Who’s managing your relationships?

Outsourcing customer relationship management is moving up the agenda. But is your CRM safe in the hands of an agency, and will the cost reductions made outweigh the potential loss of control over customer communications?


Despite these concerns, brands are constantly under pressure to think of ways to outsmart the competition and maintain custom. The challenge they face is ensuring they use data correctly and in an effective manner to steer the customer back into their welcoming arms.

Kraft Foods chief marketing officer Mary Beth West explains: “We have to continue to connect with our consumers to understand how they define value, create compelling value propositions, and then spend into them.

“We approach marketing by reflecting where our consumers are in terms of their media habits and when they are most open to engagement. At the centre of great marketing is a truth that is core to the brand and connects both intellectually and emotionally with the consumer,” she claims.

A similar approach is taken by the automotive industry, which uses CRM to actively engage with their customers while they wait for new cars to be delivered and for after-sales services once a customer has received their new vehicle.

Nissan European interactive marketing manager Darren Cox says: “We have a limited head count, so rely heavily on an agency to do our CRM for us, but this will change as we change our marketing approach and reduce offline methods to concentrate on the online. For instance, we don’t send physical brochures any more and when a customer places an order and there is a long run-time, we use CRM to keep them interested with incentives across all touchpoints, such as invites to racing events and then photos sent by e-mails.”

He adds that although it was unlikely that a multi-brand approach like Publicis’ would work for the automotive industry, there is an industry-wide recognition for the need for data integration and consumer engagement.

Yet, according to a poll by the Marketing Society and Royal Mail, only 19% of marketers are interested in using most of their budget to retain customers. Targetbase Claydon Heeley’s chief executive, Steve Grout, agrees that such engagement is lacking. He says that while leading brands are making the most of data, too many are not using it to give customers a reason to come back (see research findings, below).

The problems identified in the research stem from the fact that while CRM is correctly targeted at segments of customers, negative brand experiences elsewhere are leaving customers disengaged and unlikely to reignite a relationship.

BT Global Services head of CRM Andrew Small acknowledges this is a problem that service brands need to address: “A core challenge for any marketer is to face the double issue of building effective relationships with customers while driving cost management plans for the company and its customers. For all the efforts we invest into CRM, it wouldn’t mean anything if people did not have a positive perception of our brand so great customer service throughout their brand journeys is essential,” he says.

O2 head of CRM, Andy Day, echoes these sentiments: “We are fully in control internally of our CRM using an agency only for execution. For us, the R in CRM stands for relevancy. We have to balance business demands with appropriate communications to consumers – we ensure that we don’t isolate customers by planning, using insight and analytics. The communications are seen as a living, breathing part of our brand values. I’d be loathe to outsource that.”

Below-the-line agencies are aware of the political tussles within brands and have long been offering clients CRM solutions as part of their direct and digital marketing solutions.

Richard Madden, planning director at Kitcatt Nohr Alexander Shaw, says this is because: “Brand managers are prone to a unique form of psychosis. After a while, they start to live, eat, sleep and drink whatever it is the upkeep of their mortgage is dependent upon.”

He adds that while this is useful for creating advertising, if they used the same philosophy to create CRM, the “obsessive brand-centricity can lead to dire creative consequences.”

Madden says that the role of agencies in this case is scrutinising insight and using it to create genuine interaction through more targeted communications, ensuring that brand promises are believable and offering a consistent customer experience.

Rodney Spady, head of global interactive marketing for over-the-counter drugs at Novartis Consumer Health, agrees with Madden: “It is important that we lead the way in how we approach CRM, but if we did it in-house it would be more of an IT-led project than a creative relationship building programme using people who do creative insight. It means we can have a full dialogue with our customers individually, or collectively in a multi-brand platform.”

Tesco took a similar attitude to Novartis when it first launched its Clubcard. It initially hired Dunnhumby to help launch Clubcard in 1995 and handle all its data gathering and analysis, before deciding to buy a 53% stake in 2001 and going on to increase its shareholding to 84% in 2006.

LBi CRM practice director Pipa Unsworth, says outsourcing is actually more cost-effective for brands. “Running loyalty and CRM programmes internally can be very expensive as it requires a large, multi-disciplinary team covering strategy, planning, data management, campaign management, analysis, fulfillment and so on.” She claims that often organisations don’t have the head count and overheads to build the right size team. When you get to a certain level, it makes more financial sense to outsource CRM teams and systems to partners. She explains: “For example, [when I worked] at Sainsbury’s over 70% of my team were contracted in from agency partners.”

Not everyone wants to outsource. Like P&G, Sky has chosen to handle the CRM process in-house after initial plans to outsource the programme to EDS fell apart in 2007. The British Film Institute and HMV have also opted to run the processes in-house, though like P&G and Sky occasionally use agencies and consultants to develop and enhance programmes for them.

HMV head of CRM Matt Button says: “Much of our CRM is channelled through our purehmv rewards scheme, which enables members to earn points on purchases and then redeem these against rewards. We feel it’s important to have an in-house team, as purehmv and CRM initiatives are a key part of our brand development.”

BFI director of marketing Gail Cohen adds: “Our audiences are so broad and the data we collect is so useful to the marketing we do to keep fans involved with the BFI. By spending time looking at who our 22,000 members are in-house, we can do very targeted work with commercial partners. This ensures we are providing our customers with relevant communications.”

 Starwood Hotels and Resorts Worldwide is the latest firm to look for agency help in CRM. For others, rather than outsourcing, many brands are choosing to look beyond traditional CRM efforts to improve their marketing communications. For example, Unilever recently decided to stop Peperami using an ad agency, instead using social media to ask consumers to come up with the next TV ad using crowd sourcing.

What is emerging is a combination of ideas related to the brand’s audience or category lifestyle and some transactional loyalty, with brands increasingly looking to new promotions to embed loyalty into their brands. Schemes such as Coke Zone, Virgin Atlantic’s Flying Club and Walkers Gary’s Great Trips are encouraging audiences to participate in the brand.

The planning of CRM requires brands to think about a number of different consumer characteristics and find a way to develop a one-on-one relationship (see checklist, above right). Publicis says it hopes it can tap into this and offer every brand a platform for this communication without fear of market competition.

Tony Treacy, managing director of retail marcomms agency Ideas-to-Market, thinks the platform could be a major threat to eCRM specialists. “For the independents, it is a threat because CRM is becoming mainstream to all marketing planning and activity. CRM tactics and technology are synonymous with the brand positioning and strategy; both of which should be translated into a solid marketing communication plan. They shouldn’t live apart, and to distance the two simply dilutes their value,” he warns.

However, Pete Anderson, planning director at eCRM agency Underwired, says the multi-brand approach “will not be to everyone’s taste, with more brands looking to specialists to undertake relationship building through a host of methods. Not just email, but also if you look at the eCRM programmes being run for McCain Foods or The Sun they include SMS, websites, online PR and on-pack or off-the-page – building real relationships with consumers is about an awful lot more than just email broadcast, it’s about dialogue, learning and conversations.”

It remains to be seen how Publicis adapts Pour Tout Vous Dire, but even with the large advertising network looking to expand its digital reach, there are still plenty of brands that want to keep a tight grip on their customer data in-house.

DCH head of digital and direct, Nik Margolis, says that regardless of who is in charge, CRM will still be about”understanding the audience and delivering one-to-one messaging that is relevant to the recipient.  Everything else, is, well, irrelevant.”

To explore better strategies and techniques for customer retention attend the Marketing Week’s 6th Annual Customer Retention Summit on 14 and 15 October in London. Read details here

Targetbase Claydon Heeley

Targetbase Claydon Heeley conducted an online survey of 1,200 UK consumers to find out how they value ten leading brands – Barclays, Boots, British Gas, BT, easyJet, Google, Lloyds TSB, Marks & Spencer, MBNA and The Post Office.

The survey asked participants to score how much they value a brand – based on how engaged they are with the brand; and how much they love a brand – based on the support they show in return for that brand.

It found that despite some brands (Boots, Marks & Spencer and Google) achieving value scores of over 70%, none of the ten brands got higher than 30% for love, revealing that on average, the brands are failing to engage with 77% of their customers.

Steve Grout, chief executive of TBCH, explains: “Despite solid efforts to connect with customers and show engagement using systems such as CRM, these brands are failing to generate support from their customers, who are their lifeblood. It’s shocking really; engagement is a part of
everyday life, but so many brands including these ten are failing to find the essential methods of getting customers to reciprocate these relationships.”

Part of the reason for this fall in “love scores” stems from brands not engaging their customers using one-to-one communication methods.

Grout adds: “The scores will improve if brands enhance the way they talk to customers, recognising individual consumers and treating them with respect. The basic truths still hold true – respect, honesty and feedback to customers equates to better engagement. Segmentation is crucial to this, it shows you are treating each consumer for who they are and are talking to them appropriately, based on who they are.”

Brands must focus more on getting this right, so it doesn’t appear that they are simply using CRM programmes to blast out advertising messages.

Grout advises: “Don’t make it complicated with 78 different segmentations, but keep it tight and defined. The key is to get the right insight from the data you collect on your customer and manipulate that to your advantage so there is always a reason to be communicating with audiences and a reason for them to want to show support to you in return for your efforts.”

Following patterns of consumer behaviour and purchasing will also help brands to be more relevant in their communications. It will also assist in eroding suspicions from consumers that such communications make them look greedy for profits.

He summarises: “It’s fundamental to get the balance right. Find what the audiences are looking for, tap into that insight and ensure that everyone is right behind it from the start. The customer will be pleased with your relationship with them and as a result you can aim to expect something back in return.”

Vanessa Cohen, partner, Prophet

CRM should be seen as an advantageous tool to keep hold of customers and ensure that they remain loyal to a brand, but more often than not it suffers due to a major disconnect between the people managing the brands and those that run the CRM.

It seems obvious, but by bringing the two together in a suitable way, brands will have a distinct advantage over their competitors, provided they use the insight they gather correctly and send out relevant, targeted and personalised communications.

The core to achieving this is making sure that every single person in a company is aware of exactly what their brand stands for. It has to be throughout the business, so that even the data experts who are looking at how to communicate to customers, are thinking about the brand, and
not just how best to mine the data. It starts with the fundamentals of knowing what constitutes a brand – what do people think about you? How do they interact with you? This is affected by everything that you do and say and how you choose to do and say this.

One of the distinct problems of brands choosing to outsource their CRM is they risk making everything seem campaign focused and can be seen to be forgetting about what actually matters – the way their customers perceive them and the way those customers will choose to interact with them as a result of that.

Brands have to take some sort of control and hold on to their values, so that in every form of engagement, those ideals are clearly visible and easy to digest. It’s about touching base with customer sentiments without being generic and without seeming out of touch. It can’t be exaggerated and it can’t be in your face; it has to be as close to triggering a positive reaction as it can possibly be.

This is far from the norm at the moment. Too often, CRM experts, usually in IT departments, forget about the brand values altogether and create very generic segments of audiences that lack the personalisation that it needs to succeed.

It can’t be guess work and vague experimentation. CRM has to shape views and opinions, so the disconnect that exists is pulled back together across all parts of a brand’s strategy and reaches out across all touchpoints. Ideally, this means pulling everything together internally, possibly using external help to get that started. We are beginning to see this with the role of chief marketing officer becoming a more involved position, taking a holistic view and aligning teams to share the same brand concepts.

The push towards going beyond mere advertising is admirable, and if done correctly, CRM can certainly be a great vehicle for developing emotional engagement in ways brands couldn’t do before. However, if the disconnect that exists across most brands at the moment continues, then I fear it won’t be long before brands give up on CRM and begin to look for a suitable exit strategy.

Vanessa Cohen was speaking ahead of the European Chief Marketing Officer Conference which takes place in Zurich on October 1, sponsored by Prophet.

What to remember when managing customer relationships

Marketers must remember that consumers:

  • Are critical and questioning of all that they buy.
  • Are increasingly marketing-savvy and marketing-literate.
  • Are less favourable in their views of advertising and a lot of ‘push’ communications – almost 30% of consumers have an unfavourable view of advertising.
  • Are increasingly aware of the price of goods and services both on and offline – 49% of consumers claim to now shop around more.
  • Have developed a sophisticated understanding of what represents ‘value’ in the long-run.
  • Are armed with the tools of price comparison – turning to the internet first and the high street second when looking to buy new goods and services.
  • Demand and expect to receive ever higher levels of service and will take their service elsewhere if not happy.
  • Are generally even harder to please, less loyal, less trusting and more willing to voice their displeasure over brands that under-perform, anywhere indeed where service over-promises and under-delivers.

These factors mean that striving towards a one-on-one relationship with customers is now essential.

Source: Experian Future Foundation
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