commerce transactions – currently running at the minuscule rate of between 0.5 percent and 2 percent – and close scrutiny of multiple Web-site visits and dealings are essential to predicting future buying behavior. Most advertising agencies are beginning to understand that supermarkets in the offline world and search engines, portals (including the expanding ones of the telecommunications firms) and well-frequented Web sites in the online one are better placed to understand the habits of their clients’ customers. Ad agencies may never regain their power over the media, and the windows of opportunity for them to make money in the new media arena seem also to be narrowing.

So the battle is on to capture and profile data, at the same time increasing the stickiness of the Web experience. People stay with a site because it gets them involved, bringing about a better understanding of customers through collaboration as e-commerce evolves.

Content and blossoming relationships are inextricably entwined – which is where database research and analysis are vital. As Stewart Maclellan of GMD, one of Australia’s largest interactive companies, says, “It’s all about following the sticky footprints of the visitor wherever they go, then discovering the predictors and triggers for making the initial sale, building the relationship and then creating the opportunity for ‘one more sale.’ “

This information may also be essential to programming, and the creation of content will be especially relevant with the advent of Web TV. Much of what evolves online may amount to full-motion video – rather than just digital effects – with moving backgrounds and a 360-degree profile of the customer wearing different colors of a particular garment and so on. “The Matrix,” the Keanu Reeves movie, and “Walking With Dinosaurs” are great examples of digital, full-motion movies.

Yet because this is an area in which IT companies have no expertise – and are unlikely ever to get it – a big opportunity could exist for advertising agencies to start producing content, just as they did in the early days of television. The idea of soaps originated from the likes of Procter & Gamble doing its own thing in exactly the same fashion.

The future of enhanced e-commerce fortunes, on the face of it, lies in the provision of infomediary services provided by the few through intellicenters, where e-mail, live voice and assimilated voice queries are being coordinated. More emphasis also will be placed on the database talents of people who are analyzing customers’ lifetime value and their ability to spend money on one more order – in other words, those capable of predicting future buying habits.

While infomediary services would seem to be the expanding territory of direct marketing agencies, there’s no doubt that advertising and sales promotion thinking has a formidable part to play in the online world. But it must derive from profound knowledge of both prospects and customers. We also will need to make our messages increasingly subtle and relevant, as Netizens become aware that every online movement is being watched, recorded and acted upon.

To take command of the new world of opportunity that waits online, a drastic rethink is required. It must encompass the CRM skills that customer relationship aspirants and even advertising agencies have available to them – all part and parcel of the equation in which intellicenters managing fast, relevant and accurate fulfillment are winning the battle for the customer.

We must also realize that the key to success lies in understanding the customer in a more connected, intimate, one-to-one relationship.

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