Retention and Relationships : Marketing Thoughts by Michael Greenberg

OK, love is a strong word here.  But gaining insight into share of wallet, especially when it can be cross-tabbed with other data, is one of my favorite ways to learn how customers are engaging with your company.

I looked at a simple data set from Marketing Charts in a post elsewhere which rekindled my love for the metric.  I used this extensively as a direct marketer in a past life, because it told us so much about where there was opportunity for additional revenue.  Plus I tracked it over time, which made it a great leading indicator of softening or strengthening demand.

Lets take a simple example.

Lets say your customers report they spend $200/year at your store, and $1000/year total in your category.  6 months later, they report $250/year at your store, and $750/year total in your category.  You have 2 things to figure out - is my share of wallet increase from 20% to 33% real, and is the 25% decline in category spending real.  But you have good information from which to continue to explore.  In this case, if they are real, then you can get excited about the successful increase in market share, and be terrified by the decline in market size.

Another example is similar to how I looked at the Marketing Charts example - what if top 10% customers spend $1000/year with you and $1500 total, while next 10% customers spend $400/year with you and $1200 total?  The opportunity in the next 10% is actually greater than the top 10%, although the downside risk of not retaining top 10% is higher.  Knowing the difference, however, lets you craft strategies that best accomplish your objective(s) in each segment.

Its unbelieveable that it took the FTC 4 years to finalize the CAN-Spam rules, but hey, its government.  The most interesting element is the clarity on opt-out requirements, so eloquently interpreted by Ken Magill once again in his article Your Preference Center Could Be Illegal.  Ken points out that since customers must be able to opt out with just one click and without anything other than the email address itself, a typical preference center fails CAN-Spam.

 Ken’s one of my favorite reads.

Its been a while since I’ve been able to write here and hopefully this long of a break won’t happen again.  As President of a young company, time has a way of getting away from you and next thing you know its 2008.

The experience of seeing the whole company work together to deliver great best customer management solutions for great brands is one of the best of my career.  I’ll start sharing more of my insights gained by working with such excellent brands (without naming names, of course).

Catching up on past articles - here’s my August 2007 column at Chief Marketer.

I look at the difference between discovery - information and insights about the client - and strategy - what to do with the client to effect change.  It was prompted by the common question I get asked, which is “what should I do?”  So I tend to ask back, “what do you need?” and so on.  Enjoy

Last month’s column for Chief Marketer.  I’d planned on covering the first three elements in more detail before publishing this article, but we’ve been very busy at the office for the last couple of months.

This column touches on the power of recognition, the value of real interaction, the retaining power of collaboration (and the low cost content it can provide), and includes a push to enable advocacy by your customers.

[Things are quite busy on the work front…but I will get back on schedule starting with this post.]

Direct communication, possible once a customer is identified, unlocks a whole new level of interaction, where marketers can differentiate the message.  The various options now available enable a much more nuanced relationship with your customers.  Looking at these options is instructive in understanding the value that this element can add to your overall best customer management.

Triggered email is the high ROI workhorse of differentiated communications.  Expectations for email relevance will only continue to grow, so marketers need to continuously increase their capability to develop and deliver messages that reflect actions, attributes, and environmental factors.

Custom printed or variable printed direct mail is a personalized variation on traditional direct mail.  Ideally the same factors that make triggered email relevant are incorporated into direct mail content, either through differentiated messaging and creative, or “statement”-type data for a formal program.  In reality direct mail can and should eventually have the same level of flexibility as email.  Good marketers will incorporate this capability into their arsenal for one good reason - it works.

Targeted promotions are an evolved version of coupons, with the qualification and award tuned to the individual recipient.  While most marketers can only provide relevance through the targeting (that is, identify segments and craft promotions for each), we’re not far from algorithmically generated promotions taking over.

Site personalization is the one area that should be far more prevalent than it is.  Variable site content has been around for a long time, yet only a few companies capitalize on the increases in conversion and repeat visitation that can result.  If everything is going right, the site is reflecting the activity going on elsewhere, such as the targeted promotions above, with landing pages for the individualized triggered email.

There are other types of direct communication that are still emerging.  Widgets, small client-side apps that can be added to websites directly or via some basic integration, are quickly gaining traction and critical mass.  While many are just distributed links to a site home page, more interesting technologies are available when a company opens up their APIs, with Facebook as the current shining example.

Knowing which individuals are your customers is a crucial task for every company.  It’s easy to do in business-to-business companies, but can be quite difficult for consumer-focused companies. 

There are two parts to this problem – who is the customer, and what did they buy?  While you can solve the first part of the problem without the second, that’s not recommended.  You will have no way to calculate customer value, making future optimization decisions much more difficult.

So the best approach is to tackle both parts simultaneously.  In retail, loyalty programs and credit cards were the traditional way to gather customer identities and connect them to individual transactions.  This approach still works.  The other major approach, data appends, now depends mostly on reverse appending phone numbers, which is much tougher due to rising cell phone penetration (which can rarely be appended).  In certain circumstances, email can be used as the tracking mechanism outside of a loyalty program.

Companies can reduce the barriers to identification with newer technology (such as new point of sale systems) which can be expensive, or with great relationship programs and a great brand.  The former increases the capture rate at the point of purchase, the latter increases a customer’s willingness to raise their hand and be tracked voluntarily.

The mix that makes the most sense for your business depends on your current capabilities, budget, and overall objectives.

If you have nothing today, I’d start with a relationship program with soft benefits, requiring an email address.  If you have a high-throughput point of sale/interaction, think about using phone number as another identifier.  Bar coded cards are the most accurate, but not all consumers are willing to carry them, so you will need a ubiquitous backup identifier, and phone number has the benefit of being reverse appendable (no, its not a word, but it should be).  So at minimum, you could connect multiple purchases over time to a specific phone number, even if you can’t identify the individual.

Down the road, you will end up with more records than customers.  At that point, bring in a professional data hygiene firm to help with merge purge.

My latest at Chief Marketer.

I see 7 key elements in best customer management.  This first column focuses on the 3 basic ones:

Identify - Understanding who an individual customer is and what they have done and bought.

Communicate - Messaging an individual customer with relevance to their needs and prior actions.

Reward - Providing and promising incentives and benefits based on their activities.

I’ll spend time over the next few weeks exploring each of these areas in depth before the second column is published with the other four elements.

Word of Google and Salesforce.com’s discussions on incorporating Salesforce.com’s offerings into Google has much of the CRM industry buzzing.  Its not really a surprise, but any time two elephants start dancing, the mice start to scurry.

While Salesforce.com’s SaaS approach dovetails nicely with Google’s web based applications, adding the Salesforce.com SFA apps could be the piece that moves small and midsize businesses to the Google application set.  With Microsoft pushing Dynamics, everyone else is cooling to the idea of deep integration with the Office suite.

Should be interesting to see how this plays out.

Walk over to your email marketing manager today and give them a pat on the back, because unless its your job, you have no idea how hard they are working these days.

Ever since reputation monitoring and spam traps became the main component of filtering technology, email marketing went from “segment and send” to a complex dance of response tracking, recency filtering, authentication services, and ISP relations.   Those 500,000 email addresses you had a year ago may be down to less than 100,000 mailable, low-risk customers.  An address that has not responded in 90 to 180 days may now be a spam trap in one of the many monitoring networks that most ISPs use to filter individual messages as well as IP addresses.

Behavior-driven relationship marketing tends to cut through this problem.  So before its too late (and you’ve been blacklisted, your IPs flagged, and dynamic blocks slammed in place with every mailing), start planning on how to shift most or all of your email to a relationship driven approach.  It may take some time to match the prior level of revenue generation, but until you start, you’ll never get there.