Marketing in a Challenging Economy #3 Relationship Marketing Principles

by James on October 8, 2008

This series of 4 posts talks about marketing in a Challenging Economy. The first in the series, Best Customers, recommends finding and focusing on delivering your best customer the best experience possible. Post #2 Heavy Users looks at how heavy category users are different from the mass market, discusses why this is important, and offers some quick tips a business can use marketing to heavy users.

Customer Relationship Marketing

Direct Marketers like to say, “The most important sale isn’t the first, it’s the second.” Customer relationship marketing is key to future growth, especially in challenging economic times. Having a relationship with your best customers is your only competitive insulation. And, relationship marketing is a great growth engine, it’s one of very few tactics that generate a positive ROI, even in difficult times.

But to have an affective and efficient relationship marketing strategy your need some guide posts, some principles against which you can test and refine strategic and tactical decisions. You need relationship marketing principles.

Relationship Marketing Principles

1) Attract the right customers for the right reasons

Dr. Stephen Eply, a very smart researcher I worked with too long ago, told me that 90% of loyalty problems can be traced to the sales process. This observation was based on many hundreds of one-on-one interviews with lapsed customers.

2) The most crucial time is the beginning

Buying your product or service does not mean they have a relationship with you. Are they open to it? Perhaps. Do you have to earn it? Absolutely. Their interest in your product is high, and they are willing to listen, but don’t be deceived, their interest in the category is also high. They are listening to what the competition is saying. Acknowledge them. Let them know, through words and deeds, that you value their business. Surprise them with value beyond your product’s functional benefits.

3) In established relationships continually reinforce the decision to buy

Once you have established a connection don’t abandon your efforts. The most important purchase isn’t the first, it’s the second. Reinforce how smart they are for buying your product. Give them every reason to buy from you again. But keep the plaid jacket at home. Talk to them like you have a relationship, not like the sales guy trying to make his numbers.

4) Good customers expect to be rewarded

This isn’t to suggest that every customer gets a prize. Understand who your best customers are, the 20% of your customers who generate 80% of your revenue, and reward them. Surprise them. Delight them. Make them customers for life. Make them so happy they tell friends and associates what a pleasure it is doing business with you. The ROI on these relatively small investments, especially compared to the cost of acquiring new customers, is huge.

5) The second most crucial time is when the relationship is at risk

Again, this isn’t for every customer, but for your best customers take the time to really understand what went wrong and then do something tangible to address their concern. Don’t take the relationship for granted. Whatever went wrong used up some relationship equity. You need to earn it back.

Hip Shots

  • Customer relationship marketing is a very efficient way to use scant resources when business is tough. Don’t cut budget here. In fact, add budget if you can.
  • Make an active and tangible effort to build the relationship immediately after a customer’s first purchase. Their interest in you and the category is high, this is the time to stop being a product with a name and become a brand.
  • Don’t be afraid to sell them more. But, take cues from their behavior. Don’t sell them the next widget on your product list. Sell them the widget that will most benefit them, based on their behavior. Done correctly, the sales process can become a relationship building tool.
  • Customer service is a key element in successful customer relationship marketing. It’s a factor in every principle. Read this excellent post, Does Your Business have the Support it Needs, for an overview of customer service and its role.

{ 3 comments… read them below or add one }

Sonia Simone October 9, 2008 at 8:31 am

Something I think gets overlooked is the symbolic component of a customer reward. A thoughtful “thank you” gift can have an impact that goes far beyond what it cost you to acquire and distribute.

One tactic I’ve seen work nicely is giving salespeople a budget so they can select something truly thoughtful that corresponds to that relationship and that customer’s personality and interests. That kind of personal attention to the 10-20% of your best customers (in our case it’s heavy referrers) pays off exponentially.

Everyone in the world wants to feel appreciated. (Speaking of which, thanks for the link and the kind words!)

Sonia Simone´s last blog post..Does Your Business Have the Support It Needs?

admin October 9, 2008 at 9:41 am

@sonia what you say is too true. Everyone wants to be appreciated. Customers, especially best customer, also want to be listened to.

A simple low-cost tactic to employ is Drip Research. Include a reply device with four to five simple yes / no questions in ongoing customer communication. The act of asking for feedback is appreciated. You also get valuable insights into what they are thinking that can be addressed in subsequent communication, which demonstrates you are listening. Repeat the process with new questions. Drip, drip, everyone benefits.

All it takes is a few simple things done consistently.

Ronke Alao December 4, 2010 at 4:22 pm

Nice article, I like the point of rewarding your customers. No matter how small you think it is, everyone loves a reward.
Ronke Alao´s last [type] ..Relationship Marketing- How to be a Master at it

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