Can Marketing Regain the Personal Touch

Abstract

Continuous with customers can, in fact, be achieved Classical marketing skills, not expensive IT and neural networks, are what's needed Pilots, skunkworks, and pragmatism Avoiding electronic green stamps Years ago, retailers, bankers and auto dealers had real customer relationships. They knew their customers personally, understood what they wanted, and, as best they could, satisfied their needs through personalized service. As a result, they earned loyalty and a large share of their customers' business. But this was a costly and inefficient system, and eventually it gave way to mass marketing. Customers traded relationships for greater variety and lower prices. Today, falling IT costs enable companies to offer both. American Airlines gate agents whom you have never set eyes on know that you are a valuable customer and upgrade you to first class in preference to a once-a-year holiday traveler. Auto dealers remind you when your car is due for a service. USAA sends your daughter information about learning to drive just after her fifteenth birthday, when she is about to sign up for driver's education. Nordstrom sales reps call you when your favorite line arrives. And Hertz takes your reservation on a dedicated line, then presents you with a waiting rental car complete with your name in lights. These companies are practising elements of a new approach to marketing that uses continuously refined information about current and potential customers to anticipate and respond to their needs (Exhibit 1). Done well, this approach rests on a clear understanding of individual customers' economic potential. In its most advanced applications - like the custom binding of Parents magazine according to the age of readers' children, Fingerhut's production of scores of tailored catalogs, or intelligent agents that sort through mountains of online information to select the items you are interested in - it is nothing short of revolutionary. Yet there is hidden tension in this trend toward what we call continuous relationship marketing (CRM). Marketers can now obtain all kinds of new information about their customers, and IT makes it easy to slice and dice this data in a thousand different ways to produce a welter of marketing options. Yet none of this is a substitute for the skills of the classic marketer and general business manager - or for simple, sound business insight. Hertz, USAA, and Nordstrom are successful because they understand their customers, competitive position, and profitability, and they have figured out practical ways to gather information and act on it quickly. Most are not so successful. Many retailers offer discounts, rebates, or goods if customers present loyalty cards at every purchase, yet they fail to use the resulting information to tailor their offerings to individual customers' tastes, buying patterns, or value to the company. In the United Kingdom, the grocery industry appears to be rushing to introduce loyalty card schemes at a cost that could reduce industry profitability by as much as 20 percent. Their challenge will be to do more than just create the electronic equivalent of the green stamps of the 1970s, giving away margin in a way that any competitor can readily match. They will have to generate real benefits. Banks often pay lip service to the idea of a customer-driven approach, yet they continue to base their marketing on product lines, rather than customer segments. Ninety percent of US banks with assets over $1 billion have some sort of marketing customer information file, and many are using it for direct mail purposes. But few are building competitive advantage by continuously refining differentiated product offerings and targeting them to customers or prospects for whom they will create real value. The avalanche of cut-rate credit cards cascading into mailboxes may make financial sense in terms of expected take rates, but in many cases their undifferentiated approach and mass-market coverage are unlikely to build profitable, sustainable customer relationships. …

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