From direct marketing to relationship marketing

The time has long past since direct marketers needed to preach the value of marketing direct to individuals. There would be few in the marketing world who would argue with the benefits that can be gained from higher levels of data driven targeting, personalised relevant messages and measurable responses. Yet despite this, “direct marketing” is still a concept that carries with it certain ingrained perceptions. It is still seen by and large as a transactional activity focused on generating immediate sales and, more often than not, focused around communications.

This is why we prefer to talk about Relationship Marketing, which places an emphasis on creating trust, commitment and increased customer value through building long term customer relationships.

“Semantics!” we hear you cry. While in some respects this may be true, we would argue that there are some tangible, and quite critical, differences in thinking and approach between traditional direct marketing and the broader concept of relationship marketing.

Seven ways that you can tell a Relationship Marketer from a Direct Marketer

At the heart of the difference between the Relationship Marketer and the Direct Marketers is the focus on the total customer relationship rather than the immediate campaign and sale. A focus on developing stronger customer relationships leads to greater retention, lower price sensitivity, increased opportunities to cross and up sell, greater zones of tolerance when things go wrong, and higher recommendation.

We’ve identified the following seven characteristics Relationship Marketers possess that distinguish them from Direct Marketers.

1. They talk about customer interactions and experiences, not communications and campaigns.
They recognise that the relationship is built through the totality of these interactions and that communications are just one small part. At worst a narrow focus on communications and campaigns can damage the relationship.

2. They get out of marketing and engage with other divisions, especially operations and the front line.
They appreciate that the most potent points of interaction are in fact those that have nothing to do with marketing. The relationship is so often influenced by operational factors and the interactions that occur at the front line. The relationship marketer therefore spends a great deal of time building a strong link between marketing and the operational parts of the organisation.

3. They care as much about the 95.5% of customers who don’t respond as the 4.5% who did.
Direct Marketers are, quite rightly, focused on response rates and return on investment (ROI). But the Relationship Marketer recognises that the majority of customers don’t respond and that we need to therefore consider the impact of what we do on those non-responders. The Relationship Marketer also appreciates that response is not a binary yes or no. Often, no just means “no, not now”; it doesn’t mean “no for all time”. We call this the concept of “shades of no.”

As well as measuring campaign response rates and ROI, Datamine help organisations understand why non-responders didn’t respond – was it relevant, the wrong offer, timing or channel? This can be used to improve the success of subsequent initiatives. In one case, a local investment company discovered that 8% more money would have been invested if the campaign was run with the retrospective learnings.

4. They use customer information as a driver of business decisions, rather than just a list to mail.
Too many databases are still used as list generators rather than sources of broader insight and knowledge. Datamine frequently find that valuable customer insight is trapped in several unlinked but functional databases. Operational managers, including marketers, are often unaware of the availability and potential of this data. Odds are that you could be using your data to help you answer your burning questions, solve problems, make better decisions, improve the customer experience, and identify growth opportunities.

In some cases companies are investing in research questions that could be answered with their existing data. The value of research that is conducted is often not leveraged to its full extent. You can gain a greater, ongoing understanding of your customers over time if you fuse attitudinal and behavioural data together.

Inbound call centres are frequently a primary customer touch point with hundreds or thousands of calls per week. But do we know why they are calling, how their call was handled and what their experience was like? Did they have to call more than once and did the operator know how to answer their query? Some of the most valuable customer insights are often trapped in free text call logs. It is usually possible to extract this insight and learn from it to increase your understanding of your customers and identify ways you can improve their customer experience.

The Relationship Marketer champions the use of customer data, both attitudinal and transactional, across the organisation and takes responsibility for ensuring the voice of the customer is heard loud and clear at all times.

5. They are channel agnostic and media neutral.
While direct marketing is no longer just associated with direct mail, the Relationship Marketer still has a broader view of the role of channels. All channels have a role in building the relationship, be they above and below the line, marketing or operational, inbound or outbound. The Relationship Marketer considers these in totality.

6. They spend time understanding what has gone before and what will come after the current interaction.
Direct Marketing is still often a point in time activity; it’s about this campaign. The Relationship Marketer realises that the interactions a customer has had in the past are an important consideration, as is what will flow after. For this reason they become very focused on contact management and the importance of follow up. In many cases it may take several contacts, each one building on the previous, to create the desired response. This move from a “campaign” to “contact” mentality, characterised by the development of contact strategies, is an important distinguishing feature between the Direct and Relationship Marketer.

7. They understand that integration is about consistent experience across contact points, not about above and below the line communications.
Advertising and Direct Marketing agencies often quite rightly speak about the importance of integrated communications – a concept that has even given birth to the so called “integrated agency.” But the Relationship Marketer is less concerned about this and far more concerned about ensuring that the promises made in communications are delivered and that the experience a customer has with one part of the organisation are mirrored by another. This is true integration.

Relationship Marketing has nothing to do with Marketing

When viewed in the broad terms that we have defined Relationship Marketing above, it can be argued that Relationship Marketing is in fact about a lot more than just marketing. This view is backed up by research undertaken by Limb Walker Partners in 2004 that identified internal alignment, leadership and culture as three of the biggest factors for successful Relationship Marketing.

While Direct Marketing may be something that the Marketing team can roll out in the same way that they roll out an advertising or PR campaign, Relationship Marketing requires a much broader cross functional view that recognises that the delivery of strong relationships is as much about non marketing experiences as it is about outbound communications.

This is not something that the marketer – direct or otherwise – should be concerned about, but rather something they should embrace as an opportunity to make marketing less of a “function” and to take ownership for the customer and the customer relationship.

The rewards of relationship marketing

There is no doubt about it that the relationship marketing approach takes an investment of time, energy and resources from the whole organisation to get it right. It is not a quick fix but there will be tangible fiscal rewards. Your customers will stay with you for longer, their lifetime value is likely to increase, they will recommend you to others, and your operational costs are likely to decrease. By using your data to inform your decision-making you could also avoid the cost of making the wrong decision.

Two local examples of successful use of relationship marketing by two different sectors are:

Financial services industry in New Zealand
An Insurer used their data to inform their brand strategy. They had two well-known brands and were considering dropping one of them and continuing to invest in the remaining brand. Datamine analysed their data for the two different brands and showed a significant difference in the customer profiles. If they dropped one of the brands they would run the risk of losing a significant percentage of the customers loyal to that brand, as they will not necessarily switch to the remaining brand.

Public sector in New Zealand
A Crown Entity wanted to understand the nature of calls to their call centre. Datamine analysed the call centre data and created a data dictionary to enable ‘mining’ of the free text call log fields. Heavy volumes of call centre traffic regarding invoices were highlighted, which coincided with the timing of invoices being issued. Analysis of the note fields revealed a problem with the layout of the invoice, which led customers with automatic payments to phone the contact centre querying whether their automatic payment was working. They immediately went about addressing this issue, revising the layout of the invoices and changing other internal processes to avoid confusion and better meet the needs of their customers. This initiative improved the customer experience and had a positive fiscal impact by reducing calls relating to this issue.

Quiz: Are you a direct marketer or a relationship marketer?
We’ve developed a wee test, which will help you to determine how you measure up as a relationship marketer. Simply answer Yes or No to the questions below, noting down your answers. Once you’re done, total up your Yes’ and No’s. Relationship marketers will have more Yes’s than No’s.

1. Do you have a single customer view across all brands, products, departments, and databases?

2. Do you segment your customers and understand how their characteristics differ and do you understand your customer needs at a segment level?

3. Do you structure your communications within defined contact strategies?

4. Do you take responsibility for communicating these widely across the organisation?

5. Do you have processes in place to integrate marketing with front line and operations?

6. Do you meet with the front line regularly to share information?

7. Do you understand your customers' communication preferences, and do you use this information?

8. Do you consider how your marketing communications fit in with existing operational communications?

9. Do you always have a follow up plan as part of your communications?

10. Are you analysing campaigns and using the insight to change what you do in the future?

11. Do you seek to collect data or engage in dialogue with customers when you contact them?

If you have more No’s than Yes’s you need our help. Datamine and LWP Partners both have offices in Auckland and Wellington. To contact Datamine, call 0800 DATAMINE or email info@datamine.com. To contact LWP Partners, call

(04) 499 7170

or

(09) 377 7023

, or email info@lwp.co.nz.