By Donal Daly
3.2.2001
Too many companies undertaking marketing campaigns focus their efforts on acquiring new customers while ignoring existing ones. In today’s competitive environment this strategy is short sighted. Neglected customers often turn to competitors when they purchase again and the cost of retaining customers is far less than acquiring new ones. To maintain a competitive advantage companies must proactively work to retain their customers, a strategy known as customer relationship management (CRM). CRM encompasses continuous company/customer interactions with the aim of cultivating and sustaining relationships through satisfaction and loyalty.
The Internet has proven to be the perfect vehicle for automating CRM with its immediacy, measurability, cost effective structure, global reach and more. However, as it provides users with more choices and control it needs to be managed differently from other marketing media. For example, a Web site may contain high-quality content, but it can’t impact prospects unless they choose to visit it. Once there they will choose whether to revisit the site, potentially avoiding your brand entirely.
Offline marketing, on the other hand, such as print or TV ads, can work over time even at a superficial level to build brand equity through the subconscious. For example, as you read through a magazine, you’re likely to notice the colors/design and perhaps the headline of a given advertisement, even if you don’t internalize the copy. The next time you see an ad from the same company it likely will feel familiar. In this manner, you may internalize the brand over time without noticing it. The Internet requires a much more direct approach. First, you need to make your voice heard among the clutter. Second, you must use direct and frequent communication to build brand familiarity, develop relationships and eventually secure customer loyalty.
Creating Customer Loyalty
Experts agree that to achieve maximum profitability, companies should seek to attain a balance between increased customer share and market share. New customers bring in new revenue, but as noted earlier, it costs less to retain customers than to acquire new ones.
In fact, according to Forrester Research, attracting new customers costs four to six times more. An increased amount of repeat business can sustain profitability beyond acquiring increased numbers of new customers. And loyalty is a much more difficult attribute for competitors to try to usurp than a cost or feature advantage.
Building Customer Relationships
Companies seeking to build sustainable customer relationships over the Internet should communicate individually with each customer in a personalized and relevant manner. This will build sustainable relationships. Note that all three things– individual, personalized and relevant — are important. So, how do you meet these requirements?
First lets look at individual. E-marketing can facilitate one-to-one communication between companies and customers. It opens up a dialogue between them making it easy for customers to interact with companies; ask questions by e-mail, request to be called, place orders, fill in surveys and so on. And it makes it easy for companies to give something of value to customers: invite them to an event, send a newsletter, inform them of product updates and more. This two-way facility means customers get value and the companies obtain information on their customers. In addition, although they are part of a larger group, customers feel that they are being treated as individuals.
Forrester Research noted that Web site personalization will be the guiding structure of every e-corporation for the next several years. The effectiveness of Web site and e-mail personalization cannot be ignored. Personalization makes strangers feel like friends. It helps bring people along the continuum: At first they may be unaware of the company, then they become familiar with it, next they become customers and finally they are loyal customers. Personalization gives them a sense of customer brand ownership so they feel like they are members of a club.
Because an e-mail address is even more private than a house address, it is essential to exhibit a level of courtesy and respect to the individual recipient. Personalization can overcome this barrier, since recipients feel like they own the relationship and are in control. By addressing them correctly the company is exhibiting a level of respect to the individual. And an important point to note: Personalization differentiates communication from Spam!
The relevance of each communication to each individual determines the response to the company in the long term. People don’t like to be interrupted with irrelevant messages. This can lead to the erosion of relationships. On the other hand, receiving information and offers that recognize a customer’s preferences, needs and wants increases trust, which leads to sales. It also generates satisfied and happy customers, who are more likely to do repeat business with the company. Content customers can also be a good source of referrals; for which the self-propagating nature of the Internet is ideally suited.
Making Communications Relevant
In order to make communications relevant, company’s should obtain information about their customers such as age, sex and occupation; psychographics such as lifestyle, interests; and personality and behavioral criteria such as previous buying habits, e.g. how often they buy, when they last bought and how much they spent.
Armed with this information, they can define subgroups with similar tastes, needs and preferences. This will enable them to target customers with messages pertinent to them.
In conclusion, retaining customers is a less costly and a more profitable activity than acquiring new customers. Loyalty is built through value added communications that recognize an individual’s needs and preferences. The communications should be delivered in a respectful manner and on a frequent basis. The Internet embodies the most effective medium to automate this plan through its ability to deliver personalized, relevant, individual communication in volume at low cost.
Donal Daly is chief executive officer of NewWorld Commerce. Daly joined NewWorld Commerce in October 1999 from Wall Data where he was vice president, Europe. Prior to Wall Data, Mr. Daly was CEO, CTO and founder of Software Development Tools, Inc. (SDTI), which he started in 1986. Mr. Daly grew SDTI’s business in the U.S. and Europe prior to the company’s acquisition in 1997. Mr. Daly is a former chairman of the Irish Software Association, Honorary Lifetime Member of the Marketing Institute of Ireland, has received many technical and business awards for innovative technology and marketing initiatives and has authored two books.
