Drilling Down

Turning Customer Data into Profits

 with a Spreadsheet

Site and Book topic:

Maximizing marketing ROI with customer behavior analysis

Relationship Marketing

Relationship marketing is not about having a "buddy-buddy" relationship with your customers.  Customers do not want that.  Relationship Marketing uses the event-driven tactics of customer retention marketing, but treats marketing as a process over time rather than single unconnected events.  By molding the marketing message and tactics to the LifeCycle of the customer, the Relationship Marketing approach achieves very high customer satisfaction and is highly profitable.

The relationship marketing process is usually defined as a series of stages, and there are many different names given to these stages, depending on the marketing perspective and the type of business.  For example, working from the relationship beginning to the end:

Interaction > Communication > Valuation > Termination

Awareness > Comparison > Transaction > Reinforcement > Advocacy

Suspect > Prospect > Customer > Partner > Advocate > Former Customer

Using the relationship marketing approach, you customize programs for individual consumer groups and the stage of the process they are going through as opposed to some forms of database marketing where everybody would get virtually the same promotions, with perhaps a change in offer.  The stage in the customer LifeCycle determines the marketing approach used with the customer.  

A simple example of this would be sending new customers a "Welcome Kit", which might have an incentive to make a second purchase.  If 60 days pass and the customer has not made a second purchase, you would follow up with an e-mailed discount.  You are using customer behavior over time (the customer LifeCycle) to trigger the marketing approach.

Let's say a customer visits your site every day and then just stops.  Something has happened.  They are unhappy with the content, or they have found an alternative source.  Or perhaps they’re just plain not interested in the subject anymore.  This inaction on their part is a trigger telling you something has happened to change the way this customer thinks about your site and perhaps your service.  

You should react to this and then look for feedback from the customer.  If you improve the content, e-mail them a notice, and if the customer starts visiting again, the feedback has been given.  The cycle is complete until the next time the data indicates a change in behavior, and you need to react to the change with communication.

Let’s say this same customer then makes a first purchase.  This is an enormously important piece of data, because it indicates a very significant change in behavior.  You have a new relationship now, a deeper one.  You should react and look for feedback.

You send a welcome message, thank the customer for the trust they have displayed in your site, and provide a second purchase discount.  Then you await feedback from the customer, in the form of a second purchase, or increased visits.  Perhaps you get negative feedback, a return of the first purchase.  React to this new feedback and repeat the process.

All of the marketing decisions in the examples above were triggered by customer behavior, the actions of the customer as tracked by their activity (or lack of activity).  This activity tracked over time is the LifeCycle.

If you can track customer LifeCycles, you can begin to predict them, and if you can predict them, you can target your marketing efforts at the most critical trigger points in the customer LifeCycle.  This approach eliminates a lot of wasted marketing spending, and creates very high ROI marketing campaigns.  You spend less money overall, and the money you spend is much more effective.

All of the above is accomplished by using the data customers create through their interactions with you to build simple LifeCycle models or rules to follow.  The relationship marketing approach then uses this LifeCycle model as a "timing blueprint" to follow, targeting the right customers at the right time, with the most profitable offer.

This site and the Drilling Down book are about teaching you how to build and use LifeCycle models yourself in 30 minutes with an Excel spreadsheet.  If you want to increase sales while reducing the costs of customer marketing, you have to get this book.

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