Chapter One: One-to-One Marketing: What It's All About--The Four Implementation Steps of a 1to1 Marketing Program
At its root, one-to-one (1to1) marketing is a type of relationship marketing. But not everything that could be called "relationship marketing" is in fact 1to1 marketing. To be a genuine 1to1 marketer, you have to be able and willing to change your company's behavior toward an individual customer based on what you know about that customer and what the customer tells you.
So 1to1 marketing is basically a simple idea:
Treat different customers differently.
The actual mechanics of a 1to1 marketing strategy depend on understanding the various ways customers are different and how these differences should affect the firm's behavior toward particular, individual customers. While the idea is quite simple, implementing a 1to1 marketing program is not. One-to-one marketing involves much more than just sales and marketing, because the firm must be able to change how its products are configured or its service is delivered based on the individual needs of individual customers.
When a firm really harnesses all its resources to address the different needs of individual customers--to implement a 1to1 marketing program--we call that firm a one-to-one enterprise. One enterprise, one customer. A true 1to1 enterprise considers the cultivation and management of customer relationships to be the single most critical issue it faces--and recognizes that the strength or weakness of those relationships is the key determinant of the enterprise's long-term profitability and success.
Smart companies have always encouraged the active participation of customers in the development of products, services, and solutions. For the most part, however, being customer-oriented has always meant being oriented to the needs of the typical customer in the market--the average customer. In order to build enduring 1to1 relationships, a company must continuously learn from interactions with individual customers. It must dynamically respond to the information those interactions elicit. The enterprise must engage its customers--particularly its best customers--and ensure they never want to leave.
The actual, detailed mechanics of building a 1to1 relationship depend on understanding the various ways customers are different and how these differences should affect the firm's behavior toward particular, individual customers. It's an idea that is critical to success in high-velocity, highly competitive times. It recognizes that no two customers are the same and that smart companies can capitalize on these inherent and essential differences.
Who Is the Customer?
Most companies sell not to end users or to consumers directly but to intermediaries--purchasing agents, dealers, distributors, retailers, or resellers. Whether your company sells consumer products through retail outlets or factory machinery to the contracting officers at large industrial firms, defining the nature of all your "customers" is a first step. But even if a company doesn't sell directly to the end user of its product, it still has an interest in creating a better relationship with that end user. It is the end user--the ultimate customer or consumer--who supports everyone in a network of value-creating relationships.
Ford Motor Company sells almost all of its cars to dealers, not to consumers, but it must recognize nevertheless that the ultimate drivers of Ford vehicles think of themselves as having a relationship with Ford. Hewlett-Packard may sell expensive testing equipment to the purchasing agents at large microchip-manufacturing companies, but the ultimate users of these products are the bench engineers who develop new products and test current ones. Even companies largely thought of as consumer marketing firms usually sell their products, in actuality, to retail chains, while running tens of millions of dollars in advertising to pull consumers into these stores to buy their products.
Regardless of how the customer is actually defined, one reason so many firms are beginning to focus on 1to1 marketing is that this kind of marketing can create intense customer loyalty and, as a part of the process, help a firm protect its unit margins. These benefits appeal to firms all over the world, in every industry, because everyone's business today is threatened to some extent by declining customer loyalty and by a kind of "creeping commoditization" that steadily erodes margins.
Learning, Loyalty, and Profitability
You can make your own customers more loyal and more profitable to you--one customer at a time--by establishing a "Learning Relationship" with each of them, starting with your most valuable customers. Think of a Learning Relationship as a relationship that gets smarter and smarter with every new interaction. The customer tells you of some need, and you customize your product or service to meet this need. Then, with each interaction and recustomization you get better and better at fitting your product to this particular customer. Now, even if a competitor offers the same type of customization and interaction, your customer won't be able to get back to the same level of convenience until he reteaches the competitor what he's already spent time and energy teaching you. In effect, by implementing a 1to1 marketing program you are making your product more and more valuable to this customer through every successive interaction and transaction.
Four Implementation Steps for a One-to-One Marketing Program
There are four key implementation tasks that can be used as a guide for launching a 1to1 initiative: identify, differentiate, interact, and customize. These principles are roughly in order of increasing difficulty and complexity, although, as we'll see, there can be a good deal of overlap. Nevertheless, these four implementation steps can be thought of as a sequential process for putting a 1to1 marketing program to work:
1. Identify your customers. It's critical to know customers in as much detail as possible. Not just name and addressable characteristics but habits, preferences, and so forth. And not just a snapshot--a onetime questionnaire, say--but across all contact points, through all media, across every product line, at every location, and in every division. This is not simple "targeting." It's important to know and remember each customer individually, and to link information about that customer across the entire enterprise, throughout the duration of a customer relationship. If a company hasn't acquired the addressable identities of at least a fair number of its most valuable customers, then it isn't prepared to launch a 1to1 initiative. (Or you haven't defined your customers the right way. Your only option may be to try to create relationships, not with end users but with the intermediaries and channel members whose identities you do have.)
2. Differentiate your customers. Customers are different in two principal ways: They represent different levels of value (some are very valuable, some not so valuable), and they have different needs from you. So, once you identify your customers, the next step is to differentiate them so as to (a) prioritize your efforts and gain the most advantage with the most valuable customers and (b) tailor your firm's behavior to each customer based on that customer's individual needs. The degree and types of differentiation in a firm's customer base will also help you decide which 1to1 strategy is more appropriate for a particular business situation.
3. Interact with your customers. The next step is improve both the cost-efficiency and the effectiveness of your interactions with customers. To make interactions more efficient, drive them into more automated, cost-efficient channels. Push call-center interactions toward your Web site, and push personal sales calls more to the call center. To improve the effectiveness of each interaction, gather only relevant information, when it is needed either (a) to better grasp a customer's individual needs or (b) to more accurately quantify a customer's potential value. In addition, every interaction with a customer should take place in the context of all previous interactions with that customer. A conversation should pick up where the last one left off, whether the previous interaction occurred last night or last month, at the call center or on the company Web site.
4. Customize some aspect of your enterprise's behavior toward your customer, based on that customer's needs and value. To lock a customer into a Learning Relationship, a firm must adapt some aspect of its behavior to meet that customer's individually expressed needs. This might mean mass customizing a manufactured product, or it could involve tailoring some aspect of the services surrounding a product--perhaps the way the invoice is rendered, or how the product is packaged (we will be discussing the mechanics of mass customization in Chapter Six). In any case, in order to practice true 1to1 marketing, the production or service-delivery end of your business has to be able to treat a particular customer differently based on what that customer said during an interaction with the sales or marketing part of the firm.
These four principles overlap considerably. For instance, an enterprise might put up a Web site not primarily to interact with customers but simply to attract the most valuable ones and begin to identify them individually. Nevertheless, the principles are in a rough order that corresponds to increasing complexity as well as benefit for a company. So these steps can be used as a kind of macro-checklist to guide your efforts in implementing a 1to1 marketing program. If you can't identify your customers individually, you have no hope of differentiating them, much less adapting your behavior to address each individual customer's needs.
Is One-to-One Marketing an "All or Nothing" Proposition?
It's impossible to simply "strap on" a 1to1 marketing campaign and continue to do business in a traditional manner. Some companies--Dell Computer Corporation, USAA, or Amazon.com, for instance--are successful at creating 1to1 relationships with their customers because they built their businesses from the very beginning on the basis of direct customer interaction.
But while it's certainly easier to implement a comprehensive 1to1 marketing program by starting from scratch, it's not actually necessary. If your business is already up and running, you can make incremental, manageable progress toward becoming a 1to1 enterprise by concentrating on the four principal implementation steps outlined in this Fieldbook.
Other companies are doing it now. Large, well-established enterprises like Pitney Bowes, Wells Fargo, 3M, Owens Corning, American Express, and British Airways have begun incrementally creating stronger, more interactive relationships with their customers. They implement these strategies piece by piece, in one business unit and then another, wrestling with one obstacle at a time. But they are making substantial progress and gaining a significant competitive advantage as a result.
Or consider Hewlett-Packard, a firm with more than a hundred thousand employees in seventy-six independent business units each of which operates in dozens of countries. This vast enterprise is making substantial progress toward turning itself into a 1to1 enterprise, simply by concentrating on the individual implementation steps involved. The firm already has about a hundred separate 1to1 initiatives under way, with progress in each initiative tracked on the company's intranet.
Most firms must be able to make such progress without substantially undermining their current business, and figuring out how to make incremental progress is exactly what this Fieldbook is all about. The aspiring 1to1 enterprise needs a vision and a strategy. It also needs tactical, step-by-step plans for attaining its objectives.
What to Expect in The One to One Fieldbook
The four implementation steps--identify, differentiate, interact, and customize--provide an extremely useful road map for the 1to1 strategist. In our own consulting practice, we use these four implementation steps as an easy guide for evaluating a particular client's strengths and opportunities in 1to1 marketing.
These four steps are useful enough that we'll be relying on them throughout The One to One Fieldbook. In the first half of the Fieldbook, we'll be asking you to consider each of these steps, one at a time, and to think about its implications for your own business. We've woven a large number of examples into the first half, in order to illustrate how completely different companies, in entirely different business situations, can still rely generally on these steps as a guide.
In the second half of the Fieldbook we'll examine a variety of business functions and processes, from call centers to advertising, from information systems to channel management. What we'll be looking for is how each area of activity will affect, and be affected by, the task of implementing a 1to1 marketing program using these four steps.
How to Use The One to One Fieldbook
We've designed the Fieldbook as a toolkit, and we've stocked it with tools. The way we have visualized this book being used is as a transition guide. In our experience, managers who begin to implement 1to1 marketing programs soon find that they must interact and cooperate with other departments, even other divisions, at their firm. Often, a serious enterprise creates a kind of multidepartmental team of managers who are tasked with navigating the transition. This transition team should include ten to fifteen of the brightest, craziest people in your company, from a variety of departments and functions, including marketing, sales, customer service and support, finance, production, delivery and logistics, product management, and information systems.
Try to avoid the following on your guest list:
More than one person (two, maximum) from any business function
Anyone who's notably more senior than the rest of the crowd
Grandstanders and meanderers (including anyone who has a major vested interest in the status quo)
We have written the Fieldbook explicitly to help this kind of transition team.
You could also think of the Fieldbook as a "book of lists." There are checklists of activities for identifying customers, or for interacting with them more cost-efficiently. There are lists of tasks and responsibilities, pitfalls, advantages, things to watch out for. There are item-by-item lists of "thought starter" ideas and concepts.
In addition, we've sprinkled a number of "scenarios" into the Fieldbook. Sometimes we propose alternative scenarios and ask you to select the one that best fits your own situation in order to provide a better key for your self-assessment. Other times we use them as examples of particular business situations we think it would be useful for you to think through--problems to work out.
This Fieldbook is--even as it goes to press--a work in progress. In the few weeks or months between the time these words are typeset and you read them in print, we are absolutely positive that many of these concepts will be updated and improved. All over the world, managers at companies like yours are constantly adding to the 1to1 marketing knowledgebase. The revolution is, if anything, accelerating, and writing the Fieldbook has been somewhat like trying to shoot a moving target.
That's one reason we've gone to great lengths to link the Fieldbook to a special section on our Web site (http://www.1to1fieldbook.com).
Notice the card included with your Fieldbook? Don't lose it. This special section is for Fieldbook owners, and in order to access it, you'll need to provide the unique access code on the card during a registration process. By going to this area, you'll have access, at no additional charge, to electronic versions of every spreadsheet, worksheet, checklist, scenario, or planning page included in this toolkit. Instead of ripping the checklists out, or photocopying them, you can download and print these files whenever you choose. In addition, as the 1to1 knowledgebase grows, we'll be updating all of these tools and adding others. So you'll never be more than a few keystrokes away from what amounts to our latest learning with respect to the issues involved in setting up a 1to1 enterprise.