Relationship Marketing: Text and Cases Information Center: Bulletin Board


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Relationship Marketing: Text and Cases

Prof S Shajahan, IIM, Shillong

ISBN: 0070583374
Copyright year: 2004

Bulletin Board

Welcome to Bulletin Board

Please keep a regular watch on this page as it will be regularly updated.

We just added few interesting points given below for enriching your knowledge

One-to-one marketing, which sounds wonderful, may in fact not be possible in a majority of product and service situations. This is because of lack of information. The data about any individual that are available may not be sufficient to predict that individual’s behavior, although it may be sufficiently accurate to predict the behavior of the customer segment of which he or she is a part.

Making the right offer to the right customer at the right time may be impossible. People make decisions based on personal factors that cannot be captured in a database. We can however profitably target segments.

Companies cannot easily shift from being product-focused to being customer –focused. It sounds great, but few have actually done it. Most never will.

Communication to customers work. Used correctly, communications will

Increase your retention rate and reduce attrition

Increase cross sales and up sales

Increase referrals

Increase profits

The advent of e-mail has given marketers a valuable new communication channel which will revolutionize database marketing. One-to-one communication, which were a buzzword in the 1990’s, are being carried out in the new century. From now on, anyone who does not use E-mails will lose out in the competitive race to build customer loyalty.

Web response beats phone, mail, e-mail and results in

Reduction in cost of fulfillment

Data captured along with the sale

Immediacy of response information

Personalization and speed of response

Accuracy of he data captured

Web response involves the creation of a special micro site where customers can be recognized and greeted by name, using a Pin (?) or a cookie. Direct mail promotions usually get better response rates than direct e-mail promotions, but the cost per response may be higher.

Database marketing is incremental: Database marketing is a channel for exchanging information with customers. For database marketing to work, there have to be other channels that deliver the basic sales: mass marketing, retail stores, catalogs, interactive web sites, sales people, distributors, agents, outbound telemarketing, or direct mail. What database marketing does is make incremental improvements in customer retention rates, response rates, referrals, cross sales, frequency of sales, and average order sizes. Database marketing builds relationships with customer that bind them to your company and to your brand. Done right, it makes customers happy and gives them a feeling of identification with you, your products, your company, and your employees. It helps prevent defections.

The Internet has enabled database marketing to deliver on its promises. The idea was always to use the database to communicate with customers and make them happy. But direct mail and telephone communications are so expensive, in relation to the good that they do, they can be used only sparingly. E-mail to customers is almost free. It is instant. It can be highly personalized, delivering up-to-the-minute information. It is the best thing to hit database marketing in the last 20 years.

The Web is not a selling medium: it is an ordering medium. An entire industry on Web advertising and sales was created, wasted hundreds of billions of dollars, and then died within 5 years. What did we learn from this? The Web is a passive medium, not an active one like TV, radio, telemarketing, direct mail, or retails stores. It is not a very powerful advertising medium. People will buy products and services over the Web, but they first have to be stimulated by something else: catalogs, direct mail, or mass marketing. As an ordering medium, the Web can be superb.

Everything in database marketing can and should be measured: Whenever you design a new strategy, program, or communication, you must set aside a control group that does not get the Gold card, communication newsletter, offer, discount, premium, or special service that is being extended to your test group. This is the only way for you to know and prove to the management that your expenditure for database marketing are producing a positive return on investment. If you are not constantly testing new ideas, setting aside control groups, and measuring, you are not doing database marketing.

Lifetime value is the key measurement technique for database marketing: You must learn how to compute customer lifetime value and use it in evaluating and designing your marketing strategy. LTV is a forward-looking concept that includes spending rate, discount rate, retention rate, referral rate, product costs, and marketing expenditures. It is the only way to know how much you should spend on acquisition and retention. It is an essential step to use in getting your marketing budget approved each year.

Customers should not all be treated alike: Some of your customers are Gold. They deliver huge amounts of sales and profits. Many customers of many companies are actually unprofitable. Why should you work to retain the loyalty and sales of an unprofitable customer? What should we do? First, create customer segments and learn who your gold customers are. Create special programs and services just for them in order to retain them. Study the segment just below gold. Create programs that will get them to move up. Study your bottom segment – the worthless people. Figure out how to either re-price the services you are giving them so that they are profitable or get rid of them altogether. If you treat all customers alike, your service budget will be stretched so thin that you will be unable to use it to modify customer behavior.

Caller ID and Cookies have become essential database marketing tools: Caller ID is used by customer service reps to recognize customers, call them by name, and see their history with the company on the screen before they even answer the phone. This type of recognition builds relationships and loyalty. Cookies are used the same way on the Web. Web sites are configured differently for each repeat visitor, based on that visitor’s expressed preferences on the previous visit. Cookies build relationships and loyalty.

Becoming Customer centric is seldom an achievable goal: Since the last decade, marketers have been talking about shifting their company from being product-and brand-centric to being customer-centric. “Don’t sell products. Find out what customers want to buy and sell them that.” This is a wonderful idea, but few companies are doing it. If we were to really become customer-centric we would segment our customers and create a manager for each segment. We would give these managers greater authority than that given to brand or product managers.

Database marketing is a method of getting incremental increases in retention and sales when sales are conducted primarily through other channels, but it is also much more than that. It is a way of making people happy. People like to buy products and services. They like to establish personal relationships with their suppliers. They like to be recognized, thanked, and chatted with. They like to receive wanted communications .You can do all this with database marketing using the Web, phone, and direct mail. You cannot do these things with mass marketing. Merchants used to recognize customers and communicate directly with them in small retail stores, but most of the companies using database marketing today are not proprietors of small retail stores. What successful database marketing does is to bring back the close personal relationships that used to exist between customers and local stores and that have been lost, as our country and economy have grown.

LOYALTY PROGRAMMES AND WEB MANAGEMENT

The renowned consultant Mr. Arthur Middleton Hughes evaluated web as a medium for promoting relationship among the B to C segments made the following observations in his book The Customer Loyalty Solution (McGraw-Hill, New York 2003). The author endorses his views and recommends his book for all Corporates to follow these ideas.

What Works

Getting Customers to respond to you on the Web.

Providing customer service information free on the Web.

Determining the lifetime value of customers and using it to evaluate a marketing strategy.

Determining the next best product for each customer and putting it in the database for your employees to see and use.

Learning the retention rate for each of customer segments and working to improve it.

Sending e-mail communications to the customers who have asked for them.

Using cookies to recognize and greet customers when they come to your Web site.

Using risk/revenue analysis to concentrate your marketing resource on customers whose behavior you need to modify.

Mass marketing for certain products and services.

Building a customer and prospects database and using it to market to customer segments for certain products and services.

Communicating with customers to maintain their loyalty, sending them emails, thanking them for their patronage, and getting them to fill out customer preference profiles.

Business-to-business web transactions

Using the Web as an ordering site to support paper catalogs.

Using the Web to capture information about customers that can be used to create emails that will drive those customers to your site to make a purchase.

Distributing certificates through the Web

Registering customers on the Web

To compute lifetime values, you need a customer database that includes transactions. You need to be able to estimate the revenue and the costs in order to compute the profit from each transaction.

You use past history to determine the retention (or re-purchase) rate.

Lifetime value can at first be computed for all customers as a group, but once it has been developed, it should be determined for customer segments.

The LTV of an individual customer is derived from the LTV of the segment that includes that customer, adjusted for the products the customer owns and other factors that seem to determine the customer’s particular LTV.

Using test and control groups for all database marketing initiatives.

Determining the value of your E-mail names.

Determining customer’s lifetime value and using it to evaluate your marketing strategy.

Capturing customer’s E-mail names with permission to use them.

Viral marketing.

Retention marketing.

E-mailing last minute specials.

E-mailing follow-up messages.

E-mailing newsletters.

Communications with customers through direct mail and e-mail.

Online focus groups.

Real time reports on the results of the e-mail communications.

Getting customers to fill out personal profiles on line.

Personalizing e-mails and web sites.

Testing emails on small groups to get the right e-mail address and subject.

Using he three-click rule and having a search box on every page.

Online response.

Dividing your customer database into a few segments based on some logical schemes and developing a marketing strategy for each segment.

Always setting aside a control group in each segment that gets a generic marketing promotion (or none at all) so that you can measure the effectiveness of the promotions.

Differentiating the promotions to each segment by personal data in the database.

Finding a way to collect the data on what happened after you sent the promotions. If you can’t get the data, you may be wasting your money on the promotions.

Vendor-managed inventory over the Web that permits suppliers to manage their customer’s inventories

Providing agents with specific next best products for each customer and top 10 prospects

Finding out more about the customer’s business and solving the customer’s business problems

Creating a database of prospects and serving and them up to agents via the Web

Taking over logistics management for customers, so that they can concentrate on their core business: designing and manufacturing products.

Using the 80 percent rule to simplify customer management

Determining the possible improvements in conversion rates before you waste money on any customer management program.

Running your customer management programs based on he segment that customers are in, rather than on some overall marketing plan that does not take customer status into accounts.

Set up special Web sites for your best customers. Provide reports to your customers on what they are buying and who is buying it.

Provide volume-pricing arrangements to induce your customers to use your new Web site for ordering.

Cross sales accompanied by personalization and collaborative filtering.

Using the Web site to capture customer profiles, emails names, and preferences.

Saving order fulfillment costs through the increased use of eh Web.

Email communications to drive traffic to the catalog and the Web

Using customer-created profits to capturer emails names and demographic information

Using profiles to create personalized communications and Web sites

Using control groups to measure the response to customer communications.

Online focus groups using captured customer email names.

Measuring multiplayer performance and using it to drive marketing strategy

Live customer service on a catalog Web site.

Virtual models created by the customer.

Appending data to your customer file to learn your customers’ demographics and to create a profile

Using the profile to find prospects that match the profile of your best customers.

Asking customers to complete their own profile

Using a customer’s profile to customize and personalize that customer’s Web experience

Using a quiz on he Web to find out about what customers want, and then offering it to them.

What Doesn’t Work

Building a huge data warehouse for the purpose of building profitable relationships with your customers.

Treating all customers alike

Failing to set up control groups

Failing to test any new idea on a small group first.

Failing to use the Web as part of your database communications program.

Thinking of the Web as a sales medium. It isn’t. It is an ordering medium.

A pure-play, stand-alone, consumer selling Web site. Without a catalog or retail stores

Assuming that advertising on the Web will be the main source of revenue

Catalogs on the Web without paper catalogs to drive people to the site.

Web supermarkets.

Computing LTV using complex formulae that you top management does not understand. If your management doesn’t understand exactly how you developed it, it will have no confidence in it and will not use it profitably

Looking at LTV numbers by themselves. An LTV number by itself is meaningless. Its most important use in calculating whether proposed marketing programs will increase or decrease lifetime values.

Spending resources on getting an exact lifetime value number. LTV is a future number. The future has so many unknown factors that you should use LTV as a rough guide. Do this, and don’t do that. That is all it is good for.

Paying more than half the LTV to acquire a rented name

Starting any dot com without first computing the value of the E-mail names to be acquired

Thinking that E-mail response rates will be as high as direct-mail response rates

Failing to use control groups with any database marketing program

Flash pages that take more than 5 seconds to download

Searches that don’t provide what customers are looking for

Sites that are designed to sell, rather than being designed to provide what customers want

Mainframe legacy databases in support of online operations

Creating more than eight or nine segments. Even the largest companies don’t have the marketing staff to think up and implement unique marketing programs for lots of different segments. If you have divided your database into 10 or more segments, you have made a serious mistake.

Not revising your segments after each promotion. We are supposed to learn something from the segments. If you just promote and promote, and never revise, you may be wasting your money and not learning anything.

Collecting a lot of data about customers that you never use for anything. Everything has a cost. Getting and updating data is expensive.

Spending too much on building a data warehouse that will never pay its way in terms of increased sales through promotions based on the data in the warehouse.

Creating segments that are self-fulfilling or that do not allow your creative team to create a significant differentiation.

Building a warehouse for 100 percent of your customers

Trying to manage 100 percent of your customers

Trying to operate without a customer database

Managing a communications program today without emails

Launching a customer management program without first determining the benefits and costs.

Providing customer management benefits to all customers equally, rather than to specific segments.

Setting up a web site for customer access without talking to your customers first to determine whether they would use it.

Spending too much on a software system without first testing the concepts on a small scale.

Expecting to drive traffic to a catalog Web site without a paper catalog.

Fancy flash pages that take too long to download.

Slow products search on Web catalog sites.

Acquiring customers by giving discounts. It works in he short term, but the customers do not stay with you.

Assuming that every acquired customer is valuable. Many of them can be unprofitable.

Concentrating on acquisition to the exclusion of retention.

Hanging on to customer names and not exchanging them with others.

Getting people to fill out long, boring profile forms.

Assuming that the head of the household is the customer.

SOURCE: www.crm today, www.crmguru.com.www.buildingbrand.com and Arthur middleton Hughes (2003) the customer loyalty solution, McGraw-Hill with permission

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