CRM: Profitable Multichannel Marketing

Balancing the cost to serve customers with realized revenue

WITHOUT QUESTION there is an urgent need among direct marketers to prove that their investments in technology (databases, Web sites, interactive kiosks, call centers, catalogs and mailings) are more than paying for themselves. How, then, should companies doing business with customers over these different channels evaluate the cost-effectiveness of their marketing strategy?

Here are two metrics that managers can use to better understand how well their efforts are paying off:

• Cost to serve. Customer-specific marketing and servicing costs typically incurred by multichannel marketers to initiate and maintain a business relationship with individual clients. Some examples include freebies and promotions (shipping and handling costs, two-for-ones, cents or dollars off), fees and commissions (to affiliates or retailers), customer service and support (returns, call-center support usage) and loyalty costs (miles redeemed, gifts).

• Realized revenue. Revenue actually garnered by the firm from a given customer. This is determined by subtracting the cost to serve from the invoiced, or contracted, price (which itself can differ by channel, retailer, or if the product was bought through an online auction).

Realized revenue from clients who routinely buy only when products are being promoted, return goods frequently or require heavy levels of support could be much lower than the invoiced revenue