Shorter product life cycles, numerous distribution channels, global competition and increasingly lower product differentiation make retaining valuable customers the greatest business challenge ever. Though companies mostly regard customer relationship management as the most important component of today’s corporate information technology strategy, it remains both an art and a science.
CRM technology is just that, technology. It enables companies to execute, but it’s a means to an end. It does not replace the need for the core, underlying principles that will drive decisions and actions. The most important task is to define the general principles of your dialogue strategy, chosen methodologies, business rules and marketing tactics that will enable the CRM system to run efficiently. This strategy will serve as the marketing foundation, a detailed road map for customer relationship development that ensures resulting actions and technology requirements follow a unified, functional direction. Remember: Technology enables, but strategy leads. Let’s re-examine the forgotten art and discipline of customer relationship management.
Why is it so important to marketers? A customer relationship strategy results in several tangible benefits, including higher customer equity and a greater ability to maintain or increase revenue from existing customers. To overcome the complexity of large-scale relationship marketing strategies, marketers must follow step-by-step methodologies to implement a complete solution. This methodology provides a structured approach: definition of objectives, strategy, design, building, testing, deployment, analysis and learning. It eventually turns into a core competency that is difficult for your competitors to copy.
At the core of this methodological approach is the notion that all customers are not created equal. It also takes into consideration the “customer DNA,” or the multidimensional profile and molecular structure of a customer, as the driving force behind a positive brand experience and a lasting relationship. Often, a small group of customers will present a disproportionately greater value to the business. Similarly, not all customers are worth keeping. But segmenting customers based on where they come from, how they contacted you, how far they are in the purchase cycle, etc., is the most efficient way to engage them in a dialogue that is welcome, timely, informative, relevant and rewarding.
Segmentation and mapping of customer dialogue. Building customer loyalty begins by understanding that it is a behavioral matter. The first step is to create proactive, customer-centric conversations to support the desired brand experience and move away from company or product-centric monologues. This can be achieved by mapping customer behavior and integrated communications. Such a map is a logical representation of all relevant and actionable contact points and possible behavioral changes along the customer life cycle. It can be represented as a series of nonoverlapping segmentsthat typical customers go through, from a simple information request to a second purchase, a cross-category transaction, all the way to an advocacy level where best customers act as unsolicited sales agents. Each stage is defined by its historical or expected behavior such as an increased or decreased level of customer activity. Each customer starts within a given stage. When the pattern deviates from its historical norm, this customer transitions to a different segment. For example, a cellular phone company can use a similar model to identify or anticipate when attrition takes place and trigger specific marketing programs designed to change the unwanted behavior. Using predictive models and segmentation techniques, we can now identify which customers are going to defect well in advance so that effective communications can be deployed to save them.
Remember, however, that the pattern (both the frequency and magnitude) itself is often more insightful than the change of segment. Furthermore, a given customer can be in only one segment at a time. More complex models can allow multiple maps. In that case, one customer resides in multiple segments across multiple maps at the same time, creating multiple views of the data. For example, a cable company would identify a decrease of activity for a given customer with Internet cable but an increase of activity on the regular cable TV account. Every record includes all segments involved and therefore provides a greater understanding of the relationship.
Technology enables business triggers to drive customer communication. Once touch points have been identified, policies, business rules and actions can be defined and fully automated to accelerate response time, improve the dialogue and reduce possible human errors. A series of business rules are written to define the actions that should be taken for a given business event (a phone call, a drop in repeat purchases, etc.). The business rules are logically based on the desired outcome of the interaction. Whether triggers are the results of a customer request (reactive) or an automated model (proactive), key customer characteristics such as customer value, profile or personal preferences are taken into consideration to provide a coordinated response. Actions are being triggered; print or digital messages are being automatically sent to the recipients. Before this, events are evaluated in sequential order and frequency (start and expiration dates may apply). Marketers may want to target specific customer segments with predetermined sequenced communications (a series of five messages over six weeks, for example) that can be altered based on the customer’s behavior (a purchase earlier than expected, a perceived lack of interest, etc.).
However, triggers can be implemented only within a multichannel approach. Traditional media were not designed to provide a unified, consistent experience to consumers but instead were built around information islands. To provide a seamless customer experience, marketers need to figure out how to integrate media channels effectively, from the Internet to the telephone to wireless to traditional direct mail.
Building a triggered, closed-loop process across channels based on customer behavior is paramount to a relationship marketing strategy’s success. To build a customer relationship strategy, companies must go well beyond the purchase and installation of a CRM system. We all have seen companies set up multimillion-dollar system to engage customers and build brand loyalty, only to fail.
The discipline and art of customer relationship marketing strategy is a key weapon for building profitable relationships and shareholder value. Without it, any CRM implementation would fail. If science and technology make it possible, then the art of CRM makes it reality. Success in relationship marketing can be achieved only when both the company and its customer mutually derive high value, not from just a transaction but also from the relationship itself.