Customer Communication Strategy For Customer Segmentation example essay topic

CRM White Paper David MastervichSales Strategies and DeploymentOverviewRich customer relationships that generate loyalty and revenue are critical to sustained business performance. Now more than ever, organizations must be able to flexibly adapt to the unique needs of individual customers. To meet this challenge, companies of all sizes are deploying Customer Relationship Management (CRM) applications and strategies across their organizations. They are coordinating multiple channels: including the web, email, call centers, direct mail and face to face - to interact with customers and meet their needs. Profitable customer relationships begin with sound planning. Actionable strategies for collecting customer data, mining it for valuable insight and cost effectively building these relationships are required to drive results.

Firms must identify their Most Valuable Customers, interact with them across all channels and meet their needs. The ability of the organization to interact effectively with stakeholders depends on the quality and nature of the data, how the company derives insights from the data, and how it makes the data or the analysis available to the appropriate interface. Over time, customer loyalty, satisfaction and share-of-customer revenue increase, while costs decrease. The term CRM has become an over used and often misunderstood term in recent Marketing Strategies. It is mostly equated to IT solutions that build electronic interfaces between a business and their customers.

It is much more than that. CRM is all about the Total Customer Experience that a person has with a business that through multiple interactions across channels. Before CRM, there was database marketing. There always existed benefits in understanding customers and targeting them based on better information. When used properly this makes the customer experience more relevant and acceptable for the customer. This paper is divided into 7 sections which describe critical aspects of Customer Relationship Management.

We will investigate best practices that successful companies have developed with their CRM Marketing Strategies, and we will develop several Sales Strategies they we can use to position Direct Mail as a marketing tactic to enhance any CRM strategy. Customer Segmentation Any discussion surrounding CRM should include discussion around customer segmentation and customer needs differentiation. The goal of customer needs differentiation is to identify clusters of customers with similar needs around which companies can build customized strategies and relevant treatments. The ultimate objective is one-to-one customer relationships with these customers.

"Customer Needs" refer to WHY the customer buys, not WHAT the customer buys. Customer needs are the internal conditions or motivating desires behind a customer's purchase or usage of a product or service. Customer needs are complex and involve many dimensions and nuances including beliefs, motivations, preferences, life stages, decision making styles and more. A good CRM strategy will employ customer segmentation at its root, and build off the understandings of customer behaviors within the different segments.

A CRM strategy should analyze customer segments and make the appropriate determinations on whether each segment is profitable for their business and how to affect the purchase patterns of the segment so the business can experience the profitable attributes of CRM; loyalty purchasing, cross selling, up selling, etc. Direct Mail fits perfectly into the customer communication strategy for customer segmentation. With variable printing and data rich files a company can use their intelligence and print relevant Direct Mail that will move customers toward the purchase decision. Additionally customer communications should also enable the company to learn more about the customer over time so that it acts upon that information to better meet customer needs in the future. This is building "learning relationships" with customers, a fundamental CRM concept. A feedback loop must be built into the process so that the company can continually learn more about customers and their needs in order to improve the relevancy of its communications and offering in the future.

Mail can provide the channel for this feedback, both in direct correspondence and by sending customers to web site, 800 #s or whatever channel they prefer. When discussing CRM you should begin with the thought that all businesses need to analyze their customer data, and break their customers into as distinct as possible differentiated segments. Customer segmentation is not new, and you can understand the company better if you understand the method they use to segment their customers. Are they segmented by geography; economics; Recency, frequency, monetary purchasing behaviors, etc. Once you have that understanding of their segmentation then you can demonstrate the value that Direct Mail can bring to each segmentation philosophy. Since customer segmentation is at the root of CRM, each business that performs CRM is ready to address the bigger question of deploying unique messages to the right customer at the right time.

Again mail is the perfect and preferred media to carry those messages. CRM and Technology Historically, CRM initiatives evolved out of the IT department and were technology driven. These initiatives resulted in cutting costs with IVR systems (Integrated Voice Response) and email communications. Though cost efficient, there are inherent dangers to relying on technology to build customer relationships...

Effectively leveraging technology to enable the CRM strategy and process is important, but one must keep in mind that the technology is a tool to support the strategy, and not CRM itself. CRM is a business strategy that is enabled by technology. The Peppers & Rogers Group refers to CRM simply as the ability to "treat different customers differently". CRM can be defined using Peppers & Rogers Group "I DIC" methodology, which serves to: o Identify customers individually and Differentiate customers or customers groups based on their needs and value Interact with customers in a way that benefits them and the company Customize the relationship over time based on the company's understanding of the customer's needs and values. Companies with a winning CRM strategy examine customer interactions through the "eyes of the customer", and build customer-focused strategies and process to establish and maintain long term profitable customer relationships. The booming CRM industry has provided the in-depth customer data that is vital for successful direct mail campaigns and integrated channel strategies focused on keeping and growing profitable customers.

Data can become customer insight. Customer insight can become action. Action can grow the value of your customer base and grow your net income. Now that the data and print technology is available, mail can be positioned as a "CRM tool". 70% of CRM initiatives through IT channels have failed to show the ROI predicted or promised, and now many of these companies are searching for ways to make this expenditure profitable. Although CRM systems may have streamlined and reduced some contact points, they have not been effective in building more profitable customers.

Direct Mail can satisfy the need to show ROI from the CRM systems. Direct Mail can be measured and is a proven method for acquiring, growing and retaining customers. When positioned as a "CRM tool", hard copy communications has a demonstrated track record for creating successful loyalty programs, customer satisfaction tools, cross sell and up sell promotions and save strategies. CRM and Loyalty The key to a good CRM program is to know who your customers are and what they want, then provide them with the right mixture of rewards and benefits, or risk losing high value customers to a competitor who listens to your customers better.

Loyalty programs have a profound influence on the way consumers buy and whom they buy from - across all industries. It is becoming evident that it is key for organizations to create a focused approach to building customer loyalty by recognizing and rewarding their best customers. This approach builds on the attitudinal and behavioral customer knowledge currently available and begins to reward and recognize customers based on their value to a company. The core goals of loyalty marketing - convincing invisible customers to raise their hands and identify themselves, moving them along the relationship chain through sophisticated database marketing techniques and increasing the incremental revenues gleaned from them throughout their customer life cycle - have captivated marketers hungry for data to fuel their enterprise CRM initiatives. Businesses around the globe have therefore embraced loyalty as a tried and true tactic to deliver desired business results. Due to this proliferation of loyalty programs, customers have their antennae up.

They " re more alert than ever, and seek not those brands that offer only 'a me to" approach to loyalty, but rather those brands that bolster their overall value proposition with a sophisticated and differentiated rewards program. This new approach will be accomplished by the next long term trend in loyalty marketing, the increasing importance of customer data analytic's and business intelligence in gaining and retaining market share in an increasing competitive world. The richest and most robust source of behavioral data in the entire CRM marketplace resides within a company's loyalty marketing programs. Marketers will take advantage of a new subset of business data analysis, loyalty analytic's, using advance, out sourced analytical capabilities and new database marketing tools to perform mission critical marketing tasks such as: Forecasting marketing ROI Measuring customer value in a dynamic, ever changing model Increasing incremental revenue, one customer at a time Comparing ROI results to forecasts Defining specific marketing strategies for increasing finite customer segments Modeling customer attrition and intervening prior to their departure Modeling cross sell, up sell potential Determining the Net Present Value of marketing campaigns and initiative For marketers who are in the early stages of studying loyalty and CRM, there are three "life stages" through which an enterprise must grow before achieving the sophisticated, multi-dimensional customer data analysis as practiced in the travel and financial services industries. Understanding these stages can help us position direct mail into a companies marketing plan for loyalty programs and CRM initiatives: Loyalty Life Stage Data Toddler Data Adolescent Data adult Customer information Invisible customers Capturing transactions Advanced customer segmentation Loyalty program status Determining ROI Comparing ROI to forecast Enterprise wide CRM initiative Customer Database Fragmented data Program specific data mart Multi dimensional data warehousing Analytical Tools Basic reporting tools Advanced reporting, basic analytical tools Advanced analytical tools Considerations that companies have when building a loyalty program are: Margin: What is their current contribution margin, how will changes to your margin affect program ROI?

Number of Members: How many members do you anticipate enrolling? Number of identified transactions: Of your proposed member base, what percentage of their transactions can you identify? Average customer value: Most companies have some idea of what their customers are worth Average member value: The purpose of a loyalty program is to grow the average value of its members and thus differentiate between customers and members, whose value to the enterprise should be higher. Current Churn rate: Most companies have a churn model, which estimates the rate of customer attrition Member Churn Rate: Another key loyalty program goal is to reduce attrition, so they should model what percentage reduction in a churn rate would make their program profitable. Funding Rate: The programs value proposition is arguable the most important variable. How much can they afford to offer?

How should the reward dollars be distributed across their customer's value segments? Breakage: What percentage of reward redemption's can their program handle and still remain profitable? To assist a company in building their loyalty we can offer up a number of compelling trends regarding loyalty that have emerged from surveys conducted with consumers: Referrals are king: One of the most powerful, but under utilized, tools is the referral program Wealthy customers are more loyal: High income households exhibit greater loyalty and are influenced more by loyalty programs Consumers want more loyalty programs: Demand for retail loyalty programs is on the rise Consumers want to be loyal: Consumers will spend more time and money to participate in relevant loyalty programs. Want something more, they are demanding away from the norm, with ubiquity comes skepticism and constant comparisons, and it will become increasingly difficult to impress consumers by offering more of the same. A few companies have taken their loyalty programs to the next level; they are offering a new concept in hard-benefit design: the experiential or inspirational reward. Experiential reward design embraces the idea of redeeming points for an once-in-a-lifetime experiences, premium merchandise and life stage-or lifestyle- experiences that appeal to a members dreams.

This type of program will increasingly separate successful loyalty programs from doomed programs. Now that we understand the ever increasing role of loyalty programs within any companies CRM marketing strategies, how can we position the usage of mail to assist their programs? Obviously most of today's programs utilize mail as a tactic for communicating the program, and program status to their members. The future for mail in the very large membership programs, such as those in the airline, hotel and credit card sectors is not bright. Companies are looking for ways to reduce communications costs with their members by shifting their communications online. We have to be aware of this trend and be proactive in our conversations with the companies by demonstrating the value of mail to the customer.

We will use the new mail moment research to help demonstrate this value and be able to discuss the role mail can play as a preferred channel for customer communication. As stated earlier CRM is about learning interactions and loyalty programs offer one of the best ways to gain "opted in" approval for companies to dialog with their customers. Mail has the natural benefit of being referral, since mail is hard copy it can easily be passed on and maintain the same emotional attributes that it has for the second recipient as it does for the first. Customer loyalty programs are built around customer touches and mail offers unobtrusive opportunities to touch customers.

CRM and the Print Industry The growth of CRM and one-to-one marketing has significant implications for the printing industry because companies that embrace CRM and one-to-one marketing tend to make fundamental changes in their approach to marketing communications. CRM-based marketing exhibits three fundamental characteristics that, collectively, set it apart from the traditional approach to marketing. First, CRM marketing is multi-channel marketing. One of the basic principles of CRM and one-to-one marketing is that a business should communicate with a customer or prospect using the medium of communication that the customer or prospect prefers - web pages, email, electronic documents, telephone calls, or printed documents.

Second, CRM based marketing is integrated marketing. Once a company commits to multi-channel marketing, it must then insure that its marketing messages to any individual customer or prospect are consistent across all marketing communications channels. The third, and perhaps most important, characteristic of CRM based marketing strategies is that they make extensive use of personalized technologies to create and deliver customized marketing communications to prospects and customers. Enterprises committed to CRM and one-to-one marketing continue to use mass marketing techniques and materials, but for more limited purposes - to raise brand awareness, to establish brand identity, and to entice prospects to begin an interactive "conversation" with the enterprise. That said the growing emphasis on personalized communications with customers and prospects will obviously affect how CRM-focused enterprises use printed material in their marketing efforts and what kinds of printed material they will favor. For now, most enterprises will need to use printed material as part of their marketing communications programs, because they will have some customers and prospects who either are not online at all or who simply prefer to receive communications in printed form.

As stated by George Caci oppo, vice president, Adobe Systems, Inc. "Personalized communications are tremendously effective at strengthening customer relationships and generating profits. So integrating CRM with print will make personalized printing a practical reality and improve the relationships between firms and their customers". CRM and Employee Connectivity cornerstone of CRM is the building of processes and technology that provides employee connectivity so that all customer touch points are messaging to customers knowing the total value of the customer and conveying the same messages.

To illustrate, when a customer interacts with a company, whether it be billing, customer service, the retail associate, their account manager or the CEO, he should feel like he is having a continuous conversation with the company and that each person at the company understands his individual needs and situation. This connectivity goes a step further, processes not only need to be customer-focused and internally connected, they also need to be coordinated with external stakeholders such as third part vendors that interact with customers and handle customer information. This dimension of connectivity assists all of the touch points, internal and external, in being more responsive to customer needs. Another customer engagement strategy for the USPS is built around the need of any company building a CRM marketing strategy to fully engage their employees into the strategy, which will obviously require employee communications. Any company that understands this need of employee connectivity should consider the usage of mail to communicate with their employees both at home and the office. A lengthy CRM strategy document would be very hard to read via the computer, and should be developed much like a magazine article with culled out bullet points and highlights with quotes.

This could be accomplished by mailing an internal custom publication to all employees that could serve the multitude of purposes needed for the roll-out of a company wide change. Mail can also be used as a motivational communication channel to highlight outstanding performance by employees when dealing with customers. CRM and the Mid Market Business The mid market business (MMB) customer is in most cases better positioned than a large business, to conduct CRM activities due to several factors: 1. There exists a multitude of enterprise players that offer functionality rich technology products, which have been benchmark ed at the enterprise level. 2. The timing is right, the mid market business can leverage the third party integrators experience and the lessons learnt.

The technology has matured and now available at lower costs. 3. Most of the new breed CRM applications are embedded with the so called "Best Practices". MMBs can gain operational efficiencies by adopting the "Best Practices" in some of their basic processes.

4. MMBs can take advantage of the "knowledge management" capabilities of CRM by developing and establishing solutions and FAQs to the common issues and problems faced by their customers. 5. Compared to the large enterprises, MMBs have different perspective in terms of employee's roles and responsibilities.

Generally, employee of a small enterprise plays multiple roles. The automated functionality of CRM can play an important role in managing the interactions between employees and customers. 6. One role of CRM is to assist in managing the employee's productivity. Sales activities can be tracked along with service issues and resolve time; this intelligence will help increase customer satisfaction. 7.

CRM will help owners make informed decisions, by having the big picture of their customers, and customer segments. 8. Large enterprises have large hurdles to overcome when implementing CRM. There are unusually multiple legacy systems to coordinate all the data, and with multiple systems there exists multiple data formats which make this task daunting. MMBs will most likely have only one system if any, which would simplify the data integration. This would equal shorter time to implement a lower cost of ownership.

9. The human factor is also very important. It has been proven fact that most of the unsuccessful CRM projects were due to the lack of user acceptance. In MMBs there are usually fewer power brokers that CRM sponsor has to get "buy-in" and the chances are the business transformation into CRM will be smoother. 10.

CRM can provide a real value for companies that do not have legacy systems. There is a real opportunity that the CRM systems can be a holder of all the companies' business data and act as a central repository of business information. 11. Large companies have information and operational silos, therefore the process inter dependencies are convoluted. It is relatively easier for a CEO of a MMB to realign their business processes for the customer centric focus. Size makes the MMBs more nimble and able to react to industry situations and customer issues.

12. Most of the new CRM solutions have web based architecture, which well suits a MMB. The anywhere, anytime availability makes the applications affordable and deployment is fast and easy. In conclusion, the influx of CRM vendors in the mid market space has enabled the MMBs to take full advantage of the functionality rich mature products. For MMBs executives introducing CRM into their organizations demands a comprehensive approach, with the build of the marketing strategy first, but now the technology is available to assist in fulfilling CRM activities at all size companies. Best practices of a CRM Marketing Strategy Since CRM Marketing Strategies can be deployed at any enterprise regardless of size, let's fully understand what CRM is and some key findings and then understand the role Direct Mail can play in this market.

The overall potential for Direct Mail is very large, but it has to be positioned for what it is; as a part of total integrated communication process that builds customer satisfaction. Any company wishing to build and maintain successful customer relationships have three areas in which they must perform well. The first is to create a successful relationship marketing strategy, the second is to align the capabilities of the organization to the relationship marketing strategy and the third is measuring the relationship marketing strategy. From these three areas there are 10 key findings that have emerged. Best practice organizations: 1. Develop a clear, holistic vision of all stakeholder relationships 2.

Understand the relative importance of their customers and allocate resources accordingly 3. Centrally coordinate the relationship marketing strategy and customize the strategy locally 4. Deploy relationship marketing in stages, yet processes are guided by a comprehensive vision 5. Successfully integrate the relationship marketing strategy with numerous functional areas 6.

Rely on effective change management processes to involve all employees in an internal partnership for relationship marketing 7. Provide a consistent customer experience through multiple contact points 8. Align the relationship marketing strategy with the brand 9. Build better relationships through data based insights 10. Achieve relationship marketing accountability As we review the 10 key findings we can position mail to assist in the deployment of their CRM program; Finding # 2 is a building block for understanding customers through segmentation. Mail can be an integral part of any customer communication, but with new print technologies and data base capabilities mail has strengthened its targeting attributes.

Combine this with a dialog program; companies can use the mail to fully understand their customer's needs and attitudes toward their products. Finding # 3 gives us the opportunity to demonstrate how mail can how customize messages to local sectors of a company. Building relevant geographic messaging can improve a company's customer relationship by building the local customer connection. Finding # 7, this is a critical point in all CRM strategies. The customer wants to be reached through a medium that they prefer and the messaging through all mediums must be consistent.

Mail offers a platform to build upon for all messaging. Customers will read details within a mail piece that can better explain products or services than web messaging or even face to face interaction. Mail can become the cornerstone medium for all messaging through all channels. Finding #10 speaks of accountability, and mail is noted as the best media to perform a measurable, accountable ROI for advertising dollars.

In conclusion, as we can see Direct Mail fulfills many opportunities for a company to communicate with their customers, through a relevant data intelligent dialog. Once we have started the conversation of customer segmentation with a company we are uniquely positioned to make the Mail Moment work for them..