The traditional enterprise has tried to sell as many products as possible to as many customers as possible with the hope of increasing market share. In recent years, however, organizations have begun to shift their focus to a share of customer approach--to a business strategy that concentrates on increasing the lifetime value of individual customers
As a result of shrinking costs and increasing power of information processing, companies now have three expanded computer capabilities not feasible for anyone just a few years ago:
1. Customer databases that enable us to single out individual customers,
2. Increased interactivity that lets customers talk back to us, and
3. Mass customization, where we make something for individual customers based on what they have told us.
Using these expanded capabilities, companies can develop "Learning Relationships" with their customers. From the customer's point of view, a learning relationship works like this:
- I tell you what I want.
- You tailor your product, service or relevant information so I can now get from you something I cannot get from any other firm for any price.
- I have now spent time and effort specifying my needs. I have invested in the relationship with you. To get an equivalent product somewhere else, I must first reinvent the relationship.
Learning Relationships are at the heart of one-to- one marketing: Treating different customers differently.
Mapping Your Approach
Every organization has two capabilities, both of which are enhanced by computer technology. Companies either identify and interact with individual customers or they send standardized messages the same way to everyone, usually through mass media. Likewise, companies either tailor their products, services or communications for each customer; or they standardize their products and services, delivering the same way to everyone or at least the same way to everyone in a segment or target market. These capabilities continua can be mapped onto a two-dimensional matrix, which can be divided into four quadrants. (See Figure 1.)
Quadrant I of the enterprise capabilities matrix is where we map traditional or mass marketing firms, which offer standardized products and address customers using mass media. Companies that begin to segment and target their efforts toward niches of customers are found in quadrant II. At this stage products are tailored somewhat, but to a targeted group as opposed to an individual level. Quadrant III is where we find database marketers. Organizations in this quadrant identify and interact with individual customers, but rarely get--or take--the opportunity to tailor products, services and offerings that build true one-to- one Learning Relationships. The companies that accomplish that are found in quadrant IV. While many database companies today have the ability to identify and interact with customers, the information is still used to find target markets for products.
Only at a one-to-one level can companies meet individual customers' needs and grow their business bigger, over the entire lifetime of each of those customers. In fact, only in quadrant IV, the one-to- one marketing quadrant, do companies use the information from their interactions with individual customers to alter their own behavior to meet the needs of those customers. You speak. We listen. We both make, together.
What makes quadrant IV, the one-to-one marketers, unique is that the direction of marketing changes at its most fundamental level from a product focus to a customer focus. While companies in the first three quadrants may be interested in customer feedback, they use the information to develop and target products for groups of consumers. Whether it's a mass marketer looking at the audience for that last episode of "Seinfeld," a niche marketer looking for customers in a well-defined target market, or even a sophisticated database marketer electronically combing data to find customers for the latest product offer, all enterprises in quadrants I, II and III start with products, then find customers for products.
But in quadrant IV, the direction of marketing "reverses." The one-to-one enterprise starts with electronic knowledge of a customer gleaned from ongoing individual dialogue, then finds products for customers by mass-customizing. It also cross-sells across all the firm's products and offers and builds strategic alliances with partner companies when a customer's needs fall outside the original firm's skill set.
How is this different from traditional marketing segmentation strategies? To the traditional company, customers fall into different segments by virtue of their demographics, transaction histories or psychographics. One customer may, in fact, fall into more than one segment. But in the one-to-one enterprise, feedback from a particular consumer determines how a firm treats that customer and which offers, products and services will be made available to that customer, when and through which channel.
"Database marketing" is not the same as junk mail, telemarketing or unwanted e-mail spam. Nor does it involve over-surveying of customers, product-line extensions or purchasing new customers with rebates, coupons or special come-ons. Instead, these are examples of faux "relationship marketing." This is what happens when addressable, interactive media and high-capacity customer databases are used for traditional, product-oriented marketing, with little attention paid to the completely different, customer-oriented business model represented by genuine one-to-one relationship marketing. In a true one-to-one Learning Relationship, the customer will never get an unwanted piece of mail, receive an unwelcome phone call at dinner or be offered savings on a product they would have paid full price for.
The most important aspect of any "relationship" is its inherent individuality. In a true one-to-one Learning Relationship, the enterprise will be one step ahead of the customer, contacting her just as she's ready, with exactly the right offer for the right price.
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