Many organisations have invested in online customer relationship management systems. Now, says two gurus of online marketing, they need to invest in using them properly.
In 1993, Martha Rogers and Don Peppers published a book that helped to change the world of marketing. Even before the worldwide web was quite ready to bring its ideas to life, One-to-One Marketing became the blueprint for direct marketing in the information age: the guide book that explained how new technologies would usher in an era of unprecedented interaction between companies and their customers.
But, even as the title of their work was entering the global marketing lexicon, Rogers and Pepper were moving on to explore how interactivity, storage and mass customisation technologies could have a much wider business impact.
"By the time we had got round to writing the second book," explains Rogers, "we had acknowledged the fact that if you are going to take full advantage of these relationships, it can't just be in the marketing department."
That second volume, The One-to-One Enterprise, focused on how the deeper insight into customer behaviour that interactive technologies afford does not just produce better targeted marketing campaigns – it can also produce better targeted companies.
"People used to ask me, ‘How can I use "one-to-one" to launch my new product?'" recalls Rogers despairingly. "You can't use ‘one-to-one' to launch a product. You have a one-to-one relationship with a customer and then you can find products to sell to those customers. And that's an entirely different way of going to market."
This customer-centric view of business is the theme of Rogers and Peppers' latest book, Return on Customer, in which the authors argue that the new measure of a successful business is not so much how much money it makes, but how much "value" it extracts from each customer now and in the future.
To gauge customer value, Rogers and Peppers advise using a number of key indicators: behavioural measures of the customer, attitudinal measures and biometric data such as their life stage. It is the acquisition of this information that should drive companies to develop their interaction with customers over technological platforms, argues Rogers.
"For today's companies, customers are the scarce resource. They like to think that they can replace customers but in fact they are finite. So the value of the company is the same as customer value. If your goal is to increase enterprise value, you must increase the value you receive from your customers."
This outlook demands not only the effective management of customer information, but also a more forward-looking method of rewarding, or penalising, employees for their work.
"’Return on customer' only works when customers believe they can trust a company to serve their best interests, otherwise they won't enter into a relationship," explains Rogers. "Companies that focus on reaching short-term targets are often not thinking about the damage they are doing to the long term value of the customer."
Tesco is one company that understands this. Like other supermarket chains, Tesco mass mails its customers with offers and product news. But unlike their rivals who send the same message to all their customers, a recent Tesco mailing of 10 million messages featured 4 million different versions. In this way, "once you develop a relationship with your customers, you can begin to sell them things with higher margins than your normal product range, such as credit cards," says Rogers.
In practice though, "most companies using what they call CRM are in fact just doing better targeted harassment. Companies are not there yet psychologically," says Rogers.
For instance, instead of treating customer choice as a simple exercise in inviting people to either opt-in or opt-out of email lists, it should be a more granular exercise designed to discover what individual customers really want. This information can be used to tailor marketing material to the customer's preferences.
"For so many reasons I would like to see the end of opt-in/opt-out. We need a volume dial, not an on/off switch. The capability is there, but it's not being used," Rogers says.