Use Online CRM to Hook Customers

It’s a gold mine just sitting there, waiting. You need to find out fast how you can tap into the value of your customer base intelligently by understanding – and I mean really understanding – who your customers are and what they are buying. Then treat different customers differently.

Sounds simple, but it’s hard to do well. Do you know who your high-value customers are? Finding out is the difference between staying competitive or just being a mention in the sales history books. Who are the customers you haven’t seen in awhile? Following up with them isn’t as easy as you think. Once you’ve identified them, you must develop a Web strategy that’s personalized to convert them from buyers or lookers into loyal customers. But how?

It used to be called marketing automation and database marketing, but apparently that moniker is being tossed in favor of the latest industry buzzword: CRM. While many marketers know that customer relationship management is an age-old concept, an avalanche of new players is trying to bring a new cachet to customer service. Their mantra: The Internet is the perfect medium.

The epitome of examples is E.piphany, which recently launched version E.5 of its software and now considers itself a CRM player. The field of CRM wannabes is vast. It includes companies ranging from those that merely deliver customer support solutions to complex cross-media solutions and microfirms as small as TopDog.

Every customer interaction is its own window of opportunity. Some companies know how to execute cross-sell opportunities elegantly. Others don’t have a clue. As an example, do you know what products should be bundled together? Can your database, campaign management or CRM system determine which products are best for which customers or niche customers?

Many major companies are elbowing their way into this CRM space.

According to the chart below, today’s CRM landscape consists of 14 players shaping the way you will look at your customers. All use the Net to launch their CRM platforms, but they differ in their ability to provide insight and/or action. MicroStrategy and Broadbase provide a depth of insight while E.piphany, Kana and Quintus are new action-only players. Xchange, Net Perceptions, Prime Response and TopDog provide more insight than action. Well-established firms Annuncio, PeopleSoft, Nortel, Oracle and Siebel remain heavy on action automation.

In the above scenario, players are arranged in a circle that moves clockwise from insight to action. Judging by the chart, Iconocast thinks that Kana, E.piphany and Quintus are close competitors. Siebel is a “legacy player with a large footprint,” coming from the sales automation frontier. Today’s CRM world is new vs. old, skilled and entrenched.

Siebel and other old-school outfits such as Vantive and Clarify are faced with a world in which customers are increasingly shifting from a fully assisted sales system to a self-help model. The old world also tends to be telephony-focused with new channels, such as Web commerce, tacked on. Many of these lack direct marketing focus or strategy, and need to learn quickly. In contrast, the younger, more agile but less experienced players need to know how to manage a business.

The cost of entry is not cheap. Per module cost is $250,000. The “integrated suite” sells in the $700,000 to $900,000 range depending on the number of seats. This does not even cover all costs, such as consulting and data integration, and tie-in legacy systems if you are not a new click-only company. It is critical to create a fast return on investment if you plan on keeping up with the Joneses.

The real payoff for CRM is in retention rather than acquisition. The reason is the ROI for retention is usually several times greater than the ROI for acquisition. The most common use of CRM in retention is to create customer segments based on lifestyle and purchasing habits. An example of one customer segment breakout could be:

• Daytime shoppers.

• Evening shoppers.

• Weekend shoppers.

• Internet shoppers.

• Catalog shoppers.

• Cross-shoppers (members of two or more groups).

Good CRM requires a different communications method for each segment.

The cross-shoppers may, in fact, be the most profitable of the entire group. A typical cross-shopper may use the Internet and be a weekend shopper.

Messages sent to catalog shoppers to encourage them to come in to the store may be a waste of your money and their time.

It may be useful to advertise a “members only” evening open solely for the evening shoppers.

Another method of segmentation might be to combine the above categories with lifetime value and demographics to produce these groups:

• Gold customers.

• Business professionals.

• Regular customers.

• Sale shoppers.

• Occasional shoppers.

So, what can you do with these categories? One major chain created categories similar to this based on their customers’ behavior. Using CRM, it created separate marketing budgets for each group. Here is what might happen if a $2 million marketing budget were spent equally among all customers: Assuming that the company used the money to craft personalized communications, created a very helpful Web site, and improved its customer service, the overall result of their efforts could be a significant 12 percent increase in lifetime value.

Getting into the CRM world is not easy. For some CEOs it is a mandate of “damn the torpedoes and full speed ahead,” while for others it is a “toe in the water.” Either way, it’s the strategy for success in an uncertain future. n

pull quote: Some companies know how to execute cross-sell opportunities elegantly. Others don’t have a clue.

• Robert McKim is president of MS Database Marketing, Los Angeles.

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