Customer relationship management (CRM) is like a car race. The company or organization with the best ability to both predict and react to customer events will win. And the company cars are lining up. The pole position will be won by the fastest car qualifying, which will have the best chance at a long-term relationship with the customer. Look under the hood of these cars and you will find rules-based "what to do" engines that guide their CRM strategy. Just what is this CRM race? How does the engine contribute to the overall race effort and why is it so important?
Savvy companies are moving from mass marketing to marketing that is targeted toward particular customer segments. Even savvier companies are moving from segment marketing to one-to-one marketing (as originally espoused by Don Peppers and Martha Rogers in their 1993 book, The One To One Future: Building Relationships One Customer at a Time). One-to-one marketing means marketing to the individual as an individual, rather than as a member of a group.
In the pre-race "old days," mass marketing usually meant doing generic advertising or sending promotional material to all customers on record. Mass marketing usually cost a lot of money, and its effectiveness was not very measurable. Targeted marketing meant selecting a group of customers who were statistically more likely to respond to a particular solicitation or campaign. This typically cost less money than mass marketing and produced better results (a two to four percent conversion rate would be considered good). The basis for targeted, or segment, marketing was/is the campaign, which involved determining the criteria by which customers would be selected for inclusion.
One-to-one marketing, however, offers a product or service to a customer based on his or her specific needs or wants. Due to the "newness" of the one-to-one concept, results from one-to-one marketing are not generally known. However, Giga Group reports two personalization case studies that have proved that "personalization is more than just appealing; it is demonstrating effectiveness in increasing customer retention and turning shoppers into buyers." These case studies have shown increased spend rates of 33 percent and increased revenues of 26 percent, respectively. Clearly, one-to-one marketing has significant potential.
With one-to-one marketing, companies are now moving from the "campaign" to the "event" as a major focus. Event-based marketing means identifying what events in the customer's life, the company's relationship with the customer or the market in general represent an opportunity for an interaction with the customer. This is where the rules-based engine comes into play. GartnerGroup estimates that by 2004 "predefined rules will trigger 80 percent of customer interactions (0.8 probability)." The rules-based engine will be the critical component in determining the events that need response, as well as the response that is appropriate. The rules become "if ... then" statements. If this event occurs (a first-time purchase, for example), then use this channel to send this message in a particular way. Of course, meaningful events need to be identified, and the customer interaction channels need to be provided with the information necessary to generate an optimal response.
CRM is becoming more customer- driven, with a rules-based engine moving from being considered nice to have to being considered a necessity. In this way, a greater number of campaigns can be automated, to the point of generating what appears to the customer as an individual campaign, with a far greater conversion rate than previously possible. Just as important as what gets offered, however, is the possibility of a cross-channel CRM strategy. Imagine being able to offer new products or services in a personalized way to a customer no matter what channel the customer uses next (physical brick and mortar, call center, Web, etc.) Thus, two facets of CRM become critical. One is the identification of a significant event that could generate an interaction with the customer. Second is the determination of what channel to use to facilitate customer interaction. The second, of course, also involves knowing how many times we have previously contacted the customer about this particular campaign, the customer's preferences about being contacted, etc.
At the heart of this very significant shift in marketing paradigm is the "what to do" engine. Many vendors have "engine" products that fit in this market space; a partial list can be found at www.personalization.com (along with links to vendor Web sites).
The company car that will place well in the race for customer mind share is one that fuels personalization. Get your car's rules- based engine running and it will perform well. Integrate it into business as usual, and you have the potential for winning not only the initial race, but ongoing races. And the engine is the key to winning the event-based race. So gentlemen and ladies, start your engines!
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