Getting to know you: Prospect relationship management
Finding new customers is all too often treated as a marketing activity totally divorced from retaining existing ones. But to keep business thriving, firms need to look beyond CRM to PRM.
By Darrel Linehan, Lloyd James Group
Firms that want to keep revenues up or even grow them through the downturn need to keep chasing new business. That doesn't mean taking a hope-and-hit scattergun approach, but targeting better potential customers that will ultimately make ongoing CRM activities easier to execute and more effective.
The question is how to best to do that when money is tight. Traditionally, most companies ignore the CRM side of things in their direct marketing and just employ a cold contact strategy of sourcing lists that generally fit a target market, and then hit those consumers without significantly filtering the data.
But the cold list data itself is a diminishing resource. Research has shown that 68% of consumers say they always tick the third party opt-out box when handing over their details to an organisation, while electoral register opt-out has now reached over 40% of the nation. Lifestyle data companies now concentrate on refreshing the records they already have, rather than making the uneconomic effort to gather new ones.
Organisations are also becoming increasingly aware of the need to carefully protect their customer data, often preferring to make money from their databases through third party insert programmes, rather than actually putting their customer records on the open market.
What marketers hoping to make a more efficient use of available data need to do is implement a prospect relationship management (PRM) programme, which employs a CRM approach to customer acquisition. The result is that instead of just working to retain the most profitable and loyal customers, companies extend that strategy to finding new customers that fit their best customer profiles.
What too many firms fail to recognise is that when it comes to prospecting for new customers with their one-to-one marketing, they have a hugely valuable acquisition tool sitting right there amongst their existing assets: the CRM database.
Setting up a PRM system requires that a company build a bridge between prospecting activity and the CRM programme, using its existing data to gain a deeper understanding of customers and then using that information to approach prospects as individuals, not just names on a list – a fundamental principle of CRM.
This involves using modelling and segmentation to create detailed profiles of just who the right customers are – in other words, those who are more likely to remain loyal and expand their relationship to related businesses or brands. It means building a comprehensive picture of the key customers: what they buy, how they buy, how much they spend, and even how they want to be approached.
Taking this customer insight and feeding it into prospecting activities, by employing predictive analytics to pick the prospects that really match the right customer profiles, allows a company to build relationships with these consumers from the outset. And by talking to them at the right time, through the right channel, about the things that interest them, the likelihood of gaining long-term customers is increased.
To forge this link between CRM and customer acquisition, a company faces the difficult task of sourcing data that will yield the right prospects. The first step is to establish a pool of prospects. There are two options here: Either a bespoke pool is created that is highly tailored to the needs of each individual company, or a central pool is created by a third party that companies can use on a pay-as-you-go basis.
For most marketers, a fully tailored option would be the ultimate approach. However, in the current economic climate, the up-front investment (both money and time) of a bespoke pool of prospects may be off-putting to some.
That is why leading providers in the field are creating virtual prospect pool solutions drawn from multiple sources such as niche, lifestyle, and transactional databases, that are licensed appropriately with the data owners. This approach combines the differing strengths of the different sources - be they recency, richness of attributes, accuracy, responsiveness or cost.
Both approaches can deliver substantial uplift versus traditional cold list techniques and have the added benefit of breaking down the walls between CRM and PRM activities. Just as CRM data informs new business activities with a PRM system, so information gleaned from prospecting campaigns can be fed back into CRM initiatives such as cross-selling and up-selling to make these activities more effective.
A more personal message
Overall, this makes both CRM and prospecting budgets more effective, boosting ROI at a time when dwindling customer spending is driving British businesses to do whatever they can to maintain revenues.
Companies that approach names in a 'pump and dump' manner will seldom see a good ROI. If you hit potential customers once with ill-timed and generic offers, pause to wonder why that person failed to respond and then move swiftly on to the next identical campaign and another batch of prospects.
It is essential that marketers devise more segmented and personal communications in order to get their message across. Identifying the correct individual, contact strategy, channel, message and creative will ensure that organisations are maximising their spend and don't bombard customers with irrelevant mailings.
Darrel Linehan is client services director at Lloyd James Group