Loyalty schemes buy you knowledge, not loyalty: loyalty can’t be bought.*

We have come from the CRM world, are currently active in social media and online communities – really feel like we have one foot in each of two generations of marketing.

From this (sometimes uncomfortable) stance, let me make a prediction; Loyalty programs will become the bridge between these two apparently different worlds, for savvy companies.

Why? Because loyalty program members identify themselves.

In fact, loyalty programs are the price you pay for individual customer data. You make money from the careful use of this data. When you also know the identity of the customers in your (branded) community, you can;

• look introspectively at their behaviour within your business
• identify your best and potentially best customers
• enrich this with third party data if you choose
• match it all to their behaviour in the community – what do they post about, what ideas do they rate highly, what do they disagree with, how do they rate us (in Net Promoter terms) – segmentation by ‘behaviour in the community’ allows you to profile your brand advocates usefully using insight into their attitudes and beliefs.

The road to success is paved with good information*.

Not just right customer, right offer, right channel, right time but also right content in your marketing communications. We have had gratifying success by taking note of what different types of customers want us to talk about and reflecting that in our targeted, personalised direct marketing with good reductions in member churn for a sporting organisation.

In all customer segmentation there is a risk that your customers are homogenous – they all want and need exactly the same thing from you. If this is your case you may end up with the first online community ever that has no customer politics!

If you cannot segment through your community, you will just have to live with the goodwill that comes from being open to a conversation with your customers. Not a bad consulation prize.

* Quoted in “Loyalty Marketing: The Second Act” by Brian Woolf

Reading the Tea Leaves with Gartner

For those of you that have lived through a few Gartner “Hype Cycles”, you know the qualifications that need to be applied to the all-knowing predictions that come from the Gartner machine… but they make for interesting discussion in any case.

Try these for size…

“By 2010, more than 60% of Fortune 1000 companies will have some form of online community that can be used in marketing…” The Business Impact of Social Computing on Marketing and Generation Virtual.

And from the report “Predictions 2009: Business Intelligence and Performance Management Will Deliver Greater Business Value.”

“In 2009, collaborative decision-making will emerge as a new product category that combines social software with BI (Business Intelligence) platform capabilities…. Gartner research has shown that individuals seek advice from peers when making decisions – a trait that plays out equally in the consumer world as well as among enterprises. As social collaboration becomes increasingly important throughout the enterprise, Gartner estimates that BI vendors will look to bring social aspects to their offerings, The emergence of social software such as Facebook, MySpace and Deli.cio.us presents an opportunity for savvy (technology) leaders to exploit the groundswell of interest in informal collaboration.”

(Thanks to Alison Higgins-Miller at Acelarus for pointing to this research!)

My take: the larger potential insights are likely to reside in private branded online communities where identity and profiling can be more readily nailed down – and combined with transactional behaviour…

Is relevance enough?

A high value advantage that comes from the integration of your online conversational brand community and your CRM system, is that targeting for offer relevance can include self reported customer attitudes and ratings. Makes for richly targeted direct marketing – right offer, right customer, right time, right channel, right attitude & context.

Paul Greenberg (author of ‘CRM at the Speed of Light’) calls this integrated result CRM 2.0 and has an interesting wiki that is community defining the term.

A client, who is developing this marketing approach, recently questioned the need for their interval based suppression policies (they have implemented a ‘must be relevant and no more than 1 contact every X days’ policy to keep opt-out rates low).

“If the offer is relevant and attractive to the customer, 1to1 offers, does it matter how many and how often we send offers? It isn’t spam if it is relevant…?”

Good question.

My feeling is that offer relevance is critical to build trust which may in turn develop into loyalty and advocacy, but it is not enough;

*There is a natural customer cycle for shopping in most categories and a good offer at the wrong point in the cycle is not relevant – though it may be tomorrow or the day after. This is true in consumer goods with short cycles and automotive with long cycles.

*You have to be able to measure campaign effectiveness unambiguously – so you need a complication free suppression period that corresponds reasonably with the customers’ response cycle.

*There is a individual limit to the frequency of communications that a customer wants from you. Increasingly US retailers, for example, allow customers to set the number of communications they will accept as an alternative to a blanket opt-out – 1 per week, 1 per month…..

*Without suppression periods, you get ‘offer bunching’ as your best customers qualify for most offers. The chance that even great offers will arrive at the wrong point in their shopping cycle increases with the frequency of communication. So the customer at most risk if you adopt a uni-dimension criteria; relevance, is your most valuable! And remember, an opted-out customer is a squandered resource.

Conversational marketing allows you to get more customer insight and target even more relevantly and valuably for your customers – but the disciplines learned from decades of database marketing should not be forgotten just because we now know (some) customers quite well.

It is really a mashup.

Online Communities: Where left brain meets right brain

One of the most fascinating aspects of social media and branded online communities in particular – is the intersection (collision?!) between the spontaneous expression of people (consumers, customers, members etc) online and the driving need for corporations (brands, companies, associations etc) to distill structured meaning & insight that they can act on. Yes, the real world played at fast pace…

Several innovative brands (eg. Dell, Proctor & Gamble, Starbucks, Arts & Entertainment) have understood the power of this opportunity – and have learnt, invariably through trial and error, how best to harness it. Not surprisingly, there are traps for beginners!

The first and perhaps most obvious challenge is, of course, to get people to the community site and to keep them coming back! This challenge lies not only with the strategic thinking behind your site but with the nature of your creative (content!). The overwhelming advice from the experienced hands here is to remind yourself that it is “the community’s” site and that “what’s in it for them” should be front of mind! The research also points to developing embeddedness as being critical to this challenge.

The nature of this challenge - content – is also one for some creative right brain thinking (and reacting!).

However, there is equally a trap in establishing a highly engaging site, with embedded members – that leaves the marketer wondering why they have established the community forum in the first place… 

The recently appointed Digital Agency gets to trial every gimmick (game, competition, animation etc) at its disposal but the marketer is left wondering “So what happens now?!”

The challenge here is to make sure you have the right technology platform - a “back-office” to accomodate the structured analytical data you need to make sense of the community. Please adjust to left brain and read on…

To be useful, insight should not be anonymous. You need to identify individuals and types of individuals (you remember, segments!). You can then understand which ideas are preferred by which individuals or which segments and vice versa. Not only that, you can respond individually and appropriately to those who care about a specific idea and its related follow-up action.

And what about the definition of an idea in the first place – do you really want to analyse the same idea expressed in 50 different ways? Your back-office needs to have the ability to group ideas into themes and to filter for those that are worth analysing – without losing the power of the customer’s words in the process.

And what’s the point of using social media if we cannot accommodate the selection and ranking of ideas – this is the very structure that we as marketers have been after. Afterall, one of the major benefits of these communities are the “ideas we hadn’t thought of”.

So, the back-office needs to accomodate “user-generated” ideas that can be progressively presented back to the community for voting and ranking; in such a way that each idea (or theme!) is given sufficient “time at bat” (for baseballers) or “time at the the crease” (for cricketers) to be statistically significant. If you say this quickly enough, it becomes easier. The real point being that it is a piece of complexity that should be covered by your technology platform! 

The bottom line is that online communities need a healthy dose of both left and right brain thinking to be successful! A wierd and wonderful combination of qualitative and quantitative data and more importantly, a forum that can generate genuine customer advocates.

Vice Versa

I have been doing some more traditional 1to1 database marketing recently and it has reminded me that the more things change the more they… don’t.

Aligning the culture of an organisation is the task that really makes it difficult to transition from product-centric to customer-centric thinking.

Both of the clients are using best of breed analytics and campaign automation platforms, so the technical challenges are not insignificant, but these dragons are being vanquished. Much harder to get the whole organisation aligned in their understanding of;

• what types of customers have been defined/discovered
• what differerent treatment strategies are planned for each different customer type.

Everyone understands the need for a “Single Customer View”, a system that combines all the information you have about customers into one easily accessed view. This puts the history of your interactions with each individual customer in the hands of your service staff and allows them to offer one of the most important customers benefits – being remembered.

Less appreciated but just as important is the need to have a “Single View of Customers” across the organisation. All should agree what types of customers your marketing and service strategy is tuned to address.

For example, if you have a ‘young aspirational’ segment (hypothetically), everyone involved with customers should know their defining characteristics, your objectives for this type of customer and the service treatment that is in place for them.

When I hear clients proudly (often with a hint of exhaustion) refer to their single customer view – I ask, ‘and vice versa?’

Facts are stubborn, but statistics are more pliable*

We are devout believers in the data driven market credo; ‘why guess when you can know?’ This means we keep a weather eye open for case studies and research that will move the decisions we make with our clients from the gut to the head (with or without blinking .

The recently published Relationship Marketing – part of the Relevant Knowledge Series from MSI - is the mother load. Mr Palmatier analyses 97 different empirical studies covering 38,077 different commercial relationships. Head spinning stuff for relationship marketers!

At the risk of over-simplifying, (and being too dry for a blog like this), the summary ‘Best Practices: ways to build & maintain strong customer relationships’ is worth disclosing;

• do not let conflict go unresolved
• assign customers a dedicated contact person
• spend most of your budget on raising the skills of your ‘boundary-spanning’ (aka service) staff
• focus on social (person to person) and structural (system integration with customers) programs
• minimise the use of financial (discount) programs
• let your boundary spanners (sales people) control social programs but not the structural & financial ones
• if your sales staff churn rate is high, make an effort to get them to be consistent in approach and focus more on structural programs
• early in the relationship, focus on amount, frequency & quality of communication
• measure relationship; quality, breadth, composition and growth/velocity regularly. Especially velocity (is the relationship improving or decaying, not just its current state)
• audit your own organisation to make sure you are aligned to relationship marketing – strategy, leadership, culture, structures and control, business processes

But for me the biggest insight is Mr Palmatier’s insistence that if a customer relationship is not growing, it declines. If you cannot grow the relationship, go for efficiency and being ‘easy to do business with’. There is no such thing as maintaining relationships – according to the facts.

The Australian Direct Marketing Association held its annual 3-day forum last week and this ‘make marketing evidence based’ message was consistent from almost all presenters, including yours truly. Sounds like we are finally getting the message. Now all we have to do is follow our own advice!

At the conference I managed to catch up with an old friend – Terry White who is the Chief Innovator (great title) at Amway Japan. Terry – ‘Marketing used to be 90% magic. Now it is 90% science and only 10% magic’ – and he does not mean statistics, he means facts.

* Mark Twain on customer analytics

Because that is where the money is.

The American gangster Willie Sutton when asked why he robbed banks answered; “Because that’s where the money is.”

A similar strategy should be adopted by marketers as they strive to build relationships with customers – to increase loyalty and improve results.

The excellent “Relationship Marketing” recently published by Robert Palmatier gives us a good guide on how to find the marketing equivalent of Willie Suttons‘ banks. We have written before about the role played by reciprocity in building customer relationships; but we are not worthy when compared to Mr Palmatier who has analysed 97 empirical studies conducted over 17 years representing 38,077 different relationships. ‘Why guess when you can know?’

The fascinating finding – relationship marketing can improve or decrease performance; same marketing, opposite results. The critical variable is the Relationship Orientation (”RO“) of the individual customer.

Worth switching to quotes here; “Paradoxically, the same underlying psychological processes and reciprocity norms can both enhance relationship building with relationally oriented consumers and drive away those with a low RO.” “For customers with a higher RO, RM [Relationship Marketing] enhances relationship quality and leads them to perceive exchange efficiency…”…”According to one study, customers with a low RO would shift 21% of their business to another supplier if it offered completely automated transactions (i.e., no salesperson)…”

If your customers are inclined to have a relationship with you, marketing activities aimed at relationship building can work. If they have no desire to have a relationship with you the same activities will drive them into the arms of your self-serve competitor. More reasons to follow the Peppers and Rogers maxim – “Treat Different Customers Differently”. Segmenting customers on the basis of their RO levels seems like a good idea. But how?

Branded on-line communities may be an efficient answer.

We have discussed the golden ratios of branded social networks before in this post. In a B2C community, expect 1-2% of the population to participate (unless you are in a really fanatical category like football). In that 1-2%, the 90%-9%-1% rule will apply – 90% lurk, 9% comment, 1% generate content. It is very easy to confirm that the 9% and 1% of participants are customers with a high RO. Offer them a relationship so they will become word of mouth advocates for you.

The other 98% of consumers probably do not care enough about your category to spend the time needed to make up their own mind. Search has a cost for the consumer, even in the Internet 2.0 age. So the recommendation of someone who is an advocate is potent and generally enough to influence their behaviour.

Seems to me the most active participants in your on-line community, the frequent commenters on your blog, the best contributors to your idea exchange – these are the bank managers, guarding the money in their social network. Become a Willie Sutton and focus on them.

Online Communities and Economies of Scale?

After computerising every customer touchpoint that we can lay our hands on over recent decades – a return to treating customers individually in online communities doesn’t always sit well.

“Surely this can’t be an efficient use of resources; where’s the economy of scale in answering an individual blog comment …?!”

Well, fear not – there is light at the end of the tunnel and some great case studies emerging now that demonstrate the efficiencies and scale that can be delivered through online communities.

An example retold in Groundswell is that of Dell:

“When started their most recent support forum in 1999, they knew they’d need moderators. They pulled 30 support reps off the phones and converted them into forum moderators. Those support reps answered questions online, just as they had been on the phone.

Already, Dell was getting more efficiencies, since each answer could be read by dozens or hundreds of other people searching for it on their support forum.

Now, five years later, the support forum is many times larger than it was then. And the number of moderators is no longer 30. Its five. And that’s because the members of the community are moderating it themselves.”

We are seeing the same in marketing forums as they mature. The more embedded the members, the more likely you will see self-moderation, and a genuine desire to assist members.

Marketing with your best customers – now that’s a different kind of scale economy!

And compared with that IVR system or that CRM application – I dont think it is just a quantitative issue, I suspect the qualitative (customer experience!) outcomes might also be instructive.

4 Steps to a Killer Loyalty Strategy

  

Us Aussies love our points and prizes! We collect points when we use our credit cards, when we buy our groceries, when we travel, when we stay in a hotel, just about every chance we get. Partly because so many organisations give them to us.

Which raises the point of this post; why do organisations run these potentially expensive programs? Research I have seen suggests that the main reason retailers run loyalty programs is “because their competitors do” (Leenheer & Bijmolt).

But even in markets where programs are seen as a cost of doing business, only noticeable by their absence, we contend that you can do a better job of producing a return from your program if you take the time to build a strategy first.

The framework we use is deceptively simple – find the answer to 4 questions:

1. Which customers? Working out what types of customers your program will be aimed at is the first step. Unless all of your customers are identical, there will be differences which you can utilise to make the program more effective. Do not assume the target should always be your most valuable existing customers; their volumes typically mean they will be well rewarded anyway. For example, the Journal of Marketing found light buyers responded better to a retail program and recommended ‘…a need to consider consumer idiosyncrasies when studying loyalty programs and illustrate consumers’ co-creation of value in the marketing process.’ (Liu 2007). Get your customer analytics team involved right up front.
2. What behaviours? What actually do you want the target customers to do? Reward that. Nothing else. Sounds really obvious right? Then why do credit card loyalty programs reward behaviour that is the least beneficial to the issuer (spend big, pay no interest) and airline frequent flyer programs best reward customers who fly the most miles for the least money. Be clear what you really want the customers to do.
3. How much money? If the target customers behave the way you want, how much incremental profit will you make? Time to do some numbers, starting with the ’size of the prize’ if the program is effective at causing the behaviour you are after. Clearly you should aim to spend less on the program than it incrementally can produce if you get everything right.
4. How do I include partners? Few organisations can provide the ubiquity of points earning opportunities that will make a program irresistible for members. What other brands would logically support the program to mutual benefit of member, partner and you?

With clear consensus on these 4 points, it is much safer to then move into detailed program design.

Online Customer Communities…Be Careful What You Wish For

Setting Objectives for Customer Communities

Embarking on customer engagement online seems overwhelming at first – there are just so many possible ways of proceeding.

Keeping clear about objectives and priorities – as obvious as this might seem – is the best advice from our experience. The objective essentially becomes the conversation and shapes the audience or community.

Possible objectives broadly fall into two categories – insight and engagement. 

Detailed objectives might be as follows:

• Identify new trends in the marketplace 
• Innovate products or services
• Develop new ideas for existing customer programs
• Test new marketing ideas or programs
• Support product launches
• Improve customer processes
• Understand customer segmentation more deeply
• Develop word-of-mouth programs
• Collaborate more effectively with field representatives or channel organisations
• Keep your customer culture consistent  

Note the last two take a broader view of customer – tackling customer facing staff or channel partners.

For some inspiration on objectives and approaches, see Eight great applications win Forrester Groundswell Awards

Once you have identified the objective and the target community - useful reality checks are:

• Is the potential community large enough to achieve the objectives?
• Are there sufficient topics of interest to maintain engagement?    

You may ultimately want to run multiple communities with logical links between them – eg providing opportunities for more engaged members to move into communities with more interactive options or topics that match their profiling.  

Engagement for engagement’s sake is a risky path whatever the longer-term objectives might be. Whilst this might excite the creative urge of your Digital Agency – if you start without an end in mind, chances are that your efforts will flounder.

Any experience with this? Please let us know!  

Embracing Consumer Passion in Online Communities

A Football Club Example 

Tim’s last post looked at research on the impact of embeddedness in online customer communities – which has prompted me to look at some of our client’s communities for examples.

The Australian Football League (AFL) stirs passions that probably only locals can really understand so when we had the opportunity to assist the AFL’s oldest Club to establish a member community – we knew we had some promising ingredients.

Melbourne Football Club is possibly the oldest professional sporting club in the world (please prove me wrong!!) and is celebrating its 150^th anniversary this year. The Club was keen to celebrate the anniversary in style and to use the milestone to achieve record membership numbers.

We had identified, in some customer segmentation and modelling work, a segment that we dubbed “passionate partisans” – representing people with both strong track record of membership and attendance at games. We also uncovered from focus group work that this group had a strong desire to engage more with the Club and to recruit other members.    

The Club’s membership last year stood at about 30,000 and so facilitating this “engagement” looked horribly like something that needed to be automated. We were able to do this with a technology platform sourced internationally.

Back to Tim’s post on embeddedness…

Members were invited by email to participate in an Advisory Panel to help shape the future of the Club and to assist in planning the Club’s 150^th Anniversary. The first three Panel surveys achieved between 20% & 30% response rates.

The quality of the engagement was also impressive – to one open-ended question, the Club received over 1000 ideas – all progressively voted and ranked on by the community. 

The principles used in the Club’s communications to Panel members were:

• Recognition. We (the Club) have some ideas about xxx but we value your opinions as Advisory Panel members…
• Contribution. I (the Member) can contribute & will be seen to make a contribution by my peers. I am listened to and can make a difference – “bragging rights”. 
• Value. As an Advisory Panel member I am an “Insider” and will receive information before those outside of the Panel… 
• Feedback (Action!). We (the Club) have listened and here is what we have done or are doing about it.

The results for the Club have been some very quick insights. And as for the members? Melbournfc Marketing Manager – Jennifer Watt – says that members have been known to introduce themselves as “Advisory Panel Members” at Club events.

Sounds a lot like embeddedness!

Panels and Panel Beaters

  

The Fast Company article referenced in our previous post (“What about the ‘Influentials’?”) has certainly created a minor stir in the marketing blogosphere. Two that represent the fracas well are; here and Seth Godin’s.

Basically researcher Duncan Watts disputes the idea that a small number of people are responsible for creating and spreading ideas and fashions through social networks; “No” to serial trendsetters.

This idea was popularised in at least 2 best sellers; “The Tipping Point” and “The Influentials”. Some marketers fell in love with the idea because it is undeniable that there are some people who are significantly more energetic socially, with a much larger social network than the average person. The marketing strategy became “Find these influentials / mavens / salespeople… and you can market anything just by getting them started!”

Then this trouble-making Australian comes along with “…we find that large cascades of influence are driven not by influentials, but by a critical mass of easily influenced individuals…” Read this research.

This discussion is relevant to marketing practitioners; it has direct impact on the increasing use of online panels as a tool for network marketing. Panels we distinguish from the larger social network sites because they are purpose built for marketing.

There are three types of online panel, in our view.

1. Research panels that typically reward consumers for answering surveys. We will not discuss these. Example. Clients pay for the research findings.
2. Panels that explicitly recruit ‘cool dudes’ with the promise that they will be given the chance to be first, be trend setters, the first on the block. These offers are typically product or category non-specific and do not promise cash for comment; they recruit by promising to make members more important, cooler. These panels often transparently screen for Influentials, asking if you are shy in public, how often you give / are asked for advice in a day, do your friends say you would be a good actor, are you a leader of your group etc. To determine the size of your social network they may ask how many of each surname you have talked to in the last month; Smith, Jones, Williams or ask how many different people you talk to in a day/week/month. Example. Clients pay for access to these influentials and the impact they have on sales of the product or service.
3. Groups of known (registered) customers recruited into an “Advisory Panel” or just to have a conversation about a topic of shared interest. This type of panel self-selects customers with an interest in the brand and in our experience these are generally the most valuable customers.

We favour this last form of panel in our client work. They do not represent a statistically valid sample of your customers, but it is more important to know what your best, most engaged customers are thinking and saying than knowing the “average” customer. It also allows us to match, CRM-wise, actual behaviour to attitudes. This lets us determine for example, how our high volume/value customers differ in their opinions, and specifically which ideas, from our less valuable. This insight can guide action which is value creating, by not simply reacting to the squeaky wheel.

For us ‘Advocacy Marketing’ involves the identification and recruiting of customers who are already engaged in the brand or category. Through conversation, find out why and where they are talking about you. Provide these advocates with ‘tools’ that are appropriate to their motives and their venues, to amplify their positive word of mouth. Measure the whole process.

In the “Watts vs. Tipping Point” debate, translated to execution, we say;

• find the engaged customers first and work on making them influential – not -
• find the influentials and work on making them interested in your brand / category,

because customer passion sells and cannot easily be faked. Sincerity counts for more than a large network in the long run.

If you find customers with both, impressive things can happen. The recent book by McConnell and Huba; “Citizen Marketers: When People are the Message” has some great examples covering the marketing of cars, soft drinks, television shows, Dell (not all citizens’ marketing is positive) and others. See here.

What about the “Influentials”?

I am sure most of you have read “The Tipping Point” or “The Influentials” where the authors Keller & Berry claim ‘…one American in 10 tells the other 9 how to vote, where to eat, and what to buy’. They both claim that a small percentage of people (10% typically) trigger trends.

These books have been influential (pun intended) in conversation based marketing, to the point where many on-line panels and communities specifically screen OUT customers who do not;

• Have large social networks,
• Make lots of contacts every day
• Run all of the school fetes
• Volunteer for everything
• Claim to give advice many times a day on all subjects
• Claim to be regularly consulted by all their friends on all subjects…you get the idea.

To us this seems to be another case of marketing forgetting that the product (category) matters! Do you really take advice on computers from the same person you consult on health matters? Or do you listen to geeks and medical students respectively? Are there really people who can influence their social circle on ALL subjects, regardless of topic? Even in the blogsphere?

We find that even in tight knit social circles people are discriminating enough to recognise their peers with a special interest or expertise and favour their advice in that area. And not so much in others.

Engagement with a category is an attribute of the individual, not the products. Not all individuals share an interest in all categories. You can mostly dodge the issue in practice by doing what Larry Weber (Marketing to the Social Web) says ‘…creating compelling environments to which people are attracted.’ Especially customers who are already engaged with the product you are marketing.

Our view is that advocates are too expensive to create through marketing without an existing customer propensity – if the customer has absolutely no interest in your category it is too expensive to convince her she should. Amplify the voice of customers who are interested and their endorsement may be enough to sway the buying decisions of those who are not. And occasionally bring in another advocate for you to amplify in turn.

How do they find out enough to be interested in your brand in the first place? mmmm… (thinks) may be a place for traditional marketing and brand-building after all.

We are not alone in this view. Duncan Watts is an Aussie researcher, now at Yahoo, who is stirring the marketing pot by pointing to the lack of clothes on the Emperor of Influentials Marketing.

Stick to the obvious; find out who is (inclined to) promoting your product already, recruit them, reward them appropriately (often just recognition & thanks) and amplify their voice. That makes them Influentials that matter to you.

“Talk to Me! Remember Me!”

Conversational Marketing as CRM Navigation 

CRM – It was such a sensible idea at the time!

The one customer view, a corporate memory for the customer, the left hand knowing what the right is doing, treating different customers differently, measuring the return on marketing investment…

The results have frankly, been well……    underwhelming.

The irony is, of course, that the ”C” part of “CRM” has too often just gone missing in action… 

It is not just that CRM intiatives generally lacked executive sponsorship or understanding; became IT projects, did not engage the natural stewardship of marketers and have been overly ambitious. All contributed to poor results.

Fundamentally - what has also been missing? The voice of the customer.

CRM projects have seen a rush to elaborate requirements gathering workshops involving a multitude of stakeholders, with one stakeholder missing – the customer. Arms-length market research hasn’t cut it either.

Can you just imagine if you, as an innocent customer, stumbled on one of these workshops… yes, a frightening thought!

Of course, CRM systems are in some cases necessarily challenging with complex processes and integration points to satisfy even basic customer requirements. However, without any strong customer reference point or sense of customer priorities it is easy to see how CRM implementations might lose their way. Chinese whispers are the result.

And so, after 12 months, we get to the end of Phase 1 of the CRM implementation – and someone innocently asks – “Please remind me again, why is it we are doing this?”

What this has bred – has been a lot of CRM initiatives that are “inside-out” – the organisations view of the customer, as opposed to “outside-in” – the customer’s view of the organisation (see Richard Owen’s “CRM Grows Up” ). 

And even stronger than that, it represents “what we are going to do to the customer”  - an attitude that simply aint going to fly with today’s customer…

Enter social networking, web 2.0, online communities and conversational marketing…

In comparison to our previous CRM efforts, these appear to have sprouted effortlessly and organically. And the message to us as marketers should be abundantly clear…

Things have changed. Customers want and are getting more control. They want a 2-way, no – multi-way dialogue with the brand. They have very little trust of brands but will listen to the recommendations of other customers. A small but significant proportion of customers in every category will engage with a brand online – if handled respectfully and authentically. 

Why is this important to our internal CRM initiatives – to the CRM infrastructure that is gathering dust or suffering quiet atrophy in the corner?

Well, at a very basic level, if an online customer community equals “I hear you” and a CRM system equals “I remember you” then we have the raw ingredients of a Customer Engagement Strategy.

The power of an online customer community lies in its ability to tell us “why”. Properly functioning CRM systems should handle the other questions – who, what, when, how. It is the ability to gain quick insight and engagement that is the hallmark of social networking carefully harnessed by a brand.

The promise of online customer communities – quite apart from these immediate insight and engagement benefits – is the ability to rework, repair, re-calibrate CRM infrastructure (people, processes, programs, technology) to something more like what customers want!     

In future posts we will look at what CRM software vendors are doing in this brave new world.

The Fifth “P”: People

The addition of new places to market online – blogs, forums, social networking sites – has re-focused us on the fact that people talk to each other about the products/services we are marketing.

These conversations are not just another communication channel, the interaction shapes the message and you are not in control. This qualifies as the 5th “P” in our mash-up of Kotler’s Marketing Mix.

Almost without exception, these conversations are more credible, for all parties involved, than messages sent through non-conversational channels – but this does not make it easily accessible to us marketers!

When we start thinking about how to access these conversations, it quickly becomes clear that most of them take place face to face, not keyboard to keyboard. To be successful with the 5th P we have found it wise to accommodate both on and off line conversations in our Word of Mouth programs (WOM, another TLA!).

We prefer to call marketing that joins (or deliberately inspires) conversations “Advocacy” programs, because it is a sad fact that not all consumers are interested in discussing your brand. Those that are willing and positive, we call advocates.

All brands have some well-engaged customers who are interested in the category, are currently discussing the category with their social network and are open to some sort of interaction with you (see #1 of the “Top 10 Things Seasoned Marketers Must Do to Alleviate Marketing Performance Anxiety” here).

This means we have to start by finding the customers who are already advocating your offerings so you can understand why and where.

Knowing why let’s you design tools that can help make them more effective advocates – this is generally information but for one client it was a working model that dramatically showed how their product blasts plaque off teeth!

Knowing where lets you make sure the tools you provide are appropriate for the venue where advocacy generally occurs. (”Venue” is a Word of Mouth Marketing Association (WOMMA) term; their framework is worth a look.

For example, in a program that we are currently designing, the venue is Facebook, and the most effective tools for advocates are applications that they can put on their wall.

We have mashed another set of approaches into  conversing with the 5th P if a more formal program is appropriate. The design framework for classic loyalty programs is useful if advocacy is more effective when it earns rewards and/or recognition for your customers (i.e. why are your customers willing to advocate). The framework is a set of decisions that answer the following questions:

1. How will advocates be enrolled in the program? Generally this requires you to provide a platform where they can talk to you and their peers so they self-identify.
2. How will they earn credit and/or status in the program by advocating for you?
3. How will they redeem or receive this credit and recognition?
4. What will we do to keep their interest in the brand and program fresh and current?
5. Can we leverage the involvement of business partners or related providers to make the relationship richer? 

Mashing-up CRM

CRM was initially a response to the discovery that there is money to be made from customer loyalty. Fred Reichheld famously made this discovery in the early 1990’s; The Loyalty Effect.

This would be one of those ‘of course’ discoveries if there weren’t still so many companies obsessed with getting customers they do not have and doing little to keep customers they already have.

Doing this large scale requires lots of databases, systems, infrastructure and expense, so the system vendors were enthusiastic supporters. This expense focused attention on the value of customers as the system had to be paid for and this made CRM, for a ‘relationship’ strategy, curiously left-brain and inside-out; what is the customer worth to me?

In practice, this means organisations adopt more complex segmentation frameworks, and attempt to consider customer needs in their efforts to treat different customers differently.

But is this really different in principle? Let’s consider 3 CRM organisations most often referenced as the global best;

• Tesco & the processes that revolve around their Clubcard program in the UK:  Clubcard
• USAA the US insurer: USAA
• Harrahs the gaming and entertainment company and the processes that revolve around their Total Rewards frequency program: Harrahs.

Tesco have classified customers based on what groceries they buy so they can make sure only relevant offers are presented. They started with; Finer Foods, Healthy, Mainstream, Convenience, Traditional and Price Sensitive shoppers.

 

USAA have a detailed life cycle model of their armed services customers that allows them to predict what products will be most relevant, next; extra car insurance when your child approaches teenager-hood for example. They back this foresight with the best service in the industry, but you have to think they have a head-start if most customer conversations start with “I was just thinking about that very thing… thanks for calling”.

Harrahs looks at your gambling behaviour and builds a picture of your average gaming budget and the length of time you want it to entertain you. They use this information to, for example, slow you down with meal offers if you are losing too fast and could end up home early and disgruntled.

Using transaction data to infer customer preferences and then using this insight to and match offers to customer segment certainly works, but is it different in principle to segmenting by age, income, sex… the targeting of Kotler’s framework? (refer previous post…)

Strikes me it is more clever and effective, but not fundamentally different…

In our recent work with a football club (the mighty Demon’s!) we found that the best approach is to use a blend of the ‘old’ demographic targeting and the new-fangled 1to1 relevance stuff. This lets us speak differently to “passionate partisans” than we speak to “reclusive partisans” and where they live.

We employ the simple and useful methodology created by Peppers and Rogers to integrate CRM strategy into our client CRM work; IDIC, not the Vulcan “Infinite Diversity in Infinite Combinations” IDIC but,

·         Identify customers individually

·         Differentiate them (aka segment, target) on the basis of their value to you and then on what they need from you

·         Interact with them and remember what you both said

·         Customise how you treat them taking the preceding into account so you can be relevant. PRG.

From our perspective, CRM certainly fits in our marketing mash-up, Resonately.