Loyalty Library: The Seven Key Elements of Best Customer Management, Part One

Many new technologies are starting to hit critical mass for marketers. Others have been around for a while without a clear way to connect with the rest of your marketing efforts. Looking at key elements of best customer management along with the related technologies provides both a framework and a source list for future investigation. This month I’ll look at the first three of the seven key elements of best customer management.

If you remember college Psych 101, you remember Maslow’s Hierarchy of Needs. In a nutshell, as humans fulfill basic needs such as food and shelter, they take on more-advanced needs such as friendship and family, culminating in self-actualization. As a mental model, best customer management is not much different.

I tend to view these seven elements as a pyramid, with each building on the one below, but your capabilities may allow your company to pick and choose which to focus on. Let’s get started with the three basics.

Identify
If you don’t know who the customer is, you can’t build a relationship. And knowing the customer goes beyond having an e-mail address. As the customer interacts with your company, you must keep track of these interactions across all touch points. Tracking everything is not required, but long-term best customer management success depends on the richness of interaction data. The key is to determine which interaction data are most important to the other six elements. These data may be different at various points in your company’s lifespan, so keep an eye toward future data collection as well.

In practice, the way to approach the identity problem is to focus on three aspects of your marketing technology:

1) Try to keep your data as clean as possible. Use Delivery Point Validation (DPV) on physical addresses and syntax validation on e-mail, train front-line staff appropriately, maintain relationships between entities as robustly as possible, and incorporate at least one unique identifier at every interaction point.

2) Invest effort in connecting transactions and activities to customers. This is usually easy in online and contact center channels, but it tends to be more difficult in physical channels. Isolating the most appropriate identifier and adopting newer technologies to reduce impact on throughput is prudent.

3) Make it easy for customers to maintain their data once they’ve identified themselves. Self-service Websites, good contact center/front-line training, and proactive requests to update information on a regular basis, augmented with NCOA and industry-specific data services, will go a long way to maintaining identification.

I should note that this is as much the marketer’s responsibility as it is the IT department’s. Marketers should think of a customer masterfile, where all the appropriate information is stored or linked to for each customer. Every partnership, every promotion, every campaign, and every new application should be scrutinized for how it relates to the existing customer master. This does not mean you need to build a huge customer data warehouse. Just be sure to summarize and store appropriate information and know where to get the rest when you need it.

Communicate
Sending information and messages to an individual customer begins the climb up the slope. This can be via e-mail, Website personalization, direct mail, RSS, or other media with differentiable content. Messages should reflect what you know about the customer. While it is still not feasible for most marketers to individualize messages, even basic segmentation will greatly increase message relevancy and improve response.

Ideally this element is already operationalized within your organization so that you can focus on other elements. If not, this is an excellent area to focus your attention on for the next three to six months. If your team (or you) is struggling to create and send versioned messages to different customer segments, take the time to build out this capability, since it is necessary for so much of your future marketing efforts.

There are a lot of technology options here, but the absolute bare minimum is a good commercial e-mail service provider (ESP). It’s crazy to do this yourself these days unless you are large enough to replicate the delivery monitoring, ISP relations, industry monitoring, and scaling that an ESP provides. Most Website management platforms can handle site personalization and dynamic content pretty easily as well. If yours doesn’t, it’s time to upgrade.

Reward
With the ability to identify individual customers and their behavior, plus the ability to communicate with them directly and relevantly, you gain many options. The most basic is the ability to reward customers based on their behavior. I use “reward” generically, in that you can set up temporary, short-term, or long-term benefits based on current or future behavior or activities. This is the most common area for today’s companies to focus efforts. Coupons, discounts, rebates, frequency programs, specials, and other incentives fall into this category.

Rewards are a double-edged sword for the marketer. They are excellent for increasing response, but they can train customers to ignore nonpromotional messages, tend to erode brand equity over time, and increase the overall cost of a campaign or a program. Developing a loyalty program is one way to lessen the impact of rewards, by creating a separate promotional currency (that is, the points in the program). That way companies can get aggressive with points promotion and avoid discounting.

The technologychoices here are the broadest of all seven key elements. Managing rewards might happen in a campaign management environment, an e-commerce environment, a dynamic offer management tool, a suggestion tool, or a comprehensive CRM platform.

Next month I’ll cover the other four elements of best customer management. For Seven Keys to Best Customer Management, Part 2, click here.

If you are looking for more information, I’ll spend more time discussing each of these areas on my blog at www.michaelgreenberg.com over the next month.

Michael Greenberg is vice president of marketing for Loyalty Lab, a San Francisco-based developer of customer loyalty programs for the retail industry, and writes a monthly column for CHIEF MARKETER. He can be reached at [email protected].

Other articles by Michael Greenberg:

The 10-Year Customer
Empowering the Lonely Loyalty Champion
Microsegmentation for Macro Returns
Balancing Visible and Hidden Relationship Programs
Evolving Loyalty: How to Stay Current
The Best Marketing Investment You Can Make
The Case for Simultaneous Concept Testing
Planning for the Coming Online Standard
Objectives Are Everything
Why Do You Have High-Value Customers?
Build a Fence Around Your Customers