Manhattan Marketing Maven

Raking in Referrals

Getting customers to refer you is the number one business fantasy. Actually getting customers to refer you is the number one business challenge. Nicole Wicks at ReferNow aims to close the gap.

Referrals are every marketer's wet dream. They are powerful, personal, profitable and dirt cheap. Referral customers come in wanting to buy and eager to engage with your brand. It's your game to lose. And its a lot easier and cheaper than trying to efficiently find, convince and close new customers. If you can just get 15% of your happy customers to tell their friends ... who knows how much goodness can result?

But in real life, referrals require customers and businesses to step outside their comfort zones and act pro-actively;.an impossibly difficult task. Customers have to love you so much that they're willing to put their ego on the line for you. Its a very high bar to jump. Many of us have been teased friends who were astounded that we liked a particular brand or who were disappointed by the reception they got or the actual goods and services after such a big buildup.Nobody wants to be a shill or a salesman and many of us have already developed a complex mental system for sorting and filtering the recommendations of friends, relatives and co-workers to optimize politeness and screen out bad taste or different sensibilities.

For employees asking for a referral is a second close; one that could possibly undo the money sale that just transpired. Nobody dares to appear "pushy"and many salespeople feel that customers need to bask in the glow of a purchase and maybe even actually use the product before you hit them up for a referral.

So while it seems like a logical thing to do; it rarely gets done. Enter ReferNow.com a platform for small and medium sized businesses eager to capitalize on happy customers for either  referrals or repeat business.

Based on "the psychology of people" and "old school good manners" this site offers businesses a tool -- basically a software and reporting set-up -- for driving referrals and repeat business for $148/month by making it "as simple as possible for our customers and their customers,"  Nicole claims.

It works just the way you might imagine. The business solicits an e-mail address from a happy customer. Then using the platform to track and report things -- you send the happy customer an e-mail containing an offer that he/she sends to friends. When the friends respond they are directed to a hosted landing page and -- bingo -- a unique code is triggered. Both the new customer and the referring customer get points which they can redeem for stuff, presumably good stuff and stuff they want. Each participating business determines what the stuff is though Nicole advises them to offer something unique or a little extra by saying, "a referral customer is a free customer, so don't be stingy."

So far in the quest for referrals, they've learned:

• The price of referrals is a function of industry and is related to the buying cycles
• Cash is everyone's favorite incentive. A $25 Gift card = cash.
• Electronics -- as incentives -- are yesterday
• Customers like locally-based rewards

Working with 100 plus clients, the site, in its start-up stage,offers platform access,concepting and consulting. The cost is low because ReferNow aims to be the little guy's simple CRM tool. The platform can handle 150,000 unique users so they're aiming high.  Reports are exportable to Salesforce.com and SugarCRM.

American Airlines: Another Customer Service Disaster

In customer service ... silence is never golden! Unfortunately this is a lesson the airlines have yet to learn in spite of frequent hiccups that negatively impact on their brands.

American Airlines canceled my flight (AA 45) from Paris to New York Thursday after several hours of silence and lies and delays in the lounge and two more hours of lies and delays on the gate, the tarmac and back again. The good news is that the pilot wouldn't fly a plane with a kluge-y computer system. The bad news was that the airline was totally disingenuous and completely unprepared for what ought to be a regular occurrence.

The true values of a brand and their approach to customers comes out in non-routine situations. You might have imagined that after last year's big disasters with customers trapped on snowed in flights, nasty videos on YouTube and class action suits that American and others would have created a standard drill and a standard way to communicate with passengers when things go south.

From the moment the pilot called it quits, the situation deteriorated. We were told that Passenger Services would help and instructed to get off the plane and claim our bags. We were told there were no other flights available and that, based on class of service, we'd be put up at different hotels and flown home the next day.We weren't told any details No what, when,how or where.

We tromped off the plane, through passport control and into a baggage retrieval hall where a phalanx of American representatives and armed French soldiers knew nothing and said nothing. One woman, frustrated by the number and variety of questions from anxious travelers, admitted she wasn't even trained on the reservations computer system. We waited almost a hour with no official communication. It took almost 90 minutes for the bags to be delivered. At one point airline reps handled out a sheet inaccurately documenting,what had happened. Nobody knew what to do with these sheets, but there was a stampede to get them.

I guess nobody at American ever took psychology 101. Nor do they understand that uncertainty is the greatest anxiety producer in humans which prompts all kinds of unusual behavior. It seemed to me that getting several hundred unanticipated bodies out of the system and off the premises was the airline's top priority rather than dealing fairly and compassionately with its paying customers. Perhaps they figured if they could clear the wreak they could sort it all out later. Unfortunately not a single customer shared this perspective.

If anyone asks, I propose that customer facing brands who experience service delivery hiccups adopt a posture that emphasizes compassion and communication. If if were up to me I'd

1. Draft messages in common parlance that speaks directly to the obvious needs and anxieties of customers. It wouldn't hurt to apologize and empathize with passengers.It also wouldn't hurt to offer several alternatives raher than a single take-it or leave-it offer. 

2. Have a disaster plan handy and leverage all available personnel to manage a crisis. Cue these people in advance. Give them several things they can actually do and say rather than present them as unprogrammed robots capable only of deflecting inquiries and further frustrating customers.

3. Dedicate reaction teams to handle re-routing, re-booking and individual cases. Nobody wants to be stuck. Everybody wanted to be somewhere else, that's why they chose American. The brand has an obligation to try to make good on that premise even when the equipment doesn't cooperate. I'm not operations wizard, but when things initially got funky (long before initial check-in and boarding) why didn't somebody fly a new plane into CDG in anticipation of a problem?

4. Tell more rather than less. The natural bureaucratic instinct is to CYA and sidestep blame. This ignores the fact that customers chose your brand in the first place and have a fair amount of elastic tolerance for performance issues if you are straight with them. In fact when you ignore, bullshit or lie to them this tolerance creates an inverse effect --- your brand advocates turn their energy into enmity against you and become anti-brand advocates.

Nobody thinks the airline business is easy. Everyone understands mechanical failure. Tell us what is really going on and tell us what you are doing to help us and to fix things and we'll go along with you, even without food or free drinks. Ignore us, herd us through an airport and leave us to our own imaginations and rumors and you destroy any brand equity or loyalty you've built up.

Tip for travelers -- always travel with somebody else so they can find a way home and negotiate with the booking agents while you fight with the customer service agents.

Pretty Good Personalization

The CMO Council got Xerox, Pitney Bowes and a bunch of IT vendors to pony up cash to produce a report that documents the obvious -- personalization is good enough for those who need it and nobody has made the business case for more widespread adoption.

The reality is that businesses concerned with churn, serial or continuity sales and consumer fraud have bought and use CRM and IT tools sufficient to separate good customers from bad ones and to prevent losses. The vast majority of companies, even those who accept the premise  -- that using personal data to craft offers and messages will yield faster, bigger orders over time -- have not been convinced that the cash costs and the disruptive costs of buying and installing complex CRM tools will pay off or pay out. In fact, even many advocates of greater personalization believe that the benefits of personalization in some business sectors plateau before the technology gets paid back.

When we discuss personalization we are way beyond addressing individuals by name (e.g "Dear Danny"), although that's the most common use of personalization technology. We are talking about using purchase histories, preferences, web behavior and inferred data to make pointed, customized or time sensitive offers and to allow individual behavior to trigger outbound messaging and offers designed to increase volume and/.or maintain brand or product loyalty. And while 53% of those surveyed in the report entitled "The Impact + Influence of Individualized Content Delivery"  think personalization beats traditional mass market delivery, there has only been anecdotal evidence that this works and customers love it.

There has not been enough data or enough companies willing to come forward with case studies of sustained personalization tests and results to reach a critical persuasive mass. Add to that, the suspicion that even when it works, it peters out after a few shots rather than drives a compounding effect on volume, profits or loyalty. So its no real surprise that less than 10 percent of marketing budgets go to personalization or that marketers "appear fearful and intimidated by the investments required for personalized communications." 

The key gating factors to widespread adoption are:

1. Management Sensibilities. Most don't get it. Those who do; don't think its worth it. And even those who think it might be worth it won't give it priority among all the other competing IT investments an enterprise might consider.

2. Cost. It costs a lot to buy and implement. It costs a lot of time, money and patience to install, train and use. It is never an easy transition and few CEOs or CFOs are willing to bear the disruption, hassle and employee pain.

3. Can't Compete for IT Priority. 47 percent of those surveyed say they can't gather or properly integrate the data needed to pull personalization off. Add to that that CRM is always last place on the CI Os hit list since he/she rarely owns it, rarely understands it and rarely is willing to take direction from the monkeys in marketing. As an IT function it doesn't excite the geeks and as business function, its ROI is unclear.

4. Not Data Ready. Most companies don't know much about their customers or can't aggregate data gathered in different business silos. The systems don't talk to each other and neither do the people running them. Layer on top of this the usual bureaucratic politics where different departments own different tools (web, direct marketing, customer service) or different customer segments (industry verticals, regions, national or global accounts) and you get a United Nations-like quagmire.

The real question is  -- How do I get a bunch of high powered firms to pay me to author and shill for something that everybody already knows?.    

Genuine Customer Engagement

People throw around the term "customer engagement" but as we begin holiday 07 businesses will have a chance to truly engage customers --- on the phone. Many will miss out by emphasizing, monitoring and measuring the wrong things.

Despite the Web, we are still a phone-based culture. Sixty plus percent of catalog shoppers still buy by phone. And the magical qualities of the disembodied voice communicate understanding, empathy and suggest alternate ways to get things done much better than the fastest IM device with the most expressive icons or emoticons.

People buy people first. The second transaction involves goods or services. In many cases the voice on the phone is the only human representation of a brand that shoppers encounter. That's why its so important to prep your phone team to anticipate customers needs and behavior.   

With that in mind, here are 6 tips for Customer Service Representatives (CSRs) to maximize engagement and holiday sales:

1. Smile. Facial expression is communicated in the tone and timbre of your voice. The shape of your face positions your cheeks and your larynx which affects how you sound. As creatures this is one of the signals our limbic brain uses to discern friend from foe. A smile and a relaxed attitude come across on the phone and invite interaction.

2. Listen for urgency and intent. Talk is made up of words and feelings. Often the pace, pronunciation and parsing of the words communicate more than the words themselves. Customers dial 800 numbers with all kinds of things on their minds. Usually the feelings come across long before the words catch up. Listen for the signals because it will cue CSRs how best to respond.

3. Listen for content. A percentage of the American population are direct and straightforward. Some of us think these people are blunt or even rude because unlike the rest of us, they actually say what they mean and communicate their needs clearly. But since this segment is a minority, we often don't take their presentation at face value. If you are a CSR or are running a retail business change your ear settings and default to this customer type. You'll save yourself a lot of confusion and sell much more faster.

4. Ask Questions. A huge number of shoppers have a hunch and need a hand. This is especially true during holiday shopping where many people are shopping for others, some of whom they don't know all that well. If you ask the right questions, you can genuinely help them which usually translates into selling them something. Don't be bashful about the line of questioning. Ask "who is this for", "how much do you want to spend", "how will they use/like it", "what are they like" or "what do they like"? then shut up. Listen closely to the answer and map whatever you have to whatever they need.

5. Talk Back. Shoppers crave help and validation. If they ask you a semi-personal question answer it. If they ask where you are or what the weather is, tell them. Shopping is a social experience. If she isn't doing it in a mall with a girlfriend, she's doing it on the phone with you. Participate and join in. If she isn't comfortable with you, she's not going to buy from you.

6. Resolve Everything in 1 Call. Don't focus on talk time. Focus on making customers happy in one call whether its finding the right stuff, managing a return, answering a question or responding to a complaint. If, by the luck of the draw, they get to you they want you to help them and see the issue through to a happy conclusion.    

E*Trade Sucks

E*Trade gives with one hand and takes back with the other. Poor web design, bad interfaces and maddening customer service leads me to defect, complain publicly and encourage others to escape from these clowns.

They come on with relatively high interest rates on savings accounts to get you in the door. Then you're  trapped in their evil clutches. I had a small windfall in January and parked it with them. Now a need for quick cash arose so I go to the site to transfer money quickly to my checking account. They present a "Quick Transfer" feature so I click. I so fell for this.

I start the process, the site crashes. I enter the data nothing happens. I do it several times. Then I figure out I need to create and verify an external account to receive the transfer. I enter the data -- zap. On the third try it verifies my external account. I'm annoyed but still hopeful.

Then I try to transfer the cash and --- nada. I hit the same page again and again in a weird loop. I keep ending up in the same place. Nowhere does it explain I need to get a passcode, wait a while and then hop on one foot.

I dial the 800 number and work my way through the phone tree and --zap. I'm hung up on. Swearing a blue streak, veins pulsing in my neck, I try again and connect to Mary Lyn Pena in Manila.  She takes my information, bit by bit thanking me and apologizing, thanking and apologizing. This might be even more maddening than the technical glitches.

I feel my blood pressure rising. At first she doesn't have the web site up. Then she does but doesn't really know how to direct me. I'm reading her the screen and we're like two blind people in a blizzard. Then she lets on that since my external account is verified in the computer, I can wire in money instantly but I can't wire my money out for 24 hours.

Now I know things have been tough for online banks, but if they need another day's interest on my little boodle, they are really in trouble. Mary Lin asks to put me on hold. She apologizes and thanks one more time for good measure. Meantime the passcode finally shows up in my e-mail. By now I have a full head of steam. But wait there's more -- I missed the daily wire transfer deadline. They'll send me my money 24 hours from now. Maybe they do need my cash for the overnight sweep to keep the doors open.

Bottom line -- rather than transfer a small amount to cover my immediate need I clean out the account and digitally flea from my relationship with E*Trade.

Who are these guys kidding? We live in a 24/7/365 digital world where billions are transfered electronically every minute. There's no excuse to screw around with customer's funds. And if you can't keep a website up and give customers a quick, painless, clear, intuitive process flow, don't be an Internet bank.

Wrestling With Customer Retention

The minute you win a customer, the love begins to fade. Customer loyalty, satisfaction and retention have a half-life like a nuclear isotope. But unlike trying to re-energize a fading neutron, marketers can actually do something to intervene in the natural cycle of things.

The thing is, not all customers are the same. Start by making distinctions between those you want to retain and those you don’t. Ideally among your new customers are those destined to buy again, buy often, buy a large array of different products with high margins, give your stuff as gifts and tell everyone they know how great you are. These customers with significant lifetime value are the ones you’d do anything to retain. Similarly among your new customers are those who will disproportionately draw down customer service resources and patience and never buy another thing or say a good word about you. These you can slough.

But the majority of your customers fall in the middle of the bell curve; those who could go either way based on the actions or the non-actions you take. This is the creative part of retention marketing. And it begins by putting yourself in a new customers shoes and plotting out theoretical scenarios of how each major customer segment uses your product or service and interacts with your company.

Caveat: If your product or service truly sucks and if your firm is difficult to deal with and unresponsive to customers needs, either articulated or implied, hardly anything you do will engender loyalty or retain significant numbers.

But assuming you want to engage customers and that you aspire to keep them begin with the product or service lifecycle to understand the natural rhythm of the relationship and to count the number of organic touch points where you can begin to communicate with your new customers. You are mapping the routine interactions customers have with your brand to identify opportunities to influence their experience or the perception of their experience. Remember the moment of purchase is magic. It’s only downhill from there. The further you are from the moment of purchase, the more valuable the message needs to be to get noticed and get action.

You are fishing to find the right building blocks of a contact strategy which will create opportunities for systematic and meaningful interactions without annoying, overloading or intimidating your customers. You have to factor in what customers are doing with your product or service, if it’s high or low involvement and what opportunities exist for customers to become disappointed with your brand.

For instance, many customers get a regular bill from you – a natural, point of contact and communication. In some categories, supplemental products or updates are issued according to a pre-determined schedule; another natural chance to communicate. In other categories products have maintenance cycles or customers come in for touch-ups or additional services.

Count the baseline number of interactions and plot them over time from the moment of purchase. Then compare the points of contact with likely brand experiences. If many of your customers experience delayed sticker shock with their third bill, you need to intervene ahead of time. If many of your products tend to have mechanical problems after 18 months of use, then at the 12 month mark you need to be setting expectations and up selling. If your service is utilitarian and quickly fades into the background after a short period of use you have to remind customers you are there. And if you operate in an intensely competitive market where brand buzz, prices and features or functions change rapidly you have to be back selling and cross-selling from the moment of purchase.

Establishing an effective retention effort requires several critical things:

Clear Observation

Don’t kid yourself. You have to face the reality of your brand assets and limitations. You have to really understand what its like to use your product or service – the good, the bad and the ugly. Then you have to figure out how to align with both the promise and the reality in ways that are credible to customers. Customers have a great reservoir of faith in brands.

Your customers don’t really expect perfection. But when they demand attention they want it fast, honest and attentive. And they demand your best effort. You cannot drink the brand Kool-Aid and assume everything is and always will be swell. In fact, by being professionally paranoid, you’ll become a much more effective brand steward.

Data

It really helps if you can know who your customers are, what they are like and what they do. This is much easier to say than to actually do and most firms skimp on the IT and data infrastructures necessary to create a 350 view of their customer base. But it’s relatively easy to model your best customers, predict who is likely to go south and understand the psycho-demographic complexion of the people linked to your brand.

Data should drive every subsequent move. It is best if you can combine who they are with data on what they bought and how they interact with you either by web, by mail, in your stores or by contact customer service. In fact, the number and the flavor of these post-sale interactions is the best indicator of ending up in the “save” or “drop” category.

Intention

You have to want to spread the love. Retention is all about intention; it’s not about average call handle times, customer satisfaction scores or categories of call resolution. It’s about what kind of experience your brand has promised compared to what kind of experience your customers actually have. Tone, manner, empathy and the ability to fix things quickly usually separate the brands people love from the ones they hate.

Buying Loyalty -- The Barnes & Noble Approach

Loyalty marketing has become a game of bribes, rebates, points and promises which forces marketers to sell the perceived value of the reward harder than the original product or brand experience. In a world where only air miles and iPods are universally perceived as useful currency, you have to work really hard to convince skeptical customers that your formula or your bauble is worth a repeat or an upsized purchase.

Enter Barnes & Noble. They don’t give me anything. They sell me, and anyone else interested, a membership card for $25 that entitles me to a 10 percent discount on every purchase and every product in every channel for a year. They get twenty-five bucks. I get as much benefit as I’m willing to purchase.

But the unadvertisized multiplier lies in the way they administer the program.

Piercing the Veil of Anonymity: Step 1

Most people who see and respond to advertising are anonymous. Each day millions of unknown people click on key words, banners and emails, tune into to broadcast media and read print vehicles. It’s always been this way in a one-size-fits-all brand advertising world.

Getting past anonymity is the greatest challenge in the evolving, measurable, interactive one-to-one world we live and market in. Piercing the veil of anonymity is critical to deliver personal, customized super-relevant interactions which lead to sales and ultimately help build valuable on-going customer relationships.

Privacy and perceived value guard the unknowns. Consumers and business people are anxious about revealing themselves because they don’t trust us. They don’t believe we can or will keep what they tell us secure and to ourselves. And they don’t believe that we can restrain ourselves from pestering them with too many questions or assaulting them with too frequent or too irrelevant communications.

Yet thousands of campaigns have proven that people will give up information incrementally in return for information or services they perceive to be of value. In fact, in the presence of high perceived value privacy concerns melt away for the great majority who are happy and eager to trade information for a give-away they desire.

Therefore the challenge for marketers is to create offers perceived to be of such value that targeted audiences will uncloak themselves in return. So far “best practices” in this regard are:

I. Confirm Response and Validate Their Action

Create unique landing pages that look and feel like each campaign. Never just drop off a responder at your Home page. Most people still need to be reassured that they ended up where they want to be. The Internet is still somewhat magical to an awful lot of us.

Be sure the landing page delivers on the promise in the ad. If you tout a product or service, picture it, describe it, offer specs and offer answers to the most logical or most frequently asked questions right then and there.

If you can offer prospects a few immediate content choices that naturally follow from the ad premise, you are much more likely to delight them and engage them to continue a conversation with you. Remember that each step in the conversation pre-sells the next and that the experience prospects have at each step must close for the opportunity to continue the interaction.

II. Track Behavior and Dynamically Serve Up Content.

Recognizing and responding to behavior starts the process. Create a user experience that is easy, intuitive and relevant to anonymous prospects. First, can they find what they are after quickly and easily? Second can you watch they are doing in real time and give them more of what they want and what they express an interest in?

If you can’t do it in real time, study your weblogs, identify what significant groups of prospects have looked at and interacted with in the past, anticipate several likely pathways through your content and lay them out in an easy to find and appetizing way.

Third, based on what they seek and what they use, predict their next likely move and proactively provide them with it.

III. Reveal Yourself and Make an Offer.

After prospects have moved through predictable content paths it’s time to try to meet them. The goal is to identify named individuals with explicitly expressed preferences from the anonymous visitors. The key ingredient is patience.

Remember fundamental psychology. Nobody likes surprises. Love-at-first-site exists only in fairy tales. No sane individual tells you their whole life story when you first meet them. Everyone hates salespeople. People buy people first, then goods and services trade hands; your personality will come through by how and when you reveal yourself.

Keep in mind that it’s all about THEM not you. Their wants, needs, likes, dislikes and anxieties drive the process. Not yours. Get an e-mail address first. This is the key to an on-going conversation. Don’t try to get 25 data points out of anyone on first contact.

The three best ways to reveal yourself are:

Ask your anonymous prospect if they are getting what they need? This interest in their satisfaction can be done in a pop-up or pop-under. Simultaneous with the question should be an offer to provide more of the same, the next logical thing or something different in return for an e-mail address.

Offer the anonymous prospect something free in return for their e-mail address. This can be a free sample, a download of data, a report, music, industry intelligence, a digital tool or calculator or it can be a gizmo, a reprint or a tchachkie; in which case you might need to solicit a postal address to fulfill the offer..

Offer to enroll the anonymous prospect in a contest to win something of value in return for their e-mail address. The prize can be your product or service, a discount on your product or service, access or value from a partner or access to an event.

Once you have the e-mail address, confirm it and ask permission to continue the semi-anonymous conversation. In seeking permission comply with privacy requirements and ask your partially known prospect to tell you how, when and about what they’d prefer to continue talking. Most campaign research indicates that responders who express preferences for channel, media and frequency convert to buyers 3-5 times faster than those who aren’t asked or don’t specify what they want.

Only by piercing the veil of anonymity can you begin the process of converting a prospect into a customer, a repeat buyer or a brand loyalist and advocate.

Loyalty Marketing: Sister Hummel's Epistle

Goebel, makers of “Hummel” porcelain figurines, those tschachkes that everyone’s Grandmother has and cherishes, is celebrating the 25th anniversary of it’s collectors club, the oldest in the USA or so they claim. Club marketing, the poor man’s CRM, has had both a remarkable impact on the brands using it and a remarkable history of experimentation.

With 250,000 members in the United States the collectors’ club accounts for a huge percentage of recurring sales, which Goebel counts on as baseline revenue each year. At retail prices ranging between $100-$350, club members generally buy 3-4 units per year and can be generally counted on to buy another “club exclusive” not available to the public and refer at least one new lead annually. All in all, the club is a dynamic element in the Goebel marketing mix, which provides sales volume, customer feedback, marketplace intelligence and brand direction at a minimal cost-per-sale.

Rooted in the twin premises that … an enhanced brand experience nets a higher lifetime customer value and … that it’s easier to sell existing customers more stuff than create new customers, club marketing seems like a no-brainer. All you have to do is sign up your best buyers, give them an occasional deal, send them a newsletter and … presto … you have guaranteed sales of hundreds of thousands of units each year. If only it was this easy.

And while everybody from professional sports teams to consumer products companies to car manufacturers have embraced affinity or loyalty marketing, very few have got it right and gotten it to pay off either in terms of units sold or brand loyalty.

Consider these variables, and lessons learned from the adherents of Sister Maria Innocentia Hummel’s cult.

1. Own The Customer Relationship.

You can’t relate to customers if you aren’t prepared to respond to their needs. In many business categories the manufacturers of the brand distribute products through retailers. Each claims ownership of the customer relationship. Sometimes their interests coincide. Sometimes they don’t. Too often, in spite of intramural wrangling, neither makes much of an effort to add value, communicate with or interact with end users. But if you expect to build a brand, the brand has to own a relationship with its heaviest users. To concede away this link is to place your fate in the hands of others. It’s a recipe for disappointment leading to disaster.

Yet, if you own the relationship, you must answer the phone, mail, fax and e-mail, provide credible customer service and be ready, willing and able to engage customers’ concerns, questions and needs. It requires a substantial investment of time, attention, people and capital. It can be very annoying. The investment requirement often gets retailers and manufacturers at each other’s throats since retailers prefer to control the interaction and have manufacturers cover their costs or pay them for services rendered.

Relative brand loyalty also plays a factor. Some of the Goebel club members exclusively collect Hummels. Others collect all manner of dust-collectors from any number of competitors. A decision to own the relationship often is the by-product of an estimate of the potential ROI. Yet in a world of weary middlemen fearful of disintermediation, whomever controls the brand needs to connect with primary customers.

Another important aspect in deciding to own the relationship is the nature of loyal customers. Often, they don’t match marketers’ conceptions about who their best customers are or ought to be. It can be sobering to realize that your best customers are lower middle class, Middle American, blue-haired women, most likely of German-American extraction concentrated in second tier cities and small towns wearing stretch pants and driving 5 year old mini-vans.

It can also be upsetting when their love of the brand does not coincide with the immediate marketing agenda, the new brand identity guidelines or the new product line. Nonetheless they drive your volume. Brand stewards need to overtly or covertly own the relationship and influence the direction of marketing-oriented clubs. To do otherwise is to lose control of powerful brand advocates.

2. Use The Club Aggressively

Club members are totally into your brand. So don’t be bashful about asking them questions, profiling them and seeking their advice. When it comes to interacting with your brand, club members have very few privacy concerns. On the contrary, they want you to know them and schmear them.

Too many marketers prefer either to dictate or guess at what their best customers want or will respond to. A club offers a test bed, a ready-made research panel and a practical compass for campaigns and product development. These are people eager to help, even if they ask too many questions, constantly demand freebies and have all kinds of wacky ideas. You can’t afford to ignore your best customers, but you may need to filter their enthusiastic input.

The same energy that attracts club members can also be harnessed to drive marketing initiatives. Ask club members for referrals. Allow them to earn discounts for referring new members or purchasing selected products. Give them a heads-up on new products and new campaigns to guarantee baseline street credibility or advance word-of-mouth. If their impact on your brand is significant, customize creative messaging for them.

3. Offer Real Value

The Hummel Club offers it’s members … a free gift on joining and with each annual renewal, an exclusive series of products, unique annual Christmas plates, bells and angels, a quarterly newsletter, an annual behind-the-scenes trip to the factory in Bavaria, an annual convention and opportunities to meet visiting artisans during their publicity sweeps through the US.

This array of offerings is not philanthropy. Every club activity yields a profit to Goebel. Each has been requested by and tested with club members, who since 1981 have formed themselves into 70 local chapters in the US alone. Each component was added incrementally and each required the brand to balance practical growth objectives with the idiosyncratic needs of club members.

The allure of club marketing, especially to members, is insider knowledge and access.
Serving this primary motivator is the key to effective club marketing strategies. Don’t ignore the greed factor either. Many Hummel collectors calculate and obsess about the value of their pieces on the secondary market. If you doubt me, check Hummels on eBay.

Here product knowledge and nuances can affect secondary prices and the value of larger collections. Club members want to know every detail about artists, production, painting, back stamps, issue dates, etc. since the details often determine the difference between very valuable figurines and also-rans. The same is true in many product categories.

Club marketing requires recognition and aggressive management of a community of people and interests coalesced around a brand. These interests are not necessarily aligned and are often in conflict. The marketing challenge lies in sorting them out and harnessing them to drive brand recognition, growth and direction. Meeting the challenge can sustain and enrich your brand.

Consider the Goebel example. Cutesy figurines of Bavarian children in everyday activities made by a tubercular nun in the 1920s and 1930s and realized in glazed porcelain … a momentary fad, which should have died out when the GIs returned from occupying Germany after the Second World War, is still wildly popular. Sixty years later almost a quarter of a million Americans spend $1000 religiously each year to collect new figurines, talk about them, swap them and interact with others who do. It’s not only the legacy and artistry of Sister Hummel. It’s smart loyalty marketing.

The Real Point of CRM

I have more relationships that I can handle. I do a so-so job, managing up, down and sideways at the office. I do a little better with my gorgeous wife, great kid and lovelorn dog. I am on solid ground with my assistant who typed this column. I do a little worse with my aging mother and doting in-laws and much worse with my annoying landlord and contentious ex-wife.

Then I struggle to manage relationships with dog-walkers, babysitters, doormen, dry cleaners, piano teachers, soccer coaches, tech guys, chorus masters, postmen, next door neighbors, visiting cousins, finance guys, college pals and professional peers. I am maxxed out.

I really don’t have room for relationships with my fabric softener, my shoes, my dishwasher, my news agent, HBO, The Mets, each of the 65 magazines I regularly read, my Palm Pilot, my cell phone provider, AOL, my toothpaste or my TV set. And even if I did, I am not sure I’d do any better relating to them.

I guess I should be thrilled that hundreds of corporations have decided to take this burden off my shoulders by investing in CRM programs. I am flattered. From multimillion-dollar software installations to guys with 3 x 5 cards, somebody out there is trying to keep up, keep track and keep selling me.

The problem is I’m an odd duck. So are most people. We don’t really do what we say. We can be distracted and rerouted by deals and offers. We change our minds easily and frequently. We take advice from unqualified strangers at cocktail parties. We can be sidetracked by slick design.
And for large categories of goods and services we either don’t care or we do care very much but we don’t show it. Marketers spend too much time buying increasingly complex “M” solutions and not enough time understanding “Cs”. The greatest enemy of CRM is unmet expectations. Gartner projects that 55% of CRM efforts in telecom will fail to demonstrate a positive ROI. All
that time, energy and money without any movement along the relationship continuum and no positive cash flow to show for it.

When all the bells and whistles are stripped away, CRM rests on three fundamental direct marketing principles. All that time, money and energy is spent trying to capitalize on these truths which drive every direct marketer.

1. Birds of a Feather Flock Together. If you can find the demographic/psychographic patterns that define your most valuable or most frequent customers – you can better serve them and find more of them easily.

2. RFM Matters. If somebody takes an action, it’s easier to get them to do it again. The sooner the better. And if you watch how much they spend you’ll get a feel for how much they could be worth to you as a customer. That’s why cataloguers put offers in your shipping bag and send you a new catalogue as soon as you buy. Its all about recency, frequency and monetary
value.

3. 80/20 Rules. 20% of your customers yield 80% of your volume. Ideally if you can identify the 20%, you can communicate with them much more cheaply and thereby maintain volume while increasing margin. This fantasy of finding the 20% explains why packaged goods marketers keep trying to do CRM in spite of successive failures, total lack of understanding and
products that usually sell for less than five bucks.

Getting all the data entered correctly, kept current and aggregating personal info, buying stats, appended data, model scores and the results of email campaigns, coupon redemption or store visits could keep teams of programmers, analysts, coders and marketing research types busy for years. Imagine the costs and the time required, especially if you have legacy ERP systems, scanner data and warring business units with private stashes of numbers.

After all this, when a marketer gets it right it’s a beautiful thing. When they blow it, it’s a colossal waste of money. To help raise your consciousness about the room for relationships in consumer’s lives and the need to watch and respond, allow me to site a few examples from my relationship-rich life. They are not statistically significant or projectible. But I have a hunch they reflect the state of the CRM art. . . the good, the bad, the over-engineered and the unfocussed.

Norm Thompson
Fifteen years ago I saw an ad in The Wall Street Journal that read “I make the world’s most comfortable socks. If you doubt me, send me your card and I’ll send you a free pair”. Being younger, poorer and much more gullible (I thought there was a real guy named Norm in Oregon). I did it. So did ‘Norm’. His wick-dry socks are ‘the best’. ‘Norm’ sends me his catalogue, which I generally ignore. But he also sends me a flyer about my socks twice a year. And like a lab rat, my reflex instinct is to buy 3 pairs for $19 twice each year. Do the math. For the wholesale cost of a pair of socks and thirty 50 cent mailers ($15 over 15 years), Norm has built me into an annuity with a present lifetime value of $570 and a future value worth at least $38/year. It’s an ROI you or I would kill for.

American Airlines
I am a mile whore. But American seems to know when and where I fly even though they’ve never asked me a ton of nosey questions. They post my new points quickly and offer me deals on the routes I fly. They upgrade me much faster than their competitors and generally make me feel like a big shot. On most flights I get automatic upgrades often presented with handshakes from smiling gate agents. I’ve repaid their largess with frequent use, several incremental vacation package purchases, light mileage redemption and positive word-of-mouth. When I compare AA with Continental, Northwest, US Airways and United, who also are relating to me, AA seems more nimble, able to act faster and working much harder at our relationship.

Amazon.com
The home of the original collaborative filter bedevils me. I purchase a ton of booksusing that magical, demonic ‘1 click buy’ feature. Yet they aren’t very grateful. They never write or call. When I actually took a cross-sell offer on a CD player and CDs, I wasn’t acknowledged or thanked. Even the stodgy old BOMC celebrates a change in my behavior! I ignored their mail and FSI catalogues. I tossed the postcards pushing DVDs and white goods. I think I mean more to them than I really do. I haven’t felt this way in a relationship since seventh grade.

Brooks Brothers
I have worn Brooks Brothers Oxford cloth buttoned-down shirts since I was eleven. I used to buy them with money from my paper route since they were too pricey for my Mom. Since they’ve gone cyber, I have benefited from some great discounts. But, I can’t tell if they’ve sorted me into a “value buyer” category or if its just a coincidence that I seem to only get discount catalogues and discount HTML emails often in quick succession. I know they’ve tuned up the fashion collection. But I can’t decide if they’ve become a discounter or if it’s just a characteristic of our unique relationship? I’m trying to decide if our relationship is governed by a sophisticated profiling effort linked to an ingenious contact strategy or whether Brooks is desperate to move the goods at lower margins. The fact that they’ve never zero-ed in on what I buy, referred to my purchase history or offered me a logical cross-sell suggests that latter.

Hertz
I’ve been a Gold Card holder for ten years. I still get a kick seeing my name on those digital boards and by passing the counter filled with tourists and losers. Immediately getting in the car and driving away makes me feel important and very savvy. But what’s up with their points
deal? They offer me all kinds of irrelevant coupons. If they’d look at my transaction history and my address, they’d know how lame the offers are! Is it still a relationship, when one side no longer pays attention?

Danube
David Bouley has been the “chef of the moment” in New York for 20 years, Danube is a shrine for foodies and gourmands. David keeps the checks of his 400 most frequent diners in a shoe box under the bar. His captains note wine choices and tips given. Each time you come in, they check the box so that the free ‘chef’s taste’ you get isn’t the same as last time. In my case, they remember how much I’ve come to love beef cheeks. So they bring me a free portion without asking. The box also cues the Headwaiter which drinks, wines and desserts you’ve tried, so the waiters know what to suggest and how to up-sell you. The technology is vintage 18th Century. The feeling of being pampered by one of the world’s great chefs is sublime.

Ultimately CRM is about paying attention. Technology facilitates collecting and analyzing data about your customers. But the game is won or lost in using the data at the right time with the right customers. Ideally CRM is like a friendship. With each exchange and each interaction the
parties learn more about each other. Each gently adjusts for the next encounter and generally feels good about the whole thing.