Maxims of Retention Marketing

We were speaking with a Client's chief executive today, an individual who we are only just getting to know, but someone who is well seasoned and whip smart.  We're a month into a strategic engagement to help them with what could be a pivotal decision point for the Brand, and this executive was jumping in to get to know us.  In the course of our chat, we were informed that (and we're paraphrasing here with some editorial liberty, but this is what we heard in essence):

Retention marketing is a broad term that means so many things, I'm not sure it means anything at all.

Well, you know what they say, "the client is always, right," right?  That's a tough one, because in many instances we're retained to help provide insight as domain experts in our field, and if it runs afoul of what the Client believes, then at best we can hope to help them on a journey of self-discovery.  So, of course we didn't dare take exception. 

However one thing stuck with us.  This executive chided that in speaking with many colleagues and friends on Boards of, and running some of the largest consumer brands on the planet that they almost uninamously agree that if they had to do it all over again, they would rather spend money they invested in retention and loyalty programs elsewhere because the programs did nothing for their bottom line by serving customers already loyal who didn't need a discount to continue buying.

Well, as you can imagine there is so much wrapped up in that comment its hard to know where to begin.  But that did get us thinking, and we decided to push this out to our readers, just in case you have someone on your own executive team who believes all this relationship and retention marketing stuff is "a bunch of hooey."

Next week we're sending one of our top analysts on a paper chase to track down the empirical data on whether, in fact, retention marketing is failing to positively affect bottom lines of the largest brands, and we promise to report back, whether buoyed or sunk by the results.  For now, we're going to venture out on the proverbial limb by betting they do, and offer 10 maxims of Retention Marketing:

  1. It is less expensive to retain an existing customer than to acquire a new one.
  2. The general definition of retention marketing is "marketing programs focused on increasing customer engagement, creating brand affinity, and fostering loyalty to a brand, company or product."
  3. In the digital Age, the consumer decides.
  4. The social web has forever redefined how brands relate to their customers certainly during acquisition, but more so in retention.
  5. Know ZMOT.
  6. Be SMART about messaging.
  7. Retention Marketing does not simply mean loyalty.
  8. Loyalty is different from affinity, but both are types of "relationships" in the world of relationship marketing/management.
  9. To manage relationships you must be able to measure retention.
  10. In the digital age, every company needs to be Facebook.

Now, we'll undertake to say more about each of these maxims in the ensuing weeks aside from other planned content we're brewing for you. 

For now, we stand by our position: pay attention to retention; its not meaningless marketing hype.  If you're concerned about cutting your marketing costs, spend your dollars on keeping your existing customers and let them help you acquire new ones.

How Not to (Ann) Tailor Your Messages

Our fearless leader, PJ Santoro, grabs the virtual podium today from the collective C[IQ] voice, to share a customer experience of her own that illuminates the importance of thinking through CRM initiatives. And it raises our favorite topic: SMART messaging.  PJ starts with an open note to one of her favorite brands, where this all began a couple of weeks ago...

Dear Ms. Dykstra-

I like your brand and love your products, but wish you would like me more back.  You see, recently I received an eMail from your Brand, recognizing me as a loyal customer.  And there was exciting news for me!  Ann Taylor is starting product ratings and reviews.  The message encouraged that if I would just click-through to try it out, Ann Taylor would register me for a shot at a $500 gift card.

Now, I admit to being an overly busy professional running a growing Firm of my own, but my loyalty to your brand led me to take a moment to click through; after all, I had recently purchased a spring skirt and several tops that look amazing and fit perfectly, so I was glad to let others know.  Well, that was until I clicked through.  You see Kristen, in a perplexing surprise, I arrived at a landing page that asked me to:

  1. find a product to review,
  2. log in (or register), and
  3. then actually do the review. 

Really?  Seriously?  “Wait a minute,” I thought, "That can’t be right.  I mean, they already know what I’ve bought.  I can look at my complete purchase history any time I want to by logging in.”  But nope, those dots weren’t connected in this case.  Although, I expected to be taken to the product page of my most recent purchase to review, that "heavy clicking" was left to me (um, did I mention “busy professional?”)  And now a perfect touch point opportunity to draw in a loyal customer had been squandered on a simple mistake to not launch reviews in a little more thoughtful (integrated) manner.

So, let’s back up and consider how Ann Taylor should have done this.

First, bear in mind, I still love the products and like the brand.  And if I didn’t, I wouldn’t have asked my team to let me take over this "virtual podium" of sorts and make this post. 

But after all, I manage a marketing technology firm that specializes in this stuff – CRM, Loyalty, and Customer Intelligence.  So, while this experience might not seem like much of a problem for some customers, I'm pretty sure this was not the kind of rich rewarding customer user experience that Ann Taylor Marketing or I.T. intended when it went live.  Where did it probably go off the rails?

I mentioned connecting the dots.  Let’s do that. 

  1. Ann Taylor has all of my purchase history in a database—a well thought out customer marketing database we would assume. 
  2. Ann Taylor also knows I am a registered user on their site with a fairly good RFM score and active visit and shopping history. 
  3. Ann Taylor put together a system for product reviews that simply needed to be fueled by this customer intelligence they already have.  But they appear to have fallen short; perhaps for want of time to launch or some other limiting choice or decision.
  4. Actually, it appears the ball dropped in campaign management.  This is where the initiative should’ve been better engineered to: [a] draw on their customer data, in order to [b] drive their messaging, and [c] populate the message with the appropriate links, to then [d] bring me (click free) to my most recent purchase’s product page to rate that product and hopefully write that review (for CRM and customer intel, unstructured data of free form text in the form of reviews is very useful in addition to the structured rating data... but that's another blog post). 

To put a fine point on it, this is the essence of an integrated CRM strategy: where the “system” -- comprised of the marketing database, the ratings and review system, and the eMail campaign management platform -- is properly orchestrated and fully leveraged as a unit to create mutually high value customer touch points.

Sure, it may be some quirky implementation requirement of the contest for the Reward Card, I don’t know; and if I were not a customer of Ann Taylor who just happens to have spent my last 28 years in CRM, loyalty, and direct marketing, I probably wouldn’t have cared whether it was simply a goof in implementation of the contest or messaging campaign.  In that case, all I would care about is that I just had a nearly useless customer experience.  In fact, as applied here, our tenet of SMART messaging just went down like the Hindenburg.

We’ve written lots about SMART messaging, but to review, all campaigns should adhere to five principles; that is, be Succinct, Meaningful, Actionable, Relevant, and Timely.  And you can see it: this campaign tripped, stumbled, and fumbled both action and relevance

The Ann Taylor Product Review Offer fell short on "actionable" because, well, it really wasn’t (at least not as conveniently as it could have, and for busy professionals—a fair description for a good portion of their target market—too time consuming to do so now, which is to say never.)

And the message was accordingly irrelevant because it failed to tie the action to something that mattered directly to me:  the satisfaction I had with my particular product purchase—not just any purchase I’ve made, or knew a friend who made, or a gift I had received, etc.

So, Ann Taylor very likely has the data to have done this right, but apparently that data was either trapped, or not easily (or readily) accessible, or there was some quirk in making it work with the contest offer, or (heaven forbid) no one simply thought through the solution to connect the product review opportunity with an actual product purchase (for those who had bought online anyway).

The result was largely a non-actionable irrelevant message and a huge missed opportunity to engage their customer.  And, an important opportunity this is (was) because Ratings and Reviews are a powerful way to connect your customers with your brand, build a sense of community, and provide a proverbial “Canary in the coal mine” for product development, customer service, and marketing.

So what should Ann Taylor have done? 

Not that I am suggesting they copy another solution, but let’s start by comparing how another brand we work with has pulled off product reviews.  NIKE has extensive product review and ratings capability.  Here’s how it works. 

  1. At Nike.Com a customer purchases product.
  2. 10-14 days after shipping once Nike “knows” the product has been shipped (and with the time lapse likely delivered), an eMail is keyed off of the estimated delivery date and sent to the purchaser (whose address was included as part of the transaction for notifications purposes). 
  3. The eMail content is the offer to review/rate the product(s) purchased and in a nice manner: the message includes clickable thumbnail pictures of each product purchased and the call to action. 
  4. Clicking through the thumbnail takes the recipient directly to that product description page with a prominent Rate & Review button.

Here is what C[IQ] would suggest to ratchet that process up for the Ann Taylor Ratings & Review campaign. 

I’m betting in Ann Taylor’s case, they were trying to cover a few too many bases with a single message.  You see, one can imagine that not all loyal customer eMail recipients purchase online, and some of them purchase in a physical retail store.  Fine.  What we would do is make 2 list pulls: one for those who’ve recently purchased on line, and one for those who have not.  Let’s call the latter pull a more “generic” message and the former the more personalized or tailored message for the online shopper.

For the generic message, which could largely be the creative that Ann Taylor sent in this case, language could be added that recognizes the recipient has not made a recent purchase online, but they may have bought in one of Ann’s stores or received a gift of an Ann Taylor product, and encourage them to look-up that item to review. 

Now here is another way to improve on that if there is some registration information required (i.e., the Gift Card raffle registration).  Ann Taylor’s CMDB should have a record flag set to indicate if the customer has ever activated an online shopping user account.  If they have an account, then a log-in session could be presumptively established (similar to how Amazon.com functions), so that the recipient could be logged in through the URL path, thereby avoiding the log-in step to register for the Reward drawing.  An authentication step could easily be added if necessary, again, as Amazon.com does.

The personalized version would be an elegant solution: the link would send the user directly to the product page of their most recent purchase with the review button ready (and log-in that user to a session state if authentication data were required.)  In this manner, the valuable time of the customer is optimized, the message becomes fully actionable and relevant, and the brand (in this case, Ann Taylor) delivers on its promises, catering to the customer in an appealing manner.  Now to me, that would be a well tailored message (if you'll pardon the pun).

Best,

PJ Santoro
Managing Partner

Customer Relationship Management is a Contact Sport

Our Friday parting shot (...yes we're still here but heads down on three new projects that hit simultaneously) ...our parting shot this week is, as the title suggests, a commnt about one of the best in the consumer relationship management space: Apple and how they use their brick and mortar experience to build brand loyalty.  We've said before and say again that CRM is brand engagement and management.

Yesterday, Forbes contributing editor Carmine Gallo posted an interesting article that nearly ironically coincided with one of our partner's having an Apple store experience, and separately sharing with us  consistent insight, without even being aware of Gallo's article.  In fact, we would've missed it, but for deciding on a lark to run a Google Search on the topic.

The gist of the article and our own observations is that the details of consumer experience matter big time, and every Apple retail employee knows such.  In fact, did you realize that before the opening of a Store each day the displays on all the Macs are precisely set to a certain angle?  And its not just aesthetics.  Actually, it is done intentionally to engage a visitor to adjust the display to their own best viewing position.  That's right: the intent is to engage the consumer in touching the equipment! 

Gallo writes about his one year spent researching the Apple retail experience, and this is but one of the little inside tricks he learned.

The resulting maxim is: interactive expereinces create a sense of ownership.  This is also why every machine is jacked into the Internet and loaded with Apps.   Gallo writes (we'll paraphrase here), that the idea is to engage the consumer or customer in a way that encourages direct tactile interaction.  For example, trainers who teach customers how to use Apple products never touch the device without the student's permission.  Rather,  they patiently guide customers to find the solutions themselves.

And here is a really big idea (that most retailers finance officers will roll their eyes at as nonsense, and yet if you look into any Apple Store on any day you'll see its swamped with both broswers and buyers.)   The idea is that the Apple Store was never created on the premise that people want to buy stuff.  Actually, Apple discovered that by creating an "ownership experience," customers would be more loyal to the brand.  And they would eventually buy.  In volume.  For life.

Indeed, as Gallo explains (and we have it on independent information this is true), the Apple Store is designed to create an ownership experience from the moment a consumer walks through the door.  Devices are there to be fondled... furiously if so desired.  Our partner took special note today, the first afternoon of summer vacation, how the store flowed with kids (of all ages) many fixated and furiously mousing or tapping, or visually entranced, depending on the circumstances of their engagement.

Gallo recounts an experience with his daughters and points out something really telling: the difference betweeen an Apple Store and a Best Buy store experience.  Ironically, our partner also found himself at Best Buy at lunch today and saw this with his own eyes: the opposite is true at Best Buy.  The store is not overflowing with people, and the machines are typically in screen-saver mode with very few Apps, seldom connected to the 'Net, with many not even turned on.

The point really is, Apple learned long ago what many other businesses are just starting to realize: make it fun for consumers to connect with your product or service using all their senses, and you will quickly sense brand loyalty.

Gallo goes on to share another example to prove the point that this isn't just applicable to consumer electronics, but works for things like the Build-a-Bear Workshops -- again employing this multisensory experience paradigm. 

We note that Carmine Gallo has actually written a worth reading new book on the the Apple Experience -- "Secrets to Building Insanely Great Customer Loyalty."

So, our parting shot this week is that CRM is a contact sport.  The more you engage your customers’ senses, the more likely it is that they will engage with your product on an emotional level and reward you with their loyalty.  As Gallo suggests, and we heartily agree: the next time you wander into an Apple Store (and you know you will), pay attention to the smallest details.  You might learn something valuable about creating customer loyalty.

 

Comment

Gregory Miller, CTO

Greg has been in the tech sector as a software architect and engineer, product manager, marketing and biz dev exec., and even IP and privacy lawyer for 3 decades. He is currently on the Board of a non-profit tech foundation reinventing America's election technology, is a venture adviser in the Silicon Valley, and serves as the CTO for C[IQ] Strategies, Inc.

Typing Relationship Management Models

Last week we wrote about the confusion that seems to rage over what exactly CRM is and is not.  So, we've decided to start a little series of posts here.

First, the bad news: there is no ordained definition of what "CRM" is, but there is a fairly strong consensus among marketing strategists what the phrase "customer relationship management" intends.  So let's start by stating, as can be found in many resources:

CRM is a business strategy.  It is not a software application, platform, or system.  This business strategy is directed to understanding, anticipating, and responding to the wants and needs of an enterprise's current customers in order to grow the life-time relationship value.

A couple of points right away:

  1. Current vs. Prospective Customers. Some will argue that CRM equally applies to potential or prospective customers as it does existing customers.  We disagree.  The business strategy called CRM is really about retention marketing, not acquisition marketing.  The former is unique in that the tools of CRM focus more on the middle to late stages of the customer life cycle (i.e., selection, satisfaction, loyalty and advocacy), not the early stages (i.e., awareness, knowledge, consideration and selection.)  We'll save the nuanced counter argument about addressing the same customer in future cross-sell or up-sell opportunities as an iteration through the entire life cycle.  One could argue that a new product is a return to raising awareness and increasing knowledge, etc.  Its different. Full stop.  Please ask us to explain or watch for the book :-)

  2. The Definition of a Customer.  This is the immediate threshold element in understanding why some CRM solution providers confuse matters.  A "customer" is one who purchases your product or service.  A customer can be an individual consumer; a client; a constituent; a retailer; a distributor; a purchasing cooperative; etc.  The key is to ask: "Is the individual, group, or entity a purchaser of my goods and services?"  Next it is imperative to know whether the "customer" as you have identified it is a consumer or a "proxy" or representative of a consumer.  The former amounts to a so-called "B2C" relationship whereas the latter amounts to a "B2B" relationship.  And this distinction will be essential to determining your CRM strategy, approach, requirements, and tools.  For example, where the customer is a consumer, client, or constituent, the individual is who you are establishing the relationship and therefore addressing their individual needs (which often tend toward to emotional values of your brand promise).  On the other hand, where the customer is a business, the proxy is generally a purchasing agent (in larger enterprises) or the owner (in small business) and in any event is some decision maker with whom you are estbalishing a relationship and therefore addressing their business needs (which often tend toward the rational values of your brand promise -- remember our position that CRM is brand management?).

The challenge for us today is that the Internet has driven many Manufacturer/Wholesalers to seize the tantalizing opportunity to connect directly to consumers of their brands, often unwittingly trampling on their established distribution and retail channels.  Of course, there are some interesting solutions to address how integrated retail eCommerce can work to the benefit of both the brand and its channels. 

Nevertheless, where the enterprise is the maker of the goods and services , which they subsequently sell through channels, CRM becomes a bit confusing because they are typically looking for a solution to address both B2B (their distributors and retailers) and B2C (their ultimate consumers.)  To add some more alphabet soup to this, this latter approach to moving their products is often called "direct to consumer" (or DTC).

The Major Relationship Model Distinction

So, once you understand which kind of CRM your business requires (i.e., B2B or B2C, or actually both) and what the strategy right-sized to your enterprise will require, then comes the task of figuring out what type of CRM solution provider you may want to turn to for tools.  Some CRM experts attempt to delineate several models for academic purposes.  We're kewl with that, but think its useful at the outset to focus on just two:

  • Horizontal CRM Solutions
  • Vertical CRM Solutions

...and have an appreciation for their major differences and cost implications.

Horizontal CRM Solutions.  Horizontal CRM makers provide a non-specialized base platform intended for application across all industries.  They tend to be less expensive (up front), least common denominator solutions.  For example, an autombile manufacturer would adopt the same platform as a publisher.  Generally, although horizontal CRM solutions have a lower initial up-front cost, they tend to be more expensive in the long run because they typically require customization or tailoring to the particular industry and business model.  This tends to be similar to the great promise and paradox of earlier ERP; that is, the so-called 80-20 solution where 80% of the functionality was promised to be "out of the box" with the remaining 20% being the required customization.  In reality it was often the other way around, and certainly the cost model was more like 20-80.  Major CRM vendors offer horizontal CRM solutions.  A perfect example is Salesforce.Com.  In order to tailor a horizontal CRM solution, these companies may use industry templates to overlay some generic best practices by industry on top of the horizontal CRM solution.  And often they rely on a network of authorized resellers and systems integrators who have industry and application specific domain expertise to carry their platform into vertical markets.

Vertical CRM Solutions.  As you might expect then, vertical CRM manufacturers offer specialized, industry application-specific CRM solutions.  Vertical CRM solutions are typically more expensive up front but lower cost over the lnger term because they already incorporate best practices, specialized capabilties, and templates and tools that are specific to an industry and business model.  A good example of this would be a CRM solution where the "C" stands for "client" and the application is in the legal profession.

Here is an important rule of thumb from our experience: it is 10-12X more expensive to build a vertical solution from a horizontal CRM platform  than it is to choose a vertical solution already tailored to your business model at least (e.g., B2C vs. B2B) and at best, tailored to your industry if it is vertical or specalized in what you make and how you sell and support the good or service.

This latter point is a hurdle for providing sound CRM strategy and advice.  The reason is the horizontal makers want you to adopt and purchase their CRM solution, but one type does not serve all.  For instance, we have a pair of clients right now who both are historically a product maker in a B2B business model who now desire to expand into a B2C busines model.  And they're both being vigorously told that SalesForce.Com will serve all of their needs -- they simply define customer records and set a flag for the customer type.  Nonsense. 

Clearly, Salesforce.Com is a powerful platform primarily intended to serve the B2B and customer-service models.  However, the data, information, outreach and marketing tools for serving a customer who is another business is considerably different from what is required to implement a CRM strategy for serving an individual consumer (in a B2C/DTC business model).  The former's audience amounts to Procurement Managers on behalf of their businesses.  The latter's audience are individual consumers who are buying directly from the enterprise.

Next up, we'll share some more about some of the academic model distinctions, and the challenges of implementing the best customer intelligence strategies.

 

CRM: Not the Floor Wax and Dessert Topping You Thought it Was

From the "what did we learn today" session we try to do around here at the end of a week, comes this little revelation: CRM is still misunderstood. We know, shocking, eh?

We're in the throes of preparing a new digital marketing technology strategy for a client, and part of that process of course is interviewing.  So, it probably shouldn't come as any surprise to us (of all people) to learn that if you put 2-3 sharp people in the same room and ask them to define CRM you get four  to five answers.  Actually, you get a vigoroous disagreement amongst them that nearly derails the project.

For one person CRM is all about database marketing.  For another it was sales force automation, and for a third it was customer service.  Of course, we asserted that CRM is Brand Management.  And that certainly widened some eyes (turns out in the end, we gained agreement on our definition, and we quickly called it a "wrap" observing that it was Friday after all, and sunny out.)

Here's the main thing: there is really nothing new about the basic concepts of CRM

After all, marketing has long urged their Companies to “to get in touch and engage with their customers” and then effectively build to suit their (products, services, encounters).   For nearly 2 decades now the leading edge of marketing (us, humbly included) have been evangelizing the importance in the 3rd Age (the digital age) to realize a shift to consumer-centricity and the power the Internet provides for direct-to-consumer commerce.

To put a fine point on the real issue: the challenge has been to figure out how to implement this concept in a cost effective manner for more than a few key strategic customers.  So in practice, relationship management or marketing (whichever "m" word you like) has only been applied in key account situations, and frankly by virtue of the phrase "key account" generally the Company and customer are already in the 3rd, 4th or 5th stages of the customer life-cycle (i.e., "consideration" "selection" or "satisfaction").

The rest of the time, mass-marketing principles have been employed.  So, the strategic concept of CRM has been to employ information technology to create highly personalized learning-based relationships by moving customer "ownership" up to the corporate level from the sales person or channel.  And if this could not be done affordably for all customers, then the mandate has been to focus on the most valuable customers on an RFM basis.

Add in the Internet and some churning out of innovations during the dark years between Web 1.0 and Web 2.0, and now we have a wide range of marketing technology to identify, track, and interact affordably and effectively with N customers in a highly personalized, tailored and targeted manner.  The unintended consequence of this, however, is for Companies to see CRM as marketing technology itself, rather then the reason the technology came about in the first place.

So, it seems once again we need to emphasize that CRM is an attitude, a philosophy, a set of principles, and even an ethos, but not an application, platform, software, or system. 

In fact, CRM is Brand Management, or perhaps more specifically, "managing brand engagement."  It is the direct 1:1 conversations between the customer and the brand.  And CRM can be implemented with a number of marketing technologies. 

The best CRM results are obtained in those Companies who recognize that if they make and sell a product or a service to a consumer that their busines must be "consumer centric" not "product centric."

Before any strategy can be set, or changes can be made in the Company's I.T. or M.T. infrastructure,  management must become very clear about what CRM means to it's business and why it wants to proceed.

But its equally important to understand what CRM it not.  CRM does not replace, but rather complements other marketing and customer service initiatives. For example, CRM cannot replace market research.  A well executed CRM strategy will employ systems to create and manage detailed profiles on customers and their longitudinal behavioural data. This will enable the marketing team to understand what particular customers are doing (and make possible cross-sell and up-sell opportunities).  But market research remains essential to understanding (non-customer) consumer behaviour and forecast shifts in that behavior relevant to the Comany's business.  In other words, while a CRM strategy should strive to attain a so-called "360-degree view" of customers, it must be integrated with all aspects of the business  in order to do so, and complemented by other marketing tools to provide the broadest possible overview.

Therefore, our parting shot is CRM is still misunderstood.  Our insight this week is that we need to better help our clients understand that CRM is a process.  We think the key is to equate CRM to the challenges of brand management, particularly in this always-on digital age.

Time for cocktails.
Cheers!

Comment

Gregory Miller, CTO

Greg has been in the tech sector as a software architect and engineer, product manager, marketing and biz dev exec., and even IP and privacy lawyer for 3 decades. He is currently on the Board of a non-profit tech foundation reinventing America's election technology, is a venture adviser in the Silicon Valley, and serves as the CTO for C[IQ] Strategies, Inc.