Best Practices for Direct Marketing and CRM in Relationship Marketing

By: JUSTINE P. CASTELLON 

If you are starting a new business or launching a new product line, how do you go about acquiring new customers? Once you have a core base of good customers, how do you go about finding more customers like the good customers you have? How do you strengthen the relationship with your good customers, build their loyalty and make them heavier buyers from you? How do you prevent your good customers from leaving you for your competitors?These are the key questions driving new strategy orientation in many forward-thinking firms today.


There are many terms being used to describe this new strategy orientation, but perhaps the two most common terms are “Customer Relationship Management” (CRM) and “Direct Marketing.” CRM and Direct Marketing are rapidly moving into the core of consumer and business-to-business marketing practices, simply because they represent the single most compelling growth strategy in today’s highly competitive landscape.

CUSTOMER PROFILING
Strategies in the New Customer-Centric Economy
As we enter the 21st century, the new economy is becoming increasingly customer-centric. Building long-term, loyal relationships with customers is the key to profitability. Thus, when Averell Gaspar, Operations Manager of Lilly Philippines (makers of the bestselling anti-depressant, Prozac) refers to the new economy as a “relationship revolution,” he is describing the impact of technological and economic change on business relationships.“For me, CRM plays a big role. Any company which can maximize its potential will win in the marketplace.” Gaspar explains that there are three areas where CRM can impact the business: customer service, market research and business processes. CRM can revolutionize sales force effectiveness and processes that can lead to higher productivity.


The concept of CRM is based on the simple activities of (a) figuring out who your best customers are, (b) using transaction data analysis to determine the characteristics of your best customers, (c) getting more customers like your best customers, and (d) understanding the value drivers that make your best customers better. These activities are then put together to implement a strategy where different customers are treated differently depending on their potential value.If there is a way a CRM can consolidate information gathered through various market research activities, sales and even sales representatives’ inputs, and make them accessible to the decision-makers fast, then the organization can react quickly and exploit opportunities as they occur. “A lot of companies are now using PDA-phones mostly for sales-call reporting purposes but I can see that in the future, these gadgets will be equipped with customer-information and even interactive systems that link them directly with customers’ need for info, products and service”, added Gaspar. This new technology tool allows for a more dynamic profiling of opinion leaders (top customers), thus one can address customers’ needs and wants more seamlessly. “Speed and the ability to target specific markets to customize strategy will lead to higher productivity and better ROI.”

TAILOR-FIT STRATEGY
The primary CRM focus areas support the requirements of the customer-facing processes of a business: By using CRM, marketers can also access the necessary business intelligence to better understand which campaigns are working and which customers to target with a specific offer. This type of information reduces wasted time and money on sending out the wrong promotion to the wrong customer. With the right profiling of customers, it is to better understand which campaigns are working and which customers to target with a specific offer. One of the best tailor-fit strategies is Avon.

Avon is a global manufacturer and marketer of beauty and related products. Avon’s business is primarily comprised of one industry segment, direct selling, which is conducted worldwide. Sales are made to the ultimate consumer principally by independent Avon Representatives. Avon understands the importance of financial independence and self-fulfillment of women globally. They focus their strategies by dedicating their entire supports to women – not only in beauty – but health, fitness, self-empowerment and financial independence. Avon knows who their primary target audience is, and understand the psyche of this market perfectly. The company capitalized on this segment and built a strong sales and marketing strategy . . . and that’s going direct. Avon Representatives describe as self-empowered women, a group you want to be associated with. They attract, retain and develop loyal customers, heighten marketing, sales and service efficiencies, cut costs and boost profitability.


Today, Avon is in the list of Fortune’s “Most Admired Companies”, featured in Business Week as one of the “100 Most valuable Brands”, with more than 4 million sales representatives in 100 countries. With the success of Avon, many marketers see direct marketing as playing a broader role, that of building a long-term relationship with the customer. Direct marketing can help virtually every type and size of business today. But making it work is becoming more difficult as an increasing number of businesses embrace it. How can you succeed in using direct marketing to help your business?

MARKETING INTELLIGENCE
An integrated CRM strategy gives the marketer access to intelligent information on customer profiles as well as campaign metrics and analytics. Marketing intelligence on campaign metrics can help the marketer understand which channels are most effective, which campaigns are generating the most leads, and which lists resulted in better response rates. This enables marketers to measure campaign effectiveness and allocate resources to the most successful tactics.
For example, when you decide to go direct to the consumer based on the results on customer profiling, you must implement basics and essentials that are necessary in any direct marketing endeavor.

 

  • GET THE RIGHT PRODUCT OR SERVICE
    A terrific product or service is absolutely essential. Otherwise, people won’t return to buy from you again. An important direct marketing concept: the back end is more important than the front end. In other words, getting your customers to buy from you again is most important and you won’t get them back unless you have a terrific product or service. If your product or service can stand on its own without a lot of hype, you will get repeat customers.
  • CREATE A MEDIA CAMPAIGN THAT GETS RESPONSE AND BUILDS A RELATIONSHIP.
    In creative work, copywriting skills are vital. Art attracts but COPY SELLS. You need to break through all the communications clutter in the marketplace. Good design should lead the eye. It should not dominate the display. The design does not sell — even if you’re selling Caribbean vacations. Art attracts, explains and enhances, and good art will let the copy make the sale.
  • DEVELOP and LEVERAGE A CUSTOMER DATABASE
    The lists you choose can make or break your mailing. Your most valuable marketing resource is the database containing the names of your current and previous customers who have defined their interests in terms of the products and services they have purchased. These are the people that can be depended upon to make any promotion profitable.
  • MAKE THE RIGHT OFFER.
    The right price, terms, guarantees and extras
    An offer simply means what you’re willing to give and what you want in exchange for a particular response from prospects or customers.
    – Proper timing is essential.
    – Segmented marketing can achieve very high responses for you.
    – Tailor your mail to an individual prospect.
    – Options put your prospects in a power position.
    – Urgency lifts your total response.
    – Risk relievers, such as guarantees or warranties, build confidence.
    – Use reinforcers, such as testimonials and case histories, which state your product or service
    is really the best. If someone else says you’re great, that’s better than you saying you’re
    great
  • BUILD ADVOCATES The transformation of loyal customer to aggressive sales force Advocates are your very best customers. They not only buy from you very heavily, but sell for you by touting your product or service to business colleagues, friends and neighbors.
    The objective of any direct marketing effort is not just to get a response or make a sale. It is to build customers. Direct marketing can be used at any stage – separating suspects from prospects, moving prospects to trial, converting one time buyers to multiple buyers, and getting multi-buyers to become advocates.
    Not everyone will become an advocate. Direct marketing helps you leverage the 80-20 rule (80% of your business will come from 20% of your customers). It allows you to identify the 20%, reward them to retain them, and then clone them.

 

 

MEASURING RESULTS
Being able to measure means being able to improve

This means income generated per money spent on marketing. Do not be fooled by an expensive promotion with a high response rate compared to a less expensive promotion that may have a lower response rate overall but a higher rate of responses per dollar. Also, any evaluation of your marketing effort must include an assessment of the lifetime value of an average customer. This information allows specific promotions to be evaluated both in terms of the cost of acquiring a new customer and in terms of the customer’s contribution to short and long term profits compared to the average. There are a number of ways to improve lifetime value (other than lowering product/service costs): lowering customer acquisition costs, increasing frequency or duration of purchase, and increasing size of purchase.
Customer Relationship Management has become the bridge by which vendors get, keep, and grow customers, whether you decided to engage in ethical marketing or direct marketing. It is the means by which companies are meeting the needs of customers who now expect high levels of personalization and care at every touchpoint. While providing superior customer relationship management across your organization may seem overwhelming at times, it is a mandatory competency. “When used strategically, it has potential to improve business profitability. The key is to use it where it brings incremental benefits not because it is “nice to have”. Gaspar ended.

[published January 2005/ Ad Edge Magazine]

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