Retention 101

21 years ago   •   4 min read

By Marcia Kadanoff

Towards Relationship Marketing

Three fundamental building blocks of any relationship marketing program: Recognition, Reward, Shared Purpose

The computer biz is aging fast. If you want proof, you need only attend PC Expo and go eyeball to eyeball with those waiting in line for a taxi. Today you’ll find that the average attendee sports a few wrinkles and gray hair in abundance. It’s not only “our crowd” that is showing signs of wear and tear. The people we sell to are also aging rapidly. In the home market, 40% of households already own one or more PCs. In the business market, the majority of new PCs are purchased as replacements for an existing desktop machine. These trends mean that as an industry we must wean ourselves away from new customer acquisition as the single marketing strategy that will determine our success or failure to one where retention and cross-selling are equally if not more important.

Weaning is hard work. Ask any mom and she’ll tell you that one of the biggest problems here is listening to the well-meaning but misinformed advice of so-called experts. For example, Steve Ballmer, Executive Vice President of Microsoft (the company we all love to hate), is on record as saying that relationship marketing doesn’t apply to his franchise in that Microsoft sells the majority of its product through the channel. Not true, Steve! This is an old wives’ tale of the first order.

In fact, relationship marketing is a broad-based strategy that applies to any company that depends on sales to existing customers for its financial health and well-being. The problem is that few people really understand what relationship marketing is, never mind how to put together a program that makes sense for their customer base.

Ask the average marketing person to define RM and they’re likely to point to a customer newsletter they received or one of the frequent flyer programs they belong to, or hand you a thank-you card they recently received from a retailer. While these tactics could all be part of a relationship marketing program, taken by themselves they are just that — tactics.

Here’s the definition we use with our clients. See if it works for you:

“Relationship marketing is an ongoing program designed to treat different customers differently based on their underlying affinity to the brand.”

Relationship marketing is where advertising and direct marketing intersect.

Advertising professionals have long known how to wrap the brand in emotion. Like advertising, relationship marketing starts with the premise that people buy the brands they do for both rational and emotional reasons. Where advertising seeks to create a preference for the brand, RM works to strengthen the emotional attachment to your company. The goal is to build an attachment that will endure the inevitable ups and downs inherent in marketing technology products. (One day your product is on top of the world, well differentiated, the darling of every review and roundup. The next day, you find that your point of difference has evaporated into thin air due to the introduction of an even whizzier product from the competition.)

So what’s a smart company like yours to do? Build strong relationships with your customers that keep them true to your brand. The kind of relationships we’re talking about aren’t necessarily of the touchy-feely kind. Technology buyers don’t want you to send them flowers, a birthday greeting, or a thank-you note. No, what the technology buyer wants is a relationship built on recognition, reward, and shared purpose:

  • Recognition
    Recognizing your best customers as such.
  • Reward
    Rewarding your best customers with extras that add value to their product experience.
  • Shared purpose.
    Encouraging your customers to feel a part of something bigger than they are. This was the original basis for user groups—to help customers bond with other like-minded customers.

The best relationship marketing programs use recognition in combination with reward and shared purpose. Volume discounts and points programs are nice, but they do little to shape and change how the customer feels about your product, service, and company. Savvy customers can recognize a bribe when they see it. If you have to bribe someone into buying your product, it probably means you don’t have much of a relationship with them to begin with.

We’re all familiar with the frequent flyer programs that award points in exchange for purchase. What may not be obvious is how these programs work. The airlines have figured out that people will go out of their way just to maintain their best-customer status so as to have the ability to block the seat next to them in coach or upgrade to first class on a whim and very little cold, hard cash.

Think about your holiday card list. Chances are, only about 10% of that list is made up of people in your inner circle. It’s this top 10% that gets a regular, ongoing stream of communications, which you hand-pick for their relevance to them. Everyone else gets a single mailing once a year with a generic recap of the year’s events.

At the very minimum, you should be touching your best customers more often than customers of lesser value. Does upping the frequency of communications lead to greater loyalty and ultimately more buying of your products and services over the competition? Yes, as long as the communications you send are well targeted for maximum impact and relevance.

Consider establishing a separate e-mail address for best customers off your website, one that guarantees select customers an answer within 24 hours. Use snail mail to make sure your best customers know about your latest, greatest product offering before it hits the press. After all, you wouldn’t let your best friend read about your engagement in the newspaper, would you? Yet, it is standard in our industry to preview new products with the press before we get the word out to our best customers.

All relationship marketing programs use recognition, reward, and shared purpose in some combination to increase customers’ affinity to the brand and therefore their willingness to spend more with you as opposed to your competition. Your customers have a special relationship with you by virtue of the fact that they are your customers. What relationship marketing is all about is leveraging your initial relationship into something more meaningful, more long-lasting, and ultimately more financially rewarding.

First published in Marketing Computers magazine October 1997 and reprinted here with permission.

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