Databases don’t add up to one-to-one marketing

Only when in-depth customer data is used to deliver superior value to consumers will one-to-one marketing prove successful, says Alan Mitchell

One-to-one marketing is coming to the UK. That sounds a bit strange considering the term “one-to-one” has been standard fare on most direct marketers’ lips since Don Peppers and Martha Rogers wrote their seminal book The One-to-One Future seven years ago. But only recently has their consultancy, the Peppers and Rogers Group (PRG), focused on the UK, and only last week did they sign an alliance with management consultants KPMG to help with data warehousing, systems integration, business process re-engineering and change management.

Systems integration? Business process re-engineering? Change management? Phrases such as these start ringing ugly warning bells (such as “big bucks, few bangs”) for many chief executives – and why, thus far, one-to-one marketing is practised in inverse proportion to the amount it is preached. As Rogers, who was in London last week with Peppers to launch their latest book The One-to-One Manager, admits, “there are not many poster portraits of the one-to-one enterprise yet”. While many companies have dabbled with one-to-one initiatives, the overall impact on marketing’s big guns in consumer goods, retailing, financial services, travel, motoring and telecoms has been small.

Consider the seven steps to one-to-one heaven and it becomes clear why. Step number one is to remember your customer. That rules out many companies and industries – such as classic packaged goods businesses – where this data isn’t available or is too expensive to capture. Only recently have mass retailers done so with their loyalty schemes. Besides, having a database isn’t the same as remembering. How many times do you check in to the same hotel chain and give them the same information – name, address and so on – that you gave them the previous time? Having you on a database isn’t the same as remembering you.

Step two is remembering customers across all divisions and brands. Procter & Gamble may have an effective direct marketing programme targeting Pampers users, but does P&G know which Pampers users also buy Ariel, Fairy, Pringles and Sunny Delight? Most banks are still struggling to get separate product-focused databases and divisions – current accounts, loans, savings, investments and credit cards – to talk to each other so that the organisation can get a complete picture of its customers.

Step three is actually doing something with this information. How to model life-time customer value, for example. How to use this data to change the way you deal with different customers. Doing so usually involves organising the company around customer groups rather than product-oriented brands, and that’s an awesome organisational and cultural upheaval.

Step number four is interacting properly with customers, where “properly” means capturing each in-coming customer contact – whether a letter, phone call, face-to-face discussion with a salesman, or visit to a Website – and linking them to see the relationship as the customer sees it, a seamless entity. Easy to say, but frighteningly difficult to do and critically important. As Rogers points out, information about customers that competitors don’t have lets you compete on things they don’t even know about.

Mounting these four steps is so difficult that most organisations have either fallen by the wayside or are still struggling to get there. But there’s more. Step number five is an even bigger challenge, revolving not around IT systems and organisational structures but people and mindsets. Modern data warehousing and datamining technology is spectacularly powerful. But new technological capabilities applied by an industrial-age mind often end up being counterproductive, resulting in “technology-enhanced customer harassment”, warns Rogers. One-to-one success involves becoming what Peppers and Rogers call the customer’s “trusted agent”.

Cross-selling, for example, is an ancient concept which would-be one-to-one marketers dream of achieving. So the loans product manager tries to use the new integrated customer database (assuming regulations allow) to mail shot current account holders with a loan offer. Ditto the savings product manager, credit card product manager and insurance product manager. Peppers says: “Someone, somewhere, has to be the traffic cop who speaks for the customer. You have to have someone who is looking for the product most appropriate to the customer, rather than the customer who is most appropriate for the product.”

In other words, all these IT and organisational changes have to result in the company delivering demonstrably superior value to customers. Customisation of communications, core products and services has to take place so that customers feel special. This is crucial because without it, customers rarely take the next step – what Peppers and Rogers call “a learning relationship”.

A learning relationship is where customers are willing to share more information with the supplier over time, because the supplier uses that additional data to good effect. Only at this stage do customers become “locked in” to the relationship, partly because they have invested so much in it and partly because it has become valuable to them. The previous investment only now begins to pay off .

The final step is to keep it all going. Building relationships and maximising life-time customer value often go against the grain of traditional corporate cultures and reward structures, which focus on short-term budgets, sales targets, transaction margins and volume. If one to one does not become a natural way of doing business, it cannot survive.

Considering how hard it is to climb these seven steps, there’s little wonder Rogers can point to so few “poster portraits”. There is, however, a growing army of wannabes. All the high-street banks have signed up with PRG, for example. So has Ford, for a global, multi-year customer relationship management programme. For many companies (though certainly not all), the only viable future lies in one-to-one marketing. Technology enablers, competitive pressures and consumer preferences all point in the same direction. But getting there is turning out to be a real marathon.

Alan Mitchell

asmitchell@aol.com

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