The seven key elements of best customer management

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By: Wise Marketer Staff |

Posted on November 19, 2007

The ever-increasing rate of change in marketing shows no sign of letting up, according to a white paper from Loyalty Lab which explains the major elements involved in best customer management. Indeed, blogs are already looking like old news as social networking takes centre stage.

As these high-speed, high-technology changes take place, marketers need to understand how to plan for the future. The company's white paper provides a framework for evaluating decisions in the context of best customers, primarily by looking at the hierarchy of key elements of managing those customers most effectively.

What is best customer management?
According to Michael Greenberg, Loyalty Lab's president, "Best customer management is the practice of maintaining and improving the value that comes from your most important customers. The definition of best customers depends on your company - some may be based on lifetime value, others by the extent of influence, yet others by frequency of contact or number of product categories purchased. The actual definition is less important than the clear understanding that some customers are more important to you than others."

These best customers are the ones who generate a disproportionate amount of profit, directly or indirectly. It is the notion of indirect profit that turns traditional direct marketing practices on their heads. The advent of word of mouth marketing and other non-traditional methods has made it clear that there are individuals who influence profits while generating little profit of their own.

To make it more difficult, there may be many different groups that meet this definition of best customers. A new, high-potential customer with influencer tendencies may be just as important to your company as a long-time customer with predictable purchasing habits.

Seven key elements
Managing these best customers entails a spectrum of activity. For those who've studied Psychology at even the most basic level, you will probably recall "Maslow's Hierarchy of Needs". In a nutshell this asserts that, as humans fulfil basic needs such as food and shelter, they take on more advanced needs such as friendship and family, culminating in self actualisation. As a mental model, best customer management is not so very different: you begin with the basics and build up to more and more engaging interactions with customers.

The seven key elements, which are covered in great detail in the white paper, include:

  1. Identify: If you don't know who the customer is, you can't build a relationship. And knowing the customer goes beyond having an e-mail address. You must keep track of these interactions across all touchpoints.
  2. Communicate: Once you can clearly identify customers, you can send information and messages, providing the beginning of a differentiated and relevant relationship. This can be via e-mail, Website personalisation, direct mail, RSS, or other media with differentiable content. Messages should reflect what you know about the customer.
  3. Reward: With the ability to identify individual customers and their behaviour, plus the ability to communicate with them directly and relevantly, you gain many options for expanding your relationship. The most basic is the ability to reward customers based on their behaviour.
  4. Recognise: Best customers are usually not just your best customers - they tend to be other companies' best customers as well. These customers tend to get rewarded richly by everyone they do business with. These best customers tend to be more responsive to recognition, where your company acknowledges their special status as a best customer.
  5. Interact: Moving beyond one-way efforts (communications, rewards, and recognition) changes the dynamic of the best customer relationship substantially. Interactive programmes explicitly change the experience based on what a customer does (or doesn't do).
  6. Collaborate: While interaction has a one-to-one relationship as its objective, collaboration goes beyond back-and-forth and puts both parties on the same side of the table. Letting your customers help design products, choose ad campaigns, post comments, select winning entries in contests, answer questions from other customers, review products, and generally contribute to your community of customers is a "can't lose" proposition.
  7. Advocacy: The last element isn't really something you can explicitly add to your best customer management efforts. Social networks are a tremendous resource for advocacy. While traditional word of mouth is hidden in email exchanges, voice conversations, and SMS, social networks put the WOM exchange on a data-driven platform.

Building a strong programme for best customer management involves a staggering array of factors, but by adding elements in phases that build on earlier efforts, companies can achieve a consistent, integrated programme on almost any budget.

The full white paper, including detailed descriptions and action plans for the seven key elements summarised here, has been made available for download from Loyalty Lab's web site - click here. Loyalty Lab provides on-demand best customer management for consumer brands. The company's flagship CRM suite provides integrated and on-demand loyalty programme management, email, incentives, and campaign management.

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