Knowledge Library

Relationship Marketing - The 9 Truths!

Direct Marketing

Everybody talks about relationship marketing. But do we really know what it means? Bart Foreman from Group 3 Marketing has outlined the 9 Truths that he believes are important in the marketing planning process. He stopped at 9 Truths so no one would think these are commandments.

Bart says: "Although relationship marketing is not exactly brain surgery, it does require technical discipline, customer-centric thinking and a willingness to try new ideas that have one goal: deliver sustainable, profitable growth by marketing to known customers in a way that competition can only hope to mimic."

What is Relationship Marketing? Debate continues about how to describe what we do. Some call it 'loyalty marketing' - others call it 'direct,' 'frequency,' 'one-to-one,' or 'CRM.' And these terms are all right - and, at the same time, all wrong. Dynamic and integrated touchpoints and channels (both virtual and real) are redefining the marketing process. And there are no walls; we are all interconnected through Intranets and the Internet. As our marketing world continues to change, every business needs to adopt a carefully crafted position that supports how to best interact with its customers. It's not the same for every company, and no canned program will work for all situations. With that in mind, let's look at these Truths. By learning how to accommodate them in your own operation, you can develop a relationship marketing program that will help you keep your best customers - and your livelihood.

Customers are no longer loyal. They are actively seeking new and better ways to shop. Mall traffic is down and Internet traffic is up. Any correlation? In the B-to-B world, face-to-face sales calls are being replaced by e-mails and online ordering.

Customers don't really want a relationship - but companies do. It is a logical premise: Acquiring new customers is expensive and relationships with new customers are very fragile. The current mentality in many companies is that a relationship marketing program can extend the life of a customer. That's true as long as management understands what is driving the dynamics of the relationship; trusted products and services and customer service that exceeds the customer's expectations. Unfortunately, many companies only want to have a relationship with their 'best' customers. In reality, that thinking is flawed. A more productive philosophy is to embrace the idea that 'everyone has potential.' Furthermore, you must understand that: Your best customers can leave; Your marginal customers can buy more; Consumers can become customers.

Customers want information. The company that controls the flow of information and keeps its name in front of customers has the best chance to extend the customer's lifecycle. Control is easier said than done because there are so many touchpoints available to customers.

Customers not only want to be thanked for their patronage; they expect it. This can be as simple as a follow-up 'thank you' letter after a first or major purchase has occurred. Many businesses overlook this critical step. The logical extension is to create an incentive program that rewards customers for their continuing patronage, which can be based on the idea of 'Spend and Earn; Redeem and Save.' A typical concern is that this will reward customers who will buy anyway - scary thinking in today's dynamic competitive environment.

Customers control the selling process. Gone are the days when a company could put a price on an item, run some ads and customers would blindly buy. Customers will readily abandon traditional selling outlets with a trip to eBay or at the hands of an Internet search button.

The lifetime value of a customer is not relevant; what is relevant is your company's lifetime value to the customer. For years, direct marketing experts have created formulas to calculate the lifetime value of customers based on macro forward-thinking assumptions. The formulas are not disputed, but their underlying static assumptions do not reflect today's real-time multi-dimensional marketing environment. Today's dynamics demand that companies know their customers, their demographics and their purchases. Purchases at the SKU level with corresponding frequency patterns are important in determining not the lifetime value of a customer, but where each is in their lifecycle of buying. As a company pieces together lifecycle dynamics and clusters customers, it has a better chance of marketing to them in a meaningful way.

Overly complicated programs fail to keep customers. Customers won't understand a complicated loyalty program. They won't spend more or shop more because of different reward levels for different spending levels. And sales associates won't understand it and will be frustrated when customers question them.

Keep reporting simple and focused on the customer. Management often gets caught up in analysis paralysis and loses sight of the reporting focus. Management should establish clear and measurable reporting benchmarks for their program, such as number of members, their activity, their sales as a percentage of total sales, etc.

What if? Ask this question often. Experiment every chance you get and don't call it testing. With a known universe of customers, a company can target specific ones and determine if a certain offer triggers a positive response. There are many reporting tools that deliver a wealth of information.

Bart closes in saying: 'Management should never be afraid to try something new - and if it works, expand it. If it doesn't, little is lost and we learn while we prepare for the next idea.' ... and remember, the most important order you can get is the second one. A two-time buyer is at least twice as likely to buy again.

Winnifred Knight

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