In the not too distant past, the task of managing the traditional brand-customer relationship was relatively straightforward.
The business reached the customer through a marketing communication initiative designed to trigger a response – a purchase from the company. Upon receiving the order, the company would make the delivery and provide appropriate service.
Generally, this relationship was characterized by standardized delivery channels, such as traditional advertising or direct mail, and products; limited customer touch points; and limited individual customer data collection and synthesis.
Today, however, a new breed of company is rapidly gaining precedence, characterized by multiple customer contact points; complex product, service and content offerings; and multilayered advertising and margin-based revenue structures. This emerging business model requires more sophisticated practices in how businesses develop and manage their most strategic assets – their brand and their customer base.
Their challenge is to do more than merely manage customer relationships. They must be optimized by taking an enterprisewide understanding of the brand and the customer model in integrating efforts across all customer contact points and product, service and content offerings.
A good example of this new breed of company is Martha Stewart Omnimedia.
The Martha Stewart brand, the key asset optimizing the value of the franchise, has become synonymous with the idea of quality living in and around the home. The business is driven by the diverse but complementary delivery channels of publishing, television, branded merchandise and retail businesses.
The largest selection of its branded merchandise, about 3,000 products, is found exclusively at Kmart in the United States and Zellers in Canada. Fewer branded products, 1,200, can be found via its catalog, Martha by Mail, and Internet site, marthastewart.com. More than 60 percent of its revenue is derived from publishing – magazines, books, the syndicated askMartha newspaper columns and its radio show.
The Martha Stewart organization understands that the keys to supporting and growing the value of the brand are the underlying associations it creates, maintains or grows, all of which imply a promise to customers from the organization as a whole.
But MSO might be able to make more of its brand by better optimizing its customer relationships across these distinct delivery channels, and other customer touch points, through a more holistic approach to customer relationship optimization.
Here is the underlying issue for MSO from a direct marketing perspective. Assume an MSO customer can be cost-effectively pushed to a finite number of targeted outbound contacts/marketing impressions. Are those contacts spent with a primary call-to-action to visit, touch and feel the Martha Stewart merchandise at Kmart? Are they spent driving consumers to marthastewart.com? Or with a primary call-to-action to subscribe to Martha Stewart Living? Or to watch the television show, to maximize viewership and, therefore, advertising revenue?
The organization probably uses a combination of these approaches. The way in which these strategy decisions are made is essential to this new breed of company.
Traditional direct marketing tools rely on the customer database populated with purchase and nonpurchase interactions and with appended data. But in MSO’s situation, using key variables such as recency, frequency and monetary value to segment by transaction behavior is not sufficient.
With customer relationship optimization, a strategic view of the entire organization’s business drivers is combined with principles and models from traditional and retail marketing. New tools would be defined to optimize MSO’s customer base and to help extend the value of the brand. That holistic view would lead MSO’s strategists to answer questions such as: What is the value to the organization of each customer interaction?
MSO would need to figure how much hard revenue it realized when consumers purchased a branded product at Kmart, then analyze how the value of this customer with this transaction history compares with those who have not had a Kmart transaction. Another thing to understand is the revenue potential of a customer who has purchased through Martha Stewart by mail and has subscribed to Martha Stewart Living.
What customer actions best drive value? Traditional direct marketing maximizes transactional value (response rate and average order) for each promotion/offer. In this environment, however, a holistic perspective serves better. If, through the customer modeling analysis described above, it is learned that a subscriber to Martha Stewart Living delivered more value over time to the franchise, it would make more sense to aggressively market subscriptions to Martha Stewart Living, despite the lower, immediate transaction value versus a $100 online purchase.
What customer actions best strengthen the brand-customer relationship? Martha Stewart would analyze its data to understand key trigger activities that would create a deeper customer relationship.
What company action is most likely to lead to the desired customer action? Response testing for contact, content, offer and vehicle will help MSO understand what drives the optimal business result. If a Martha Stewart Living subscriber drives the most value in the enterprise, and the trigger event is the subscriber’s Web site registration, should a subscription offer be mailed or an e-mail be sent? Or should a copy of the catalog with a subscription blow-in card be mailed? Would a related promotion increase the conversion rate? Such questions would be answered through response testing.
By addressing such strategic questions through the use of current and enhanced marketing tools and understanding the customer model, MSO would be in a much better position to initiate strategies that optimize and leverage the customer base – and extend the brand – across the entire franchise, not solely divisions within it.