One-to-one marketing is easier when a product or service can be customised. But what happens when there are aspects of your business that cannot be tailor-made?
After an initial wave of enthusiasm, relationship marketing is starting to get a bad press. The basic idea is seductive. We all know that money invested in keeping a customer is more productive than money spent trying to replace customers we have lost. A good way of retaining customers seems to be recognising that they exist, communicating with them, and responding to the needs they express through this dialogue.
The trouble is that real relationship or one-to-one marketing, as some people call it, is awesomely difficult. The fact is that, for most established companies, achieving the one-to-one nirvana is a formidable task - so formidable that marketing gurus can cite precious few real-life examples. Those that do exist have built themselves around the concept from scratch. Dell makes computers to order, Custom Foot makes shoes to fit each person's specific foot measurements and Streamline, a Boston-based company, offers home delivery of a wide range of items including groceries, dry-cleaning, pharmaceuticals and rented videotapes.
Unfortunately many would-be relationship marketers seem to get lost on the journey. Some have been seduced by opportunists who hi-jack the phraseology to sell old ideas. Others have simply done it badly. According to one US study, led by Harvard Business School assistant professor Susan Fournier, 'the very things that marketers are doing to build relationships with customers are often the things that are destroying those relationships'.
Likewise, McKinsey partner John Hagel III warns that the voracious appetite of aspiring relationship marketers for information about consumers is creating a backlash.
To keep on the one-to-one track, Don Peppers, US relationship marketing guru and author of The One-to-One Future, identifies four key steps for businesses. The first is to identify individual customers. That's easy if you sell aero-engines but a massive task if you make nails or jars of instant coffee. The second is to differentiate these customers by key characteristics, such as need and value.
In some markets, such as airlines, a tiny proportion of customers account for a huge percentage of revenue and profits. In others markets, such as bookselling, the value of each customer tends to be more equal. Virtually every bookshop customer's needs are different. Few of them all want the same books. But the needs of airline travellers tend to be pretty similar. Which means that some industries, where a few customers account for a high proportion of total profit and where the product or service is easily customised, lend themselves to one-to-one marketing far more than those that don't.
The third step, interaction, is even more difficult. The company has to communicate with each customer in a way that recognises their specific needs and characteristics and persuades them to respond. Customer response then helps the company's marketers learn still more about their customers' needs and wishes. While it's all very well knowing who your most valuable customers are, however, what are you going to do with the information?
In practice, things work very differently. A customer needs to be 'recognised' no matter how, when or where he 'touches' the company, whether it's a phone call to sales, a letter querying an invoice, a faxed complaint to customer services, or a web-site visit. This means that companies must have enterprise-wide customer information systems, which gather all relevant information, including a history of all interactions with each customer. Such data should be instantly available to any member of staff who needs it.
'The problem is not really the systems, but the culture,' says Stephen Kelly, a vice-president of software firm Chordiant, which sells systems for this purpose. Businesses are usually built around functional departments or processes. The key is 'how do you build the organisation around the customer?'
The last step involves customising the service or product to reflect the specific desires of the customer. After all, it's pointless taking the previous steps unless the customer actually sees some benefit from it. Again, this is easier said than done. As Peppers concedes, some aspects of some businesses have to be standardised. 'You will never get an airline asking you what time you would like to fly,' he points out. 'So you have to reconcile the non-customisable aspects of your business with your need to create some kind of relationship with your customer, which is based on adapting your product or service to something different about your customer.'
The best way to do this, he suggests, is to pinpoint your most valuable customers, draw a line between them and the rest, and give them the one-to-one treatment. Once you have succeeded with them, you shift the 'picket fence' to the next most valuable group. British Airways is trying to do just this with its executive club schemes.
But as Peppers admits: 'We have a long way to go. The truth is, there is no single good example of a learning broker (that is, a fully fledged one-to-one marketer) right now, despite the obviousness of the idea. And there are very few companies that even have an inkling of an idea about how to create good relationships with end user customers - no matter how obvious that is.'