Tell Me About Your Vision For "CRM"

I recall reporting to an Executive who called CRM a "four letter word". This person felt burned by the failed promises of a movement that may have been ahead of its time (or maybe way behind the times) in the late 1990s.

Maybe things would have been different if CRM were shepherded by marketing folks. Often, CRM was driven by the Information Technology folks, in partnership with vendors selling solutions. All too often, the focus was on "Management", not on the "Customer Relationship".

These days, it gets harder and harder to define "CRM". I believe that's a good thing. Here are examples of "CRM" in the year 2007.

• The President of Whole Foods talks directly to his customers via a blog, allowing customers to respond to him.
• Nielsen and Experian enter an alliance to provide "CRM for CPG Companies", promoting use of a series of traditional direct-marketing techniques to traditional brand-marketing organizations.
• Tamara Gielen writes a great blog about using E-Mail to build relationships with customers.
• The American Catalog Mailers Association is formed to protect the craft known as cataloging.
• Google might say they own relationships with customers, by matching customer needs with vendors willing to pay Google the most to meet the needs of a customer.
  
• Salesforce.com might argue that they provide software that allows folks to manage relationships with clients.

My questions for you, the loyal reader, are these:

• Do you believe that a "brand" can manage customer relationships? In other words, is the term "CRM" antiquated, given today's marketing environment?
• If you were building a "brand" from scratch, which elements of "CRM" would you use to build your business? E-Mail? Catalogs? RSS? Blogs? Paid Search? What else?

Lord & Taylor CRM Solution

DMNews announced that Lord & Taylor is going with a CRM solution from Harte Hanks.

Let's assume that that Lord & Taylor has the following future value metrics (these aren't actual metrics, they are being used to illustrate a point) for customers who purchased between March 1, 2005 and February 28, 2006 ... measuring performance from March 1, 2006 to February 28, 2007.

• An annual retention rate of 60%.
• 4.0 annual purchases.
• An average transaction size of $140.
• Twelve Month Sales Value of 0.60 * 4.00 * 140 = $336.
  

In your opinion, how much would a CRM solution from Harte Hanks cause these metrics to increase? Would the retention rate increase, and if so, how much? How about the annual number of purchases? The average order size? What do you think will happen, based on your experience?

Multichannel CEOs and CMOs: There is no doubt that CRM solutions can improve your business performance. At least five things contribute to the success of a CRM implementation.

1. The implementation should be driven by your own marketing or database marketing staff, not by information technology individuals, not by vendors. The marketing and database marketing folks will create and execute the ideas --- the IT folks will move on to the next project. Your vendor will care, but has to care for a veritable plethora of clients.
   
2. Take your financial estimates for a CRM implementation, and discount them by seventy-five percent. Share the low number with folks. Show me, in the marketing literature, the litany (i.e. more than ten) of successful CRM implementations that dramatically increased the bottom-line of the company implementing the solution, and I'll revise this observation.
3. You have to have your organization focused on the CRM initiative. A CRM solution is useless if your creative team will not produce on-demand e-mail campaigns that take advantage of the new software solution. A CRM solution is useless if your merchandising team will not purchase the merchandise your software suggests customers want.
4. Success happens in baby steps. Improving the overall response rate of a catalog from 4.00% to 4.05% is a reasonable expectation for a CRM implementation. Improving the open rate on an e-mail campaign from 20.0% to 20.3% is a fantastic result.
5. CRM does not solve your business woes. Given the choice between investing in a CRM solution, and investing in merchandise and the customer experience, always error on the side of merchandise investment and customer experience. Notice that I am not saying you shouldn't invest in a CRM solution. Rather, the solution has a level of importance that is below merchandise and the customer experience. Simply acknowledge that, and you may be pleasantly surprised by the performance of a CRM initiative.
   

The MineThatData Honor Roll: February 16, 2007

Several articles caught my attention during the past week.

DMNews talks about happenings at the eTail conference. Pay attention to the comments from Jodi Watson at Williams Sonoma. Over the next few years, you are going to see a separation between the concepts of "e-commerce" and "website". The website will become the primary marketing tool for a multichannel retailer --- it will be an indispensable tool for marketing retail brands. I really believe a skillset will emerge, people will finally learn how to utilize a website to maximize retail sales, not just e-commerce sales. These are the folks who will drive our multichannel businesses in 2012 and beyond.

This story in CRMBuyer, written by Denis Pombriant, illustrates one of the biggest failures of "CRM" systems, and highlights the future of analytics. Our industry spent so much time collecting purchase information. Denis correctly illustrates the uselessness of the information. In so many ways, the data collection systems we have today represent a 1995-style world, one where the data could be used for old-school targeting programs. Today's data needs are so very different. We don't have a lot of control over marketing anymore. Catalog don't drive sales like they used to. Google controls the customer via search. Mass marketing is largely dead because we don't have a mass to market to. We marketers need to harness customer intentions, and use that information to influence merchandise assortment and in-store/website presentation, which drives sales.

Andy Monfried writes about his efforts at landing a key client. Pay close attention to what he talks about. Technology doesn't play a role in his success. Hard work, perseverance, and an element of humanity result in success.

Finally, on Fallon's Trendpoint Blog, we learn about plucky ad agency Anamoly's acquisition of the Virgin America account. Funny how Anamoly didn't pitch classic advertising techniques ... they offered to help grow sales. After a deluge of Super Bowl ads designed to drive "buzz", we learn about somebody who wants to increase sales.

Thoughts About 2007: Web Analytics, Multichannel Marketing, and Route 66

Why not join in the fun, and offer your thoughts about 2007? Leave a comment at the end of this post.


Web Analytics

In my opinion, 2007 represents an inflection point, not in the software that we use for Web Analytics, but rather, for the people who analyze website behavior. God has smiled on you in ways you cannot imagine. You represent the future of multichannel retailing. It is you that should know more about how customers behave than anybody in your company. In the next five to ten years, you could have the experience necessary to run our multichannel businesses. This won't happen, however, unless you fundamentally change how you approach your job.

1. Get out of your department, and start helping others. The fact that you should know more about customer behavior than anybody else means you have a responsibility to teach customer behavior to your organization. Start now, and in 2012, you'll be a leader who your company considers for advancement.
2. Start telling a story. Outside of maybe your finance department and a few analytically gifted individuals, nobody in your company cares that a certain URL had a 3.19% conversion rate, along with a 64.9% exit rate and 49.5% shopping cart abandonment rate. Your co-workers, and especially your leaders, want to know what you can tell them that gives them a chance to be successful, earn a bigger bonus, and get promoted. Start telling them a story they can understand and use to make their lives better. Stop dazzling everybody with your numerical prowess. Your career depends upon it.
   
3. Describe Customer Behavior Over Time. If your conversion rate decreased from 4.00% to 3.00%, and traffic increased from 100,000 visitors a month to 133,333 visitors a month, you may end up with the same amount of net sales. What if your customers now visit more often than they visited in the past, doing more shopping and less purchasing? Web Analytics individuals and the software they use must do a much better job of segmenting customers based on past behavior, and then use that information to describe customer behavior over time, not specifically within a "session". Tell your executive leaders that your best customers used to visit the website every twenty-seven days, and now visit every thirty-eight days. They can understand this. They can theorize why this might be happening. They can develop strategies to combat this problem, assuming it is a problem. They will include you in all of their meetings, and depend upon you for the analytical support of their hypotheses.
4. Anticipate The Future. Nothing is more valuable to an executive than an individual who has a vision, an individual who sees potential problems, and identifies solutions before the problem surfaces. You can't anticipate the future by looking at funnel analyses. You need to step away from the metrics, and simply observe what is happening around you. Listen to people in other departments, and try to understand their issues. The future takes shape when you step back, observe, and listen.

All of you gifted individuals who currently support web analytics departments have an unprecedented opportunity. Do not repeat the mistakes of database marketers, who threw away the golden opportunity they had in the early 1990s by being too metric-driven, failing to become strategic. Do not repeat the mistakes of CRM marketers, who so badly mucked-up their opportunity of the mid 1990s that CRM became a "four letter word". Do not repeat the mistakes of the E-Mail marketers of the late 1990s, who completely ruined catalog's replacement by not having the analytical infrastructure in place to accurately measure the incremental benefit they offered the customer. Do not repeat the mistakes of "multichannel marketers", who during the first half of this decade were so tied to the catalog strategies of the past that they completely missed the future.


Multichannel Marketing

You know who you are. You are the ten year veteran of catalog marketing at a company like Garnet Hill, Cabellas, Oriental Trading Company, Crutchfield, Talbots, Orvis, Ross-Simons, Swiss Colony or PC Connection. In the 1990s, when your company launched an e-commerce enabled website, you were the one who still met with the CEO on a weekly or monthly basis. In 1999, you were the one who couldn't believe that your employees were leaving your company to work at some startup offering stock options. In 2001, you were the one who couldn't believe that a thirty-one year old online marketing whiz was promoted to a Vice President job. In 2003, you were the one defending the concept of "multichannel", proudly helping the DMA and print industry promote print as the key driver of online and/or retail sales. In 2005, you were the one being criticized for having twenty percent decreases in catalog volume, while the online marketing VP earned a gigantic bonus for driving thirty percent increases. In 2006, your CFO asked you to reduce page counts, in-home dates, or use any other tactic to decrease expense, at a time when the online channel leveraged the infrastructure you spend the 1990s building to achieve record profits.

Multichannel marketing is rapidly shifting toward "online + retail". Catalogs and contact centers are rapidly becoming support channels, line-items in a profit and loss statement.

Catalog professionals are like the person who owned the motel on Route 66, only to see I-40 built right next to Route 66. Within a few years, new businesses sprung up all along the new freeway. Customers transferred their dollars from the quaint little businesses along the highway, to the new businesses along the freeway. New communities sprang up near the interchanges. Tom's Diner went bankrupt. Olive Garden and Chili's thrived.

Catalogers, and the vendors who support them, have tried the argue that their services fuel the online/retail business model. They were like the "Business 40" signs you see --- highway signs that tell the traveler to exit the Interstate highway, go into town, and use the products and services offered by the town. History tells us that this did not save the businesses on the old highway.

Route 66 is a great example of re-invention. After being bypassed by the Interstate highway system, it adapted, it evolved itself into something relevant.

If you work in the catalog industry, you can adapt in at least two different ways. You can get busy with the second half of your career, and find work somewhere in the future of our industry. Or, you can get busy testing new concepts, concepts that will become the future of the catalog industry. 2007 is the year where you need to get busy doing one of these two things. Simply carrying the multichannel banner around the office isn't good enough anymore.

Jim Fulton: Mr. Krabs Is A Database Marketer

Jim Fulton is Principal of Customer Metrics, Inc. His contribution to the Boxing Day edition of The MineThatData Blog is entitled "Mr. Krabs Is A Database Marketer".


If you have

a) a newer vehicle with a built-in DVD entertainment system, and;

b) children under the age of 8

then you will

c) spend a lot of time listening to – but not watching – Sponge Bob DVDs.

And if – like me – you have worked in database marketing for twenty something years, then you will probably start wondering which, if any, of the Sponge Bob characters could be industry colleagues.

Having pondered this question for more time than I would care to admit, I write to present a case that Mr. Krabs – Sponge Bob’s boss and owner/manager of The Krusty Krab – shares many personality/intellectual traits with people in the database marketing world.

“Nay,” you say? “Where is his end-to-end CRM solution?” you ask? Consider the following, gentle reader:

1) Mr. Krabs is cheap

I have noticed that good database marketers and finance types tend to get along rather well. Obviously, there can be some tension on particular tactical decisions – and a little bit of honest skepticism can be useful for all involved -- but on the whole, good database marketers and good finance people both inhabit a world of real numbers, and their personalities tend to veer to the cheap side of the spectrum. DMers obsess about managing tenths of a cent in per-unit postage expense, will push the e-envelope in managing and limiting search engine optimization and affiliate expenses and will generally obsess about incrementality in a way that baffles many in the organization.

Database marketing tends not to be the part of the organization that sends staff members off on “multiweek journeys” to “develop a more holistic appreciation of the customer experience” and spends many hundreds of man hours clipping out photos from magazines and assembling them in montages on conference room walls to try to gain insight into customer behavior.

2) Mr. Krabs is tone-deaf on the “atmospherics” of the brand

Direct marketers are not without their faults (and cheapness can be something other than a virtue), and in our immersion in the heavy quant details, we do sometimes lose sight of the intangible “atmospherics” of the brand. (And I suppose some of those magazine photo montages can provide some insight on this point).

In one episode, “Patty Hype,” (http://en.wikipedia.org/wiki/Patty_Hype) Mr. Krabs belittles the idea that a customer would come to the Krusty Krab for “atmosphere.” “They come here for food!” he declares with a certain crustacean curmudgeonliness.

Let’s face it, Howard Schultz’s genius was using Starbucks’ “atmospherics” to successfully charge people $4 for caffeinated water. (And I for one think that’s generally a fair exchange). Victoria’s Secret’s genius was to elevate lingerie purchasing from the schlocky to the sensual. A Motorola RAZR’s atmospherics…well, you get the idea. Suffice it to say that a successful direct business needs database marketers, but not just database marketers.

3) Mr. Krabs does not fully grasp the economics of cannibalization

In “Sponge Bob: The Movie,” Mr. Krabs opens the second Krusty Krab right next door to the first one. When asked why by Bikini Bottom news reporter Perch Perkins, he replies “Money!”

The idea of putting more investment in the areas that you’re making the most money is well-intentioned and superficially somewhat plausible, but unless one speaks the language of incrementality, it is ridiculously easy to over-invest in segments that do not provide adequate incremental return.

The idea of the Krusty Krab II next door to Krusty Krab I is funny because even an eight year old can recognize that it’s silly. Is it really THAT different, however, from a decision to do an expensive catalog remail to an audience that just got the original catalog six days before?

4) Business = customer base.

Perhaps the greatest evidence that, down deep, Mr. Krabs is a direct marketer is the fact that in episode after episode, Mr. Krabs repeatedly – almost obsessively – notes the criticality of “all me paying customers!” At a strategic level, database marketing establishes strategic equivalence between the business and its customer/prospect base. And Mr. Krabs understands this from claw to tail.

Are ya ready, kids?