Why intimacy is vital to customer relationships

Tesco has struck a deal with NCR corporation to supply a Teradata company-wide data warehouse solution. If that sounds like the sort of news you would expect from a computer trade magazine, it is. But the real story of the rise of customer relationship management is a marketing one, with huge implications.

The one-to-one marketing mantra is familiar to most readers. Just to remind you, here is what one-to-one prophet Martha Rogers, who was in London last week at the behest of NCR, had to say. “What a lot of people call one-to-one marketing is actually nothing more than database marketing – personally addressed marketing communications. The difference between the two is that one-to-one marketing is nothing without customisation. It’s all about generating feedback from customers so that marketers can learn more about their preferences; so that future offers – whether in terms of the product or service, packaging, delivery, communication, or even invoicing – can be tailored to these preferences.”

This, in turn, delivers a double advantage. It allows marketers to learn things about their customers that no competitor can know. And, by tailoring their behaviour/offers to these customer preferences, they can deliver something special, thereby “locking” their loyalty in.

One-to-one marketing changes the whole direction of marketing. Instead of employing product managers to find consumers for products, it’s about customer managers finding products for consumers. Marketers shift from being what Rogers calls “order takers” to customer “agents”.

It also transforms branding and brand management. According to Rogers, modern branding was born as a necessary response to the remoteness inherent in mass production, distribution and communication. “It is a substitute for a relationship with customers.” And branding’s future lies not in the branding of products or services, but relationships. “The brand of ‘You plus Us’ is much more powerful than just ‘Us’.”

This is all visionary. But what’s remarkable is how, after endless hype, there’s scant evidence that anyone (in the UK at least) is actually doing it.

There’s one answer that Rogers, as a consultancy sales person, dismisses. It’s this: her ideal one-to-one business is, almost by definition, a start-up. One-to-one marketing requires such different approaches to doing business that it just cannot be grafted on to traditional mass marketing operations. The graft simply won’t take. If you have factories to feed or aeroplanes to keep full, you simply have to find consumers to keep them busy. Acting as agent for them just isn’t an option. You need their orders.

Likewise, it’s all very well talking about focusing one-to-one marketing activities on the 20 per cent of customers who deliver 80 per cent of your profits, but if the business needs operational critical mass to survive it needs to delight them all. And in these circumstances personalising this and customising may simply lead to ballooning costs. Better, perhaps, to accept you are a mass marketer and to do it properly.

But there is another possible answer: only now is the technology emerging that can help turn vision into reality. When Rogers first wrote The One-To-One Future with Don Peppers six years ago, they didn’t even mention the Internet, and the sort of data warehouses Tesco has decided to invest in had hardly been thought of.

The point about one-to-one marketing is that its mode of operation is entirely different to that of mass marketing. Mass marketing is remote. So it works by closely observing the target market and developing and administering the right stimulus to get the right response, from afar. One-to-one marketing flows in the opposite direction. It is intimate. It relies on gleaning information from, not information about, customers, and using this information to sense and respond to their changing needs and desires.

Achieving this involves the equivalent of installing a nervous system, sensory mechanisms such as hearing, sight, touch, smell and taste, and reflexes into an industrial machine so that it becomes intelligent and flexible enough to receive, digest and respond to customer-driven sensory stimuli, in real time.

It’s like turning a steaming supertanker into a lithe, alert cat at play. That transformation is, in essence, what customer relationship management is about. It involves being able to recognise individual customers, no matter how the customer chooses to “touch” the organisation, whether it is in a shop, a call centre, through the Internet, a kiosk or cashpoint, or some face-to-face service encounter.

It also needs to remember the history of all previous transactions and interactions with the customer – no matter which interface – because this history will determine the nature, meaning and quality of the new encounter. And it needs to capture all relevant information from the encounter, so the cycle can be continued.

There’s more. CRM marketers also need to know the value of the customer concerned (both today and potentially, over the long term). Which, in turn, means that all this customer information has to be linked to the internal costs of serving him. Which, in turn, requires an enterprise-wide customer-centric information system.

Luckily for those organisations exploring such moves – including retailers, financial services providers, airlines, telecoms operators, and a whole host of business-to-business companies – there are many quick wins along the way. Better customer segmentation and targeting, for example. Or the ability to calculate individual customer profitability as well as product line, channel and account profitability. Or simply more efficient operations. Tesco, for example, claims that by linking internal operational data to Clubcard data it can do a whole range of things more efficiently – from better promotions and range management through to stock control.

But the ultimate destination of CRM is not just quantitative but qualitative. It’s not just about operational efficiency. It’s also about transforming customers’ experience of dealing with organisations; creating a new dimension of “relationship branding” which delivers experiences customers want to buy. This is an absolutely gargantuan task littered with tank traps. And it may not be suitable for every sector or every circumstance. But where it is, marketers who get left behind face a lean future.

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