Customers for Life: Applying Relationship Marketing

THIS IS THE FINAL PART of an excerpt on relationship marketing from the upcoming third edition of David Shepard Associates’ “The New Direct Marketing” (McGraw-Hill).

In past issues the trends behind relationship marketing, its foundation elements and systems needed to implement the business process were discussed. Here the focus is on applying relationship marketing throughout the customer life cycle. Some examples follow.

* Consumer awareness and education. Initially, several channels that provide information about the company and its products are made available to the public. These include the traditional outbound applications of television, radio, print media, outdoor advertising and event sponsorship as well as new media like Web sites and outbound e-mail. Since one of the goals of relationship marketing is to establish a dialogue with consumers, outbound media are used to trigger an inbound communication instead of only stimulating sales. Currently, the most typical inbound channels are telephone service centers, Web sites and “snail mail.”

Regardless of the inbound channel, the main intent of the introductory dialogue is to work with consumers to define their needs, suggest options for supporting those needs and discuss associated costs and benefit levels. It can be very effective at this stage to demonstrate care when working with consumers. This often translates into contacting them later with answers to their specific questions, additional details or a well-thought-out custom solution.

* New customer acquisition. If sufficiently interested, consumers can move into establishing a direct relationship with the company. In this case, the dialogue is expanded to include providing more information, specifying which products or services are being purchased, setting up billing accounts and scheduling next steps.

Ideally, these consumers will come away from the experience feeling they have initiated an ongoing relationship and consider the company a valuable source of support.

* Customer acceleration. Once an active relationship has been established, the company can use the customer service process and transactional channels to find out more about their customers’ needs, provide forward-thinking support, and measure customer satisfaction and the company’s effectiveness.

The company should be providing information about new products and services and more effective use of current products. Customer usage rates and resulting costs should be monitored, with the company suggesting the most cost-effective and productive scenarios. If implemented properly, this approach will further establish the company’s position as a valued partner.

Beyond promoting the customer, these communications are founded on servicing specific needs. As a result, product use is expanded, “brand switchers” concentrate their purchases and related products can be cross-sold.

* Customer retention. At its heart, relationship marketing is about using information to provide value beyond delivering a product or service. It takes a substantial period of time to establish the value proposition, earn the customer’s trust, build a base of customer-supplied information, observe product purchase/usage trends, and explore product and service alternatives.

Any new company trying to serve its customers would have to work through a learning curve, resulting in a lower service level for some time. Therefore, these relationships tend to be stable once developed.

* Lapsed customer reacquisition. Depending on the company’s industry, losing and reacquiring customers can be either a relatively rare occurrence or a significant issue. At the very least, the company should take steps to establish and record a customer’s reasons for discontinuing the relationship. It may be appropriate in some instances to try to reacquire the customer on the spot. In others it may be best to wait before attempting this.

A company should never try to reacquire every lapsed customer. The database will contain a lot of information about customer profitability, so reacquisition must be designed to reflect that every customer is not worth having back. In some cases, the cost of reacquisition will exceed a customer’s projected value. Or, the customer may have consumed more of the company’s resources than could be covered by their contributions.

Depending on the tendency to “churn,” cycle times and amount of customer information maintained, it may or may not be appropriate to keep lapsed customer data very long. When retained, information about customer needs, preferences, patterns and explored options should be stored in an archive file and be available for transfer to the active database when needed.

Since some product usage cycles can run over a long period and alternative suppliers may disappoint customers, it’s usually better to err on the side of keeping too much data. What better way to reinstitute a customer relationship than by saying, “Welcome back, we haven’t forgotten you”?