Making the Transition to One-to-One Marketing
In our first book, The One to One Future: Building Relationships One Customer at a Time, we proposed a radically different way of doing business, given the new reality of faster, more powerful computers and increasingly interactive media. To deal with that new reality, we proposed a customer-oriented strategy we called one-to-one marketing. Instead of selling one product at a time to as many customers as possible in a particular sales period, the one-to-one marketer uses customer databases and interactive communications to sell one customer at a time as many products and services as possible, over the lifetime of that customer's patronage. It is a strategy that requires a business to manage customers individually, rather than just manage products, sales channels, and programs. Traditional marketers have always focused on getting as many customers as possible, while the one-to-one enterprise focuses not just on getting them but on keeping and growing them as well--and not just any customers, but the most valuable customers.
The kind of relationship marketing we're advocating--what we call learning relationships--has little to do with creating a fondness on the part of your customer for your product or brand. Rather, we're talking simply about convenience. By remembering customer preferences and tastes, and by always picking up in a customer dialogue where you left off with this particular customer last time, you can in fact create a "barrier of inconvenience": a reason for that customer never to want to deal with your competitor again, provided that you continue to deliver product and service quality at a fair price.
The most common error most businesses commit when preparing to create one-to-one relationships with their customers is underestimating the degree to which every facet of the enterprise needs to be involved in the process and integrated into the actual customer relationship. Probably the second most common error, however, is overestimating the amount of change required to begin an orderly transition from product-based, aggregate-market competition to customer-driven competition. In most cases, the benefits of one-to-one marketing can be measured and proved without a wholesale restructuring of a company's current sales-and-marketing system, although often the results of such testing will lead the enterprise to plan such a restructuring sooner rather than later.
The right way to make the transition is to do it not product by product or division by division, but customer by customer. Begin your journey with just a few customers at a time, and choose first those few most valued customers who are most worth the added attention and trouble. Once those customers are identified, choose some of the brightest, most visionary, and most resourceful people in your company, and make them into customer managers. They may come from the marketing department, or from sales, or from customer service. They could be astute information specialists.
Your goal is to set up a laboratory of one-to-one practice--a group of high-value customers and highly skilled customer managers--both to prove the benefits of the overall idea and to cement the loyalty of your most valuable customers first. You can visualize your customers as lying on a spectrum of values from very low to very high. Of course, as in any other business, you're likely to have many customers who aren't worth so much but only a few who are worth a lot.
To picture the transition plan for becoming a one-to-one enterprise, imagine placing a picket fence around those very high value customers at the far end of your customer-value spectrum. On the left side of the picket fence you practice marketing as usual. But on the right side of the fence, where your most valuable customers are found, you can begin implementing one-to-one marketing. Establish dialogues with those customers, interact with them as often as you can, remember everything they tell you, and do your best to change the enterprise's behavior to reflect what you have learned from each.
On the right side of the picket fence, every customer is the direct-line responsibility of some customer manager. For those customers you practice one-to-one marketing, even if you have to prototype mass-customized products or keep tabs on your progress by hand. To make it work, the customers on the right side of the fence have to be dropped into a customer-management organization, and the metrics for determining success on this side of the fence must be established. The customer managers themselves will be driving the organization forward, toward better integration of customer-specific data and better coordination among various divisions.
That initial foray into one-to-one marketing in itself offers opportunity and value--by allowing a company to identify, keep, and grow its most valuable customers, or MVCs. It also provides an important educational process, so while you're building learning relationships you can figure out how to measure success. Perhaps most important, the MVC transition is a recipe for success that will serve as a powerful demonstration of the spectacular capabilities of one-to-one strategies.
Over time, the way to make the transition to a one-to-one enterprise is simply to move the fence to the left, gradually, so that a greater and greater proportion of customer relationships are being individually managed. That type of transition has the added aesthetic beauty of moving in tandem with the declining cost of information technology. The computer support systems, after all, are likely to be the most expensive element of whatever program you implement. If the cost of information technology continues to fall by 50% every 18 months or so, then it's no great leap to figure out that many of the programs and policies that make sense for today's MVCs will make sense in about 18 months for customers worth only half as much.
In any case, your laboratory has now been set up to achieve higher loyalty and value from those customers worth the most to your enterprise. In addition, you are using some of your best people to run the lab experiment, so as you roll it out to a greater number of customers, your existing customer managers should be able to train others as well.
Making the transition on a customer-by-customer basis, starting at the high-value side of the customer base, is virtually the only transition strategy we've seen that makes economic sense, given the major changes necessary to accommodate this new type of competition.
In your business you've probably already singled out the high rollers for special treatment. Chances are, it's a labor-intensive effort, but it's justified by the fact that those extremely good customers are worth handling with kid gloves. Using a variety of electronic tools, however, from a Web site, to a card-swipe membership club, to a crew of pager-equipped salespeople, you can differentiate your customers even more effectively, making special treatment of individual customers cost-efficient even if the customer base doesn't include any high rollers at all.
There are some understandable, practical, and effective strategies for pushing your enterprise in the one-to-one direction: knowing who your customers are and remembering what they tell you, trying to manage your enterprise's behavior to treat different customers differently, delivering what each individual wants, and creating more ways to receive feedback from customers as cost-efficiently as possible.
Put a few of those strategies together and pretty soon you'll have a serious, nontrivial change in the strength of your enterprise's competitive situation. You'll be playing by different rules--competing in a different dimension. Be the first one-to-one enterprise on your block and take over your industry, starting with its largest, most valuable customers. Then keep them. Forever.
Excerpted from Enterprise One to One , by Don Peppers and Martha Rogers, Ph.D., to be published by Currency/Doubleday. Copyright © 1997 by Don Peppers and Martha Rogers, Ph.D.; printed by permission. All rights reserved. Peppers is the president and founder of Marketing 1:1, in Stamford, Conn. Rogers is a partner in the firm and a professor of telecommunications at Bowling Green State University. Both can be reached at firstname.lastname@example.org by E-mail.