Customer obsession

“With this book, Abaetê and Ricardo demonstrate why their business has seen such tremendous growth over the years Not only they understand direct marketing from a theoretical perspective, but more importantly, they know how to translate that theory into practice.” Bob Horvath, Chairman and CEO, Rapp Collins Worldwide “This book is absolutely mandatory reading for any marketing professional focused on achieving measurable results A rare combination of precious information to be put into practice.” Carmen Baez, LatAm President, DAS Latin America “If you cannot spend personal time with Abaetê and Ricardo (as I have been fortunate to do), buy this book! A one-time complicated science made understandable, interesting, and actionable.” Gary Von Kennel, Former Chairman and CEO, Rapp Collins Worldwide “Rapp Collins has been an outstanding success over its 10-year history in Brazil To be able through this book to learn the secrets of successful direct marketing from the team who built the brand is an opportunity not to be missed.” Michael Birkin, Vice Chairman, Omnicom Group Inc., and Chairman & CEO, Omnicom Asia-Pacific “This book helps make marketing simpler It demonstrates the value of letting go to the idea of communication as an on-going, interconnected process.” Tim Love, Vice Chairman, Omnicon Group Inc This page intentionally left blank CUSTOMER OBSESSION How to Acquire, Retain, and Grow Customers in the New Age of Relationship Marketing ABAETÊ DE AZEVEDO AND RICARDO POMERANZ New York Chicago San Francisco Lisbon London Madrid Mexico City Milan New Delhi San Juan Seoul Singapore Sydney Toronto Copyright © 2008 by McGraw-Hill All rights reserved Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher ISBN: 978-0-07-164146-3 MHID: 0-07-164146-7 The material in this eBook also appears in the print version of this title: ISBN: 978-0-07-149704-6, MHID: 0-07-159134-6 All trademarks are trademarks of their respective owners Rather than put a trademark symbol after every occurrence of a trademarked name, we use names in an editorial fashion only, and to the benefit of the trademark owner, with no intention of infringement of the trademark Where such designations appear in this book, they have been printed with initial caps McGraw-Hill eBooks are available at special quantity discounts to use as premiums and sales promotions, or for use in corporate training programs To contact a representative please visit the Contact Us page at www.mhprofessional.com TERMS OF USE This is a copyrighted work and The McGraw-Hill Companies, Inc (“McGraw-Hill”) and its licensors reserve all rights in and to the work Use of this work is subject to these terms Except as permitted under the Copyright Act of 1976 and the right to store and retrieve one copy of the work, you may not decompile, disassemble, reverse engineer, reproduce, modify, create derivative works based upon, transmit, distribute, disseminate, sell, publish or sublicense the work or any part of it without McGraw-Hill’s prior consent You may use the work for your own noncommercial and personal use; any other use of the work is strictly prohibited Your right to use the work may be terminated if you fail to comply with these terms THE WORK IS PROVIDED “AS IS.” McGRAW-HILL AND ITS LICENSORS MAKE NO GUARANTEES OR WARRANTIES AS TO THE ACCURACY, ADEQUACY OR COMPLETENESS OF OR RESULTS TO BE OBTAINED FROM USING THE WORK, INCLUDING ANY INFORMATION THAT CAN BE ACCESSED THROUGH THE WORK VIA HYPERLINK OR OTHERWISE, AND EXPRESSLY DISCLAIM ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE McGraw-Hill and its licensors not warrant or guarantee that the functions contained in the work will meet your requirements or that its operation will be uninterrupted or error free Neither McGraw-Hill nor its licensors shall be liable to you or anyone else for any inaccuracy, error or omission, regardless of cause, in the work or for any damages resulting therefrom McGraw-Hill has no responsibility for the content of any information accessed through the work Under no circumstances shall McGraw-Hill and/or its licensors be liable for any indirect, incidental, special, punitive, consequential or similar damages that result from the use of or inability to use the work, even if any of them has been advised of the possibility of such damages This limitation of liability shall apply to any claim or cause whatsoever whether such claim or cause arises in contract, tort or otherwise We dedicate this book To my patient, good-humored, and affectionate wife, Juçara U de Azevedo, and my infallible English dictionary To my children, Jacyara, Iberê, and Acauã, from whom I get the oxygen for my best energy To Atám, brother, father, and best friend And also Dorinha’s enthusiastic kindness Abaetê To my wife, Cristiane, who has taught me the real meaning of the word relationship, not only in the corporate world, but in life To my children, Yuri, Bruno, and Larissa, who are the main reasons for my achievements To Noelli, Loris, Lenina, and Carl, who are always cheering me on Ricardo This page intentionally left blank Acknowledgements T his book has had important personal contributions, both local and international André Pasquali was in charge of art direction, providing us with his creative talent and great work capacity to create and diagram the content Maurício Castro da Silva reviewed the financial math required to make some of the more involved technical calculations Marcos Yamamura coordinated the gathering of on-line illustrations and Mauro Letízia was responsible for selecting the most representative options Juliana Verde, Leila Braz, Marcos Bittencourt, Marianna Capobianco and Tatiana Pacheco helped in obtaining approval from the clients Ágatha Bellesso’s support was also decisive in managing the various daily support activities that require so much time and organization We also want to acknowledge Acauã Azevedo for an excellent suggestion Several marketing professionals also contributed and are responsible for choosing the brand cases Here we want to thank the executives Antônio Matias, Emílio Munaro, Fábio Bruggioni, Fernando Chacon, Flávio Dias, Flávio Lima, Guilherme Franco, Jacuguara Santos, Jaime Chaves, Marcos Nohur, Mirian Huchigara, Paulo Gouvêa, Sérgio Santos, Simone Dinis and Vinicius Carraro v vi acknowledgements Direct from Omnicom NY, Carmem Baez led the requests for cases from the 70 Rapp Collins Worldwide agencies, with Tais Melilo’s operational support And from our Rapp Collins LatinoAmericana, we had the collaboration of Maximo Rainuzzo from Argentina and Paul Garnier from Costa Rica And for encouragement and guidance, we want to thank Milton Assumpção and also Ernesto Yoshida for his support Contents Introduction CHAPTER ix Industry, Retail, or the Consumer: Who Controls the Market? CHAPTER How Much Is Each Customer Worth? 13 CHAPTER Relationship Strategies to Win Over and Keep Customers 25 The New Integrated Communication Scenario Based on Relationship-Marketing Strategies 53 CHAPTER CHAPTER Creating Results 75 CHAPTER Relationship Marketing in Action 97 CHAPTER Database Intelligence 115 vii 212 appendix was associated with low incomes per consumer, as shown in Figure Therefore, there would be no high priority for acquisition efforts Another segment, “Privileged Families”, had the highest rate of adolescent children at home This segment could be reached using new models of portable devices and with price reduction plans during the off-season, when adolescents talk more The “New Neighbors” segment had a higher penetration of apartment dwellers who reside at the same address for at least two years and who tend to move This segment could be reached using national or regional calling plans Partnership marketing could also be used Developing segmentation by behavior A multidimensional segmentation model was developed for customers using behavioral data as well as segments grouped according to their life stage (as one of the dimensions) The behavioral dimensions included the time during which the individual is a company customer, analogic versus digital telephones, the number of minutes used that exceed those included in the credit plan and the number of active services per account Customer dimensions serve as a basis for final segmentation That’s why they were carefully developed to provide considerable insight into the target public Each dimension can be controlled as a mini-segmentation model, developed from a high level of customer contribution Using the Latent Class Model, such dimensions were then plotted in five segments that described the customer base in a comprehensive manner The description of these segments is in Table A ppendix Table Segment Description / Key Characteristic Segment Description/Key Characteristics Communicative Families • Families with accounts for several services • Above average incomes, payment of at least dollars per month in additional resources • Above average use of roaming • Tend to make many short duration calls • Above average penetration in “Privileged Families” New Customers • Company customers for more than years • Slightly below average income and tend to not exceed credit minutes • Most not have demographic information Convenience Users • Customers of a single service with “Convenience” price plans • Use more than their permitted number of minutes • Higher proportion of weekend calls • High penetration in the “Singles” and “Prosperous Families” segments Safety Comes First • Customers have their phone for safety and guarantee reasons • The largest segment, but contributes little to total income • Customers for a long time • High penetration in the “Senior Citizens” segment Super-users • Tend to use several services, intensive use and higher income per account • High penetration of business customers (B2B) • Contains a smaller proportion of customers, but they contribute to a larger part of income • Most customers have digital price plans and exceed their credit limit • They bought their services through customer ownership channels or those controlled by them 213 214 appendix Recommended marketing actions for the behavioral segments Among all the segments, the “Safety Comes First” user category had the lowest incomes in proportion to its size (see Figure 3) These customers bought their phones for safety reasons and basically used them only in cases of emergency Since this is the largest segment, but the one that also generates the least income, it was necessary to evaluate its profitability The least profitable customers could migrate to pre-paid services Another segment, “Convenience Users”, had many customers with fewer minutes than the average in their price plans, but they had a strong tendency to use more than those permitted minutes on a regular basis Since the company’s basic objective Figure Distribution of Customers and Income Using Behavioral Segments % Customers Commuicating Families New Customers Convenience Users % Revenue Safety First Super Users A ppendix Figure Three Dimensional Graph of Behavioral Segments The size of the bubbles is proportional to the size of the segment month Avg Revenue Super Users Communicating Families New Customers Safety First Convenience Users % Digital is to retain as many customers as possible, they could be recommended plans with a higher minimum monthly rate and more credit minutes The most valuable segments were “Communicative Families” and “Super-users”, with the highest incomes in comparison to their size “Communicative Families” had a lower percentage of customers with digital phones (see Figure 4) Since the digital price plans are more convenient for the user (greater variety of price plans, better reception, etc.) and easier to be served by the company, it should be recommended to the analogic customers to migrate to digital services The “Superusers” segment had higher utilization rates and higher expenses among all segments These customers should receive special treatment and they should be rewarded through loyalty programs The result: the company should whatever is necessary to retain these customers 215 216 appendix Conclusion Increasingly lower budgets and the reduction in response rates demand more relevant marketing campaigns, effectively directed towards the customer in order to generate profit Well-conceived segmentation provides insight on the customer, which helps marketing professionals create and define offers and messages, elaborate loyalty programs, design new products and determine probable target publics for several marketing treatments Once these marketing programs have been conceived and tested, it is necessary to build response/income LTV models in order to foresee the customer’s individual performance in each program It is then possible to develop decision rules in order to select the optimal program for each customer and thus maximize financial performance However, as a starting point, segmentation is the structure through which the companies can understand their consumer base and direct efforts with the objective of creating appropriate programs for different existing and potential customers Endnotes Chapter 1 Terry G Vavra, Aftermarketing: How to Keep Customers for Life through Relationship Marketing (New York: McGraw-Hill, 1995) Web site: www.dell.com.br, April 2003 According to a definition by the Direct Marketing Association (DMA), direct marketing is a marketing system that seeks a transaction or a measurable response from the consumer Relationship marketing has a more comprehensive role: building a long-lasting relationship with the customer and, as a consequence, building brand loyalty and generating sales Direct marketing thus finds itself within the scope of relationshipmarketing programs, incorporating measuring capacity and the promise of obtaining results Stan Rapp and Tom Collins, The Great Marketing Turnaround: The Age of the Individual—and How to Profit from It (Englewood Cliffs, N.J.: Prentice Hall, 1990) Don Peppers and Martha Rogers, Enterprise One to One: Tools for Competing in the Interactive Age (New York: Currency Doubleday, 1997) Chapter Booz Allen Hamilton Banking Survey, July 1996 Jim Novo, Drilling Down: Turning Customer Data into Profits with a Spreadshee (Deep South Publishing Company, 2000) Frederick Newell, Loyalty.com—Customer Relationship Management in the New Era of Internet Marketing (New York: McGraw-Hill, 2000) 217 218 endnotes James L Heskett, Thomas O Jones, Gary W Loveman, W Earl Sasser, and Leonard A Schlesinger, “Putting the Service-Profit Chain to Work,” Harvard Business Review, 1994 Ian Gordon, Relationship Marketing—New Strategies, Techniques and Technologies to Win the Customers You Want and Keep Them Forever (Toronto: John Wiley & Sons Canada, 1998) David A Aaker and Erich Joachimsthaler, Brand Leadership (New York: Free Press, 2000) Torsten H Nilson, Competitive Branding (New York: John Wiley & Sons, 1998) Chapter Malcolm Gladwell, The Tipping Point—How Little Things Can Make a Big Difference (Boston: Little, Brown, 2000) Seth Godin, Unleashing the Ideavirus (Do You Zoom, Inc., 2000) “Americas: AOL Must Put an End to Customer Default to Survive in Latin America,” Wall Street Journal, October 7, 2002 For online relationships as a counterpoint to offline relationships, refer to the use of the Internet as a virtual channel for dialogue between the brand and its target public Frederick Newell, Loyalty.com—Customer Relationship Management in the New Era of Internet Marketing (New York: McGraw-Hill, 2000) Frederick Reichheld, and Thomas Teal, The Loyalty Effect (Boston: Harvard Business School Press, 1996) Behram J Hansotia, “Successful Customer Retention”; paper available on www.infoworks-chicago.com, 2001 Chapter Ernan Roman, Integrated Direct Marketing (Lincolnwood, Ill.: NTC Business Books, 2000) João de Simoni, Promoções de Vendas (Pearson Education, 1997) Edelman and Intelliseek, “Trust ‘MEdia’: How Real People Are Finally Being Heard,” Spring 2005 http://www.masternewmedia.org/news/2007/04/06/blog_ usage_statistics_and_trends.htm, Abril 2007 Matéria: Blog usage statistics and trends: Technorati state of the blogosphere, fourth quarter 2006 http://en.wikipedia.org/wiki/blogosphere Howard Rheingold, The Virtual Community: Homesteading on the Electronic Frontier (Reading, Mass.: Addison-Wesley, 1993) http://en.wikipedia.org/wiki/list_of_social_networking_websites endnotes Chapter Seth Godin, Permission Marketing: Turning Strangers into Friends, and Friends into Customers (New York: Simon & Schuster, 1999) Bob Stone and Ron Jacobs, Successful Direct Marketing Methods (New York: McGraw-Hill, 2001) Philip Evans and Thomas S Wurster, Blown to Bits (Boston: Harvard Business School Press, 2000) Stan Rapp and Tom Collins, The Great Marketing Turnaround: The Age of the Individual—and How to Profit from It (Prentice Hall, 1990) David Shepard Associates, The New Direct Marketing: How to Implement a Profit-Driven Database Marketing Strategy (New York: McGraw-Hill, 1999) Chapter Seth Godin, Permission Marketing: Turning Strangers into Friends, and Friends into Customers (New York: Simon & Schuster, 1999) Ernan Roman, Integrated Direct Marketing (Lincolnwood, Ill.: NTC Business Books, 2000) As described in the article entitled “Overall View of Regression and Regression-like Models and their Application,” by Behram Hansotia, Regression analysis is one of the most used techniques in Statistics and Marketing Direct marketing professionals are more familiar with regression in the context of selecting customers and prospects for different marketing programs A regression model, even if developed basically to select publics, and if carefully elaborated, can be used for at least three purposes They are: a Classify a file based on projected value, or score b With a few adjustments, it can be used to foresee the performance of the chosen names (typically, response rates) c It can provide explanations about the characteristics of names with high scores Thus, if it is a response model, it helps marketing professionals understand the characteristics of individuals with a greater probability of response, compared to those with a lower probability The classic multiple regression model estimates the expected value of the interest variable, criterion or dependent variable as a linear function of a set of variables called predictors, or independent variables The specific suppositions about the dependent variable and the nature of the function that relates the criterion variable to the predictors result in different types of regression Source: www.infoworks-chicago.com Jim Novo, Drilling Down: Turning Customer Data into Profits with a Spreadsheet (Deep South Publishing Company, 2000) 219 220 endnotes Chapter Behram J Hansotia, “Enhancing Customer Value,” white paper, Infoworks David Shepard Associates, The New Direct Marketing: How to Implement a Profit-Driven Database Marketing Strategy (New York: McGraw-Hill, 1999) Chapter 10 FACTPACK 2006, Fourth Annual Guide to Advertising ϩ Marketing, February 27, 2006 The definition of CRM, or customer relationship marketing, is shown in literature as a set of concepts, constructions, and tools made up of strategy, process, hardware, and software [Miriam Bretzke, Marketing de relacionamento em tempo real com CRM (Relationship marketing in real time with CRM), (Editora Atlas, 2000) From this perspective, a great emphasis has been placed on exploring the technological, cultural, and systemic aspects for implementation However, little attention has been given to communication itself, which feeds the interaction with the customer and keeps the relationship active The reference to the CRM area, in this case, is related to all marketing activities needed to implement communication based on relationships with the target public Only those forms that are based on mass communication strategies are disregarded For Omnicom’s annual earnings, see http://files liveadmaker.com/F/6327643/_OC266214551.pdf Bill Gates, “The invention of the digital wheel,” Veja, September 2003 Jean Paul Jacob, “Communications in the New Century: Invisible Computers,” RNT, May 1999 Peter F Drucker, Managing in the Next Society (New York: Truman Talley Books, St Martin’s Press, 2002) Manuel Castells, A Galáxia da Internet: Reflexões sobre a Internet, os Negócios, e a Sociedade (The Internet Galaxy: Reflections on the Internet, Business, and Society) (Oxford: Oxford University Press, 2001) Appendix Segment names and some data were changed to protect customer confidentiality Index A Abandonment of brand (by customers), 40, 47–48 Acquisition programs, 132–133 Adding value, 19–21 Advertising: banner ads, 89–90 determining cost per thousand for, 134 in integrated communication, 56–57, 60–61 Air France, 149–154 Air France-KLM, 149 Amazon, 20, 39 America Online (AOL), 40, 69 Analysis (see Financial analysis) Antiattrition model, 126 ARU (see Audible response units; Automatic response units) Attitudinal connections, 20 Audible response units (ARU), 43–44 Automatic response units (ARU), 106 Average LTV values, 16 Awareness, 26, 29–30 in member-get-member programs, 37 in Prospecting Relationship Marketing, 33 B B2B communication (see Business-tobusiness communication) B2C communication (see Businessto-consumer communication) B2E communication (see Business-toemployee communication) Back-end financial analysis, 132 Banner ads, 89–90 Behavior changes, technology and, 202–203 Blogosphere, 68 Blogs, 67–68 Brand advocates, 37 Brand perception, 44 Brand-customer relationship, 25–30 awareness stage, 26 consideration stage, 26 conversion stage, 27 postsale stage, 27–29 in strategic analysis, 99, 100 Brazil, 155, 164, 174, 178, 182 Breakeven point, 141–143 Business-to-business (B2B) communication, 59, 167 Business-to-consumer (B2C) communication, 167, 171 Business-to-employee (B2E) communication, 58, 164–166 C Calls to action, 57, 76 Campbell’s Soup, Case study(-ies): of integrated communication, 162–173, 191–197 of Internet relationship marketing, 182–185 of loyalty programs, 149–154, 160–161, 186–190 of online real-time monitoring, 178–181 of Prospecting Relationship Marketing, 155–159 of retention programs, 186–190 of virtual communities, 174–177 221 222 Inde x Cellular phones, marketing using, 73 Channels (sales channels), 3, at Pfizer, 178–182 for programs, 100–101 CIC (see Consumer Information Center) ClickToCall, 43 ClickToChat, 43 ClickToSync, 43 ClickToTalk, 43 Communication, integrated (see Integrated communication) Communication channels (see Channels) Communication networks, future of, 201 Communication planning, 107–109 “Communication Technology: From Fiction to Reality” (lecture), 175 Compartmentalization, 110 Competition, 7–8 Complementary solutions, 28 CompuServe, 69 Connections, customer and company, 19–21 Consideration, 26, 33 Consumer base expansion, historic, Consumer Information Center (CIC), 9–10 Consumers: mapping, 6–7 as market controllers, 4–6, 8–9 (See also Customers) Contacts, indicating, 37 Control phase (of program development), 111–113 Convergence continuums, 66 Conversion, 27, 34 Cost curves, 13–14 Cost per response (CPR), 136–139 for multi-step campaigns, 138–139 for one-step campaigns, 136–138 Cost per thousand (CPM), 133–135 Costa Rica, 186 Cost-benefit ratio, 102 Costs (in financial analysis), 133–139 Cours de l’Économie Politique (Pareto), 18 CPM (see Cost per thousand) CPR (see Cost per response) Creative plan for marketing, 75–84, 94 implementation of (see Program development) interruption marketing in, 76–79 and mass media vs direct response ads, 75–76 permission marketing in, 80–84 testing elements of (see Pilot campaigns) Credit cards, CRM (see Customer relationship marketing) Cross-selling, 46–47 Customer relationship marketing (CRM), 200 Customer service, databases for, 119 phone centers, 43–44 via telephone, Customer value, 6–7, 13–23, 130–131 and level of relationship, 19–21 and level of service, 13–14 lifetime, 15–17, 21–23 and Pareto law, 18 in strategic analysis, 99–100 Customer value increment, 130–131 Customers: involvement of, 45–46 relational, 17 support and cost curves for, 13–14 target, 98–100 transactional, 17, 23 types of, 17, 23 Customization, and relationship building, 42 D Databases, 115–127 basic structure of, 116–117 content updating in, 121–123 demographic segmentation in, 117–118 as infrastructure requirement, 103 integration with legacy systems, 119–121 for member-get-member programs, 39 psychographic and behavioral segmentation in, 118–119 and public relations, 63, 64 and RM Tool, 104 use in loyalty programs, 41 use in Prospecting Relationship Marketing, 34–36 using information from, 123–126 validation of migration rules for, 120 Dell Computer, Demographic data, 32–33 Department stores, Differentiated communication, 35 Direct communication channels, 49 Direct mail: determining cost per thousand for, 134 and integrated communication, 61–62 in pilot campaigns, 88–89 Direct marketing, 217 (See also Relationship marketing) Direct sales, Direct-response advertising (DRA), 61 Discussion forums (Internet relationship marketing), 69–70 DRA (direct response advertising), 61 Inde x Drivers, relationship marketing, 200–208 attitude/behavior changes, 202 Internet use, 203–205 technology, 200–202 E Electronic media, 87–88 E-mail, 90, 134 Emotional connections, 20 Endomarketing, 58 Estimated income sources, and lifetime values, 17 Events, and integrated communication, 62–63 Expected return, determining, 102 F FDD (functional design document), 109 Federal Express, 19–20 Financial analysis, 129–145 back-end, 132 cost per response, 136–139 cost per thousand, 133–135 costs in, 133–139 customer value increment in, 130–131 front-end, 132–133 online real-time monitoring case study, 175–179 response per thousand, 135–136 response percentage, 135 return on investment calculation, 139–144 Ford, Henry, Ford Motor Company, France, 149 Friendster, 69 Front-end financial analysis, 132–133 Fulfillment, 104–105 Functional design document (FDD), 109 G General Motors, Germany, 157 Gutenberg, Johann, 202 H Hitachi Data Systems (HDS), 155–159 Home shopping, 5, 11 Horizontal harmony, 54 Hot leads, 26–27 I Implementation, program, 110–111 Incentives, financial: and brand-customer relationship, 27 for influencers, 37, 38 in loyalty programs, 41 via promotional calendars, 59–60 Individualized marketing, 22–23 Industrial Revolution, 203 Industry (as market controller), 1–3, 10 Influencers (in member-get-member programs), 36–37 Infomercials, 87–88 Information density, 124 Infrastructure requirements, 102–106 and databases, 103 for fulfillment, 104–105 and relationship-management tools, 103–104 and response channels, 105–106 Insert cards, 86 Insight CRM, 97–98 Integrated communication, 53–74 in advertising, 60–61 case studies, 162–173, 186–197 direct mail in, 61–62 employees as participants in, 58 and events, 62–63 and Internet, 64–73 objectives in, 55–56 and promotions, 59–60 public relations in, 63–64 and relationships, 57–58 results of, 202 singular message in, 54–57 trade marketing in, 59 transition-period barriers to, 205 Internet: convenience of, 43 in developed vs developing countries, 72–73 as driver of behavioral change, 203, 204 as driver of relationship marketing, 203–205 in integrated communication, 64–73 marketing strategies for, 204–205 as marketing tool, 65–66, 205 and member-get-member programs, 38–39 sales via, social relationship networks in, 67–70 Internet pilot campaigns, 89–91 banners, 89–90 e-mail in, 90 Web sites in, 90–91 Internet relationship marketing, 64–73 and blogs, 67–68 case study of, 182–185 and mobile technologies, 70–73 via virtual communities/discussion forums, 69–70 Interruption marketing: costs in, 78, 79 effectiveness of, 77–78 message richness in, 79 Intranets, 58 223 224 Inde x K Key performance indicators (KPI), 130 KLM, 149 KPI (key performance indicators), 130 L Latency period, 48 Learning relationship, 9, 28 Lifetime value (LTV), 15–17 advantages of using, 16–17 calculating, 15–16 and estimated income, 17 increasing, 18–19 marketing based on, 21–23 ranking customers with, 130–131 and recovery programs, 16 Loyalty, cross-selling and customer, 47 Loyalty programs, 27–28, 40–42 case studies, 149–154, 160–161, 186–190 creating communities with, 43 LTV (see Lifetime value) Luther, Martin, 202–203 M Machiavelli, Niccolò, 203 Mapping, consumer, 6–7 Market: consumer control of, 4–6, 8–9 industry control of, 1–3 retail control of, 3–4 Marketing: individualized, 22–23 mass-customized, niche, 22, 31 by non-profit organizations, 162–163 word-of-mouth (see Member-getmember programs) Marketing strategies, 14–16 for industry, 2–3 lifetime-value focused, 15–16 LTV-based, 21–23 mass customization, media and mass merchandising, for relationship marketing (see Relationship building) by retail stores, sales-volume focused, 14 share-of-pocket focused, 14–15 Mass marketing, 6–8, 22 customized marketing, disadvantages of, 31–32 Mass merchandising, Mass-customized marketing, McDonald’s, 160–161 Member-get-member programs, 29–30, 36–40 beginning, 38–39 and extension to other groups, 37–38 indentifying influencers for, 36–37 influencer motivations in, 37 results analysis in, 39–40 Message richness, 79 Mobile couponing, 71 Mobile technologies: in relationship marketing, 70–73 short message service in, 71–72 Models, statistical, 125–126 Moore’s law, 202 Multilevel sales concept, 39–40 N National Society for the Prevention of Cruelty to Children (NSPCC), 162–163 Network (as business model), 39–40 Niche marketing, 22 Nike, NSPCC (see National Society for the Prevention of Cruelty to Children (NSPCC)) O Office Depot, 43 Omnicom Group, 199–200 Organon Laboratories, 164–173 P Pareto, Vilfredo, 18 Pareto law, 6, 18 Perceived value, 18–19, 21 Permission marketing, 72 authorization in, 80–81 personal nature of, 81–82 relevance in, 82–83 segmentation in, 83–84 Personal connections, 20–21 Petrobras, 174–177 Pfizer, 178–181 Philips, 182–185 Pilot campaigns, 84–93, 95 determining need for, 85 direct mail, 88–89 electronic media, 87–88 Internet, 89–91 print media, 86–87 test models, 92–93 variables in, 85–91 Planning: in program development, 107–109 for Prospecting Relationship Marketing, 34–35 Point-of-sale (POS) networks, 59 Postsale, 27–29 Price, and product, 26 Price wars, The Prince (Machiavelli), 203 Print media, 86–87 Inde x Printing press, and behavioral change, 202–203 PRM (see Prospecting Relationship Marketing) Procter & Gamble, 3, 45–46 Product placement, Product updates, 28 Profitability: customer, 17–18 factors, 16 Program development, 97–114 control phase in, 111–113 implementation phase in, 110–111 planning phase in, 107–109 strategic analysis phase in, 98–106 Promotions, 56–57, 59–60 Propensity models, 47, 126 Prospect information banks, 35–36 Prospecting Relationship Marketing (PRM), 27, 32–36 case study, 155–159 demographic/behavioral data for, 32–33 drawbacks to, 35–36 member-get-member programs vs., 29–30 objectives of, 32 planning for, 34–35 rebounds in, 34 and relationship stages, 33–34 results analysis with, 31–32 Prospects, 26–27 Public relations, 56–57, 63–64 Purchase indications, 13 Purchase time model, 126 R R% (see Response percentage) Rapp Collins, 91, 97, 147 Rapp Collins Brazil, 155, 164, 174, 178, 182 Rapp Collins Centro-America, 186 Rapp Collins France, 149 Rapp Collins Germany, 160 Rapp Collins UK, 162 Rapp Collins U.S., 191 Rebounds, 34 Recency, frequency, and monetary value (RFM) model, 126 Recovery programs, 16, 28, 47–49 Regression models, 217 Relational customers, 17 Relationship building, 25–51 and brand perception, 44 and brand-customer relationship stages, 25–30 convenience in, 42–44 with cross-selling and upgrades, 46–47 customization in, 42 with loyalty programs, 40–42 with member-get-member programs, 36–40 with Prospecting Relationship Marketing, 30–36 with retention/recovery programs, 47–49 via creation of communities, 45 Relationship integrator, 111, 112 Relationship manager, 111 Relationship marketing, 5–11 categorizing consumers with, communications mechanisms in, consumer attributes in, and control of markets, 6–10 definition of, 5–6 direct marketing within, 217 drivers of, 200–207 earnings from, 199–200 results as focus of, 206–207 Relationship-management tool (RM Tool), 103–104 Reply cards, 86 Response and earnings model, 126 Response channels: in electronic media, 88 as infrastructure requirement, 105–106 selecting, based on cost per response, 136–138 selecting, based on cost per thousand, 134–135 Response measuring, 112–113 Response per thousand (RPM), 135–136 Response percentage (R%), 135, 141–143 Response rates: of ads in magazines, 86–87 of color vs black and white ads, 87 Response times (newspaper ads), 87 Results, focus on, 206–207 Retail: first department stores, as market controller, 3–4, 11 Retention programs, 27–28, 47–49, 184–188 Return on investment (ROI), 131 analyzing (see Financial analysis) breakeven point, 141–142 calculating, 139–140 effect of response channels on, 105 impact of response percentage on, 141–143 improving with Prospecting Relationship Marketing, 32 and integrated communication, 55 maximizing, 21–22, 142–143 negative, 141 time units for, 143 225 226 Inde x Return on marketing investment (ROMI), 131 RFM (recency, frequency, and monetary value) model, 126 Rheingold, Howard, 69 RM Tool, 103–104 Roche, 186–190 ROI (see Return on investment) ROMI (return on marketing investment), 131 RPM (see Response per thousand) S Sales, direct, Sales channels (see Channels) Sales volume, marketing strategies based on, 14 Second Life, 69, 174–176 Segmentation, 123–124 behavioral, 124–125 demographic, 117–118 at Hitachi, 155, 158 impact of updating databases on, 121–122 in permission marketing, 83–84 psychographic and behavioral, 118–119 in strategic analysis, 99 Share of pocket, 14–15 Shopping malls, Short message service (SMS), 71–72 Singular message (in integrated communication), 54–57 SMS (see Short message service) Social relationship networks, 67–70 Sony, 20 Statistical models, 125–126 Strategic alignments, 19 Strategic analysis: calculating financial return, 101–102 defining actions in, 100–101 determining infrastructure in, 102–106 in program development, 98–106 target customers in, 98–100 Structural connections, 19–20 Supergroups, 123 T Target customers, 98–100 Technical design document (TDD), 109 Telemarketing: to complete databases, 120 determining cost per thousand for, 134 as a response channel, 105–106 to update databases, 122 Telephone customer support, Test models, 92–93 Toyota, 191–197 Trade marketing, 59 Transactional customers, 17 Transactional information, 119 Transponders, 200–201 U United Kingdom, 162 United States, 191 Upgrades (in relationship building), 46–47 USENET network, 69 V Validation of migration rules, 120 Value: adding, 19–21 perceived, 18–19, 21 (See also Customer value) Value deviation, 111 Vertical harmony, 54–55 Virtual communities: case study of, 174–177 in Internet relationship marketing, 69–70 Virtuous effect, 55 W Wanamaker, John, 31 Web sites, 90–91 Wireless media, 70–71 Word-of-mouth marketing (see Member-get-member programs) ... Vice Chairman, Omnicon Group Inc This page intentionally left blank CUSTOMER OBSESSION How to Acquire, Retain, and Grow Customers in the New Age of Relationship Marketing ABAETÊ DE AZEVEDO AND... Consumer: Who Controls the Market? CHAPTER How Much Is Each Customer Worth? 13 CHAPTER Relationship Strategies to Win Over and Keep Customers 25 The New Integrated Communication Scenario Based... concepts of public, channel, and communication Chapter discusses the issue of customer value, making it very clear that every customer occupies a different position, and that some offer more profits