LOYALTY.

COM
Customer Relationship
Management in the New
Era of Internet Marketing
FREDERICK NEWELL

FREDERICK NEWELL is CEO of Seklemian/Newell, an international marketing strategy consulting firm. He

is also a columnist, contributing editor and editorial director for several trade publications in the advertising
and marketing fields. Mr. Newell specializes in the fields of database marketing, customer relationship
management and 1-to-1 marketing program implementation. He is the author of The New Rules of Marketing,
a member of the Retail Advertising Hall of Fame and a visiting lecturer at Duke University and the Universidad
de Belgrano in Buenos Aires.

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 Loyalty.Com - Page 1

MAIN IDEA
Customer Relationship Marketing (CRM) is the process of making it easier and easier for customers to do business with you because
you understand what they need better than anyone else. In effect, the depth of the relationship between the customer and your
organization becomes a disincentive for them to go anywhere else for whatever you offer. The process by which those types of
relationships are built is disarmingly simple to describe but difficult to achieve. In short, a rich, ongoing two-way dialog must develop.
The organization must learn what the customer values, and deliver more of what they want.

Section 1 -- What Is Customer Relationship Marketing (CRM) And How Do You Measure Its Success? . . . . . . . . . . Page 2
CRM is a long-term business strategy by which customers are influenced to do future business with you
on the strength of past activities which created added value for them.
The key elements of a good CRM program are:

1. Identify what customers view as value.

2. Prioritize those values.
CRM 3. Link delivery of values with profitability.
4. Personalize delivery for each customer.
5. Determine return on marketing

To measure the effectiveness of a CRM program:

1. Focus on customer lifetime value.
2. Calculate incremental gains.
CRM 3. Get the right customers, not just more.
Results
4. Ignore market share. Think profit zone.
5. Have a long-term investment horizon.

Section 2 -- The Most Effective Tools Of Customer Relationship Marketing . . . . . . . . . . . . . . . . . . . . . . . . . Page 4

CRM requires special tools -- beyond database marketing, points and card systems. In the current
business environment, CRM requires digital communication tools to succeed.
The key digital CRM tools are:
1. The Customer Database & Blueprint
CRM 2. The World Wide Web and E-Mail
Digital 3. Call centers and telemarketing
Tools
4. On-demand printing
5. Data mining

To build customer loyalty, the right mix of these digital tools must be achieved and maintained.
Section 3 -- Customer Relationship Marketing Case Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 6
Companies that have succeeded in implementing high performance CRM programs have followed these
strategies:
1. Use the Internet to generate in-store traffic.
2. Apply micromarketing.
3. Develop multiple relationships.
4. Migrate from transactions to solutions.
5. Combine customer knowledge with brand power.
6. Let customers drive the CRM program.
In the end, your organization’s actions will always speak louder than its words in any CRM initiative. Quite
simply, you have to find new ways to show you care.
Section 4 -- Long-Term Strategies For Successful And Profitable Customer Relationship Marketing . . . . . . . . . . . . Page 7
Over the long haul, CRM always:
1. Turns products into services.
2. Requires a two-way dialogue to grow and expand.
The two key long-term issues every CRM program builder must address effectively are:
1. Protecting the privacy of everyone involved.
2. Accurately measuring CRM profitability.

Section 1
What Is Customer Relationship Marketing
And How Do You Measure Its Success?
Main Idea
CRM is a long-term business strategy by which customers are
influenced to do future business with you on the strength of past
activities which created added value for them.
The key elements of a good CRM program are:
1. Identify what customers view as value.
2. Prioritize those values.
CRM 3. Link delivery of values with profitability.
4. Personalize delivery for each customer.
5. Determine return on marketing
To measure the effectiveness of a CRM program:
1. Focus on customer lifetime value.
2. Calculate incremental gains.
CRM
3. Get the right customers, not just more.
Results
4. Ignore market share. Think profit zone.
5. Have a long-term investment horizon.
Supporting Ideas
Many people group direct marketing and CRM together, when
in fact they are entirely different disciplines. Direct marketing
uses the information from a database to generate specific,
measurable (and often immediate) responses. CRM, by
contrast, builds long-term 1-to-1 relationships with customers so
they become favorably predisposed to do more business with
the organization in the future.
A formal definition of CRM is that it is ‘‘a business strategy which
pro-actively builds a bias or preference for an organization with
its individual employees, channels and customers resulting in
increased retention and increased performance’’.
In essence, CRM is the difference between a ‘‘satisfied’’
customer and a ‘‘loyal’’ customer. Those organizations that
deliver the greatest value consistently and reliably will have
customers that are loyal. Over time, a good CRM program
strengthens the bond between the customer and the company.
The central nervous system of CRM is two-way, ongoing dialog
between the organization and the customer. Every potential
CRM benefit depends on the ability of the organization to prove
itself and build trust. That takes dialog from the organization to
the customer. Furthermore, every effort the organization
undertakes to learn more about the customer’s perceptions of
value is derived from dialog in the opposite direction. Without
two-way dialog, CRM cannot exist.
CRM is the difference between information and knowledge. Most
businesses today are awash in a sea of information delivered
digitally. CRM enables an organization to take customer specific
information and edit it, put it into context and analyze it
meaningfully. As a result, information is transformed into
knowledge.
Knowledge is the soul of CRM -- because it’s in customer
knowledge and the application of that knowledge customer
relationships can be built up and enhanced using CRM.
Loyalty.Com - Page 2
A viable CRM program has five key elements:
1. A way to identify value from the customer’s viewpoint.
Customers generally analyze value by;
1. Starting with whether you cover the basics okay.
2. Adding in the unique value you provide.
3. Subtracting value for any irritations that regularly crop up.
4. Ignoring everything they don’t care about.
The value analysis process doesn’t have to be complex or
complicated, but learning precisely what it is your customers
value about their relationship with your organization is of
critical importance. (And you should also be asking what else
your customers would value if you offered it as an integral
part of this process).
2. A set of criteria for prioritizing customer values.
Once you’ve identified exactly what customers value and
why they’ve made specific purchase decisions, you can then
determine priorities effectively. Again, the priorities arrived at
need to be customer-centric rather than aligned with the
preferences of your organization.
Note that for some customers, the fact your organization
tracks their preferences and does not clutter their lives with
offers for products you should already know they will have
no interest in adds considerable value. Sometimes, the
simple things are the areas the greatest added value actually
resides.
3. A tangible link between delivery and profitability.
Since CRM is a long-term program, your organization needs
to align delivering added value with increased profitability. In
other words, armed with your customer’s set of priorities for
added value, the organization needs to carry out a CRM
cost-benefit analysis, by:
• Evaluating the cost of meeting each priority.
• Forecasting the financial benefit that would be derived.
• Making a decision whether or not to proceed.
4. An effective, personalized delivery system.
CRM requires two key business capabilities:
The organization must have the technical capacity to
segment customers into very small groupings right down
to groups of one. Further, customer behavior and
preferences within those segments must be able to be
tracked effectively for CRM to work.
The organization must have the ability to enter into
two-way communication with individual customers. The
Internet and other digital tools are ideally suited to this
requirement.
5. A formula by which profitability can be realistically calculated.
Once the customer’s priorities have become clearly
identified, the organization can develop a broad set of
specific and relevant qualitative measures of success like:
• Customer retention.
• Share of total customer expenditure.
• Customer lifetime value.
• Brand loyalty.
Once this type of empirical information is available (which
can be gathered through the Internet by means which are far
less time consuming and cheaper than was previously the
case), organizations can calculate the projected return on
their CRM investments.

The key factors to look at in determining just how effective a CRM
program is include:
1. Determining the lifetime value of the customer.
For any business, the lifetime value of a customer is defined
as ‘‘the amount by which that customer’s business with the
organization exceeds the cost of attracting, selling and
servicing that customer’’.
Since CRM is an attempt to increase profitability over time,
lifetime value is the perfect overall statistical measure for the
effectiveness of a CRM program. Only if the organization has
calculated the lifetime value of the customer accurately can
the effectiveness of CRM be determined.
2. Calculating incremental gains.
A strong and effective CRM program should:
• Reduce the time between purchases.
• Increase the value of business transacted each time.
• Provide viable cross-selling opportunities.
• Enhance customer retention and loyalty.
In CRM, all of these gains will be incremental rather than
dramatic and immediate. The organization needs to be
calibrated with sufficient sensitivity to be able to notice those
small gains.
3. Concentrating on attracting & retaining the right customers.
Organizations shouldn’t even try and make CRM work for
every customer. Studies have repeatedly shown:
• 10-percent of customers produce the bulk of the profits.
• 40- to 50-percent produce modest profits.
• 40- to 50-percent generate low or nil profits.
Therefore, a good CRM program will concentrate on:
• Making the best customers even better.
• Moving the middle group of buyers into the top profit group.
• Ignoring completely the low profit customers.
A winning CRM program requires you to select the right
customers to focus on in the first place.
4. Focusing on profitability rather than market share.
Market share in and of itself is worthless if the organization
is not doing business profitably. In an extreme case, an
organization with a very high share of the wrong market may
end up going broke. It’s profitability that counts, market share
is actually irrelevant.
In short, calculating the return on any CRM investment starts
with knowing where the profit zone is for your organization,
and how you can get there and stay there.
5. Maintaining a long-term marketing horizon.
At a minimum, most CRM programs will require three years
of consistent effort before any significant payoff benefits are
derived. Over that period of time, the customer mix for your
organization will change in sync with broader changes
occurring in the marketplace. Thus, an integral part of CRM
is to learn what your organization needs to be good at
tomorrow if it is still going to add value for its customers.
Long-term customer loyalty cannot be bought. It can only be
earned through the establishment and nourishment of
consistent interactions which deliver increased added value
to your customers. CRM is all about finding ways to make
your customers’ lives easier, their behavior more profitable
and their interests more central to everything your
organization does.
Loyalty.Com - Page 3
Key Thoughts
‘‘Customers don’t want to be treated equally. They want to be
treated individually.’’
-- The Peppers & Rogers Group, www.1to1.com
‘‘Relationships between companies and customers are troubled
at best. Customer satisfaction rates are at an all time low. Some
of the very things we are doing to build relationships with
customers are often the things that are destroying those
relationships. Too often we are skimming over the fundamentals
of relationship building in our rush to cash in on the potential
rewards of creating close connections with our customers.’’
-- Susan Fournier, Susan Dobscha and David Mick,
Harvard Business Review Jan/Feb 1998
‘‘It’s not just what companies say in their communications to
customers. It’s what they do to show they really care.’’
-- Frederick Newell
‘‘1-to-1 enterprises engage in a Learning Relationship with
individual customers that works like this: "I know who you are. I
remember you. I get you to talk to me. And then, because I know
something about you my competitors don’t know, I can do
something for you my competitors can’t do -- not for any price".
This means the customer actually adds value to what you can
do for her and will find it easier and less costly to do more
business with you than to start over somewhere else. You will
help her create her own barrier to exit. You will no longer buy her
loyalty -- you will sell it to her.’’
-- Martha Rogers, cofounder, Peppers & Rogers Group
‘‘Marketing’s contribution to business success lies in its
analyzing future opportunities to meet well-defined consumer
needs with products and services that deliver the sought-after
benefits better than the competition offers. This means that
marketing must always be trying to find out what customers are
doing (behavior) and thinking (feelings) and what external things
(environment) are affecting their buying decisions. Companies
can then use this information to alter the mix of those factors to
produce a desired buying behavior.’’
-- Frederick Newell
‘‘The world is moving even more in a 1-to-1 direction. The
winners have learned that the real challenge is to build and
manage customer relationships in ways that will modify
customer behavior over time and strengthen the bond between
customers and the company. It’s not about cards but about
building relationships and maximizing the value of the
relationships to the customers and to the company for the
customer’s benefit and the company’s profits. As marketers
learn that customer loyalty can’t be bought, they are looking for
new solutions. The winners are finding new ways to develop
customer relationships, and they’re using the latest technology
to manage them.’’
-- Frederick Newell
‘‘More information and more technology will not necessarily lead
to increased values and return on investment in marketing. The
only real values are the values you add for your customers and
the values your customers deliver to your company. Real value
is not in the data or the technology. It’s in the customer
knowledge and your use of that knowledge to manage customer
relationships.’’
-- Frederick Newell

Section 2
The Most Effective Tools Of
Customer Relationship Marketing
Main Idea
CRM requires special tools -- beyond database marketing,
points and card systems. In the current business environment,
CRM requires digital communication tools to succeed.
The key digital CRM tools are:
1. The customer database & blueprint
CRM 2. The World Wide Web and e-mail
Digital
3. Call centers and telemarketing
Tools
4. On-demand printing
5. Data mining
To build customer loyalty, the right mix of these digital tools must
be achieved and maintained.
Supporting Ideas
1. The Customer Database & Blueprint
The master CRM tool is a customer database -- which stores all
the information that relates to the customer relationship like:
• Purchase transactions.
• Logs of calls and responses made.
• Customer comments.
• Returns.
• Service calls.
• Complaints.
• Company initiated offers made in the past.
• Letters, calls and personal visit notes.
• Personal information -- age, income, children, interests.
Capturing the information for the database and storing it in a
structured manner is vitally important. Careful thought needs to
be put into how this is achieved so the organization will store
enough data to be useful.
To take the data and turn it into information that can guide the
relationship building activities of CRM, a conceptual blueprint
must also be put together. Generally, developing a blueprint
requires the efforts of constructors (professionals who know
database software and computers inside and out) and creators
(marketing professionals with a strong bias for relationship
building tactics). In addition, the CRM team will need the
authority to start new CRM programs, the long-term budget to
fund it and guidance about the specific organizational objectives
CRM should aim at.
Generally, the blueprint will extract raw data from the customer
database and analyze it for the critical CRM factors:
Recency -- when the client last purchased something.
Frequency -- the number of purchases within a time frame.
Monetary -- the total purchases within that period.
Demographics -- lifestyle description.
Modeling -- the relative weightings for predicting profitability.
From these factors, the CRM blueprint will then be used to
calculate the lifetime value of the client and to develop specific
CRM programs and other marketing applications. This blueprint
can also be used to forecast potential returns on marketing
investments -- data that most organizations will require before
undertaking any significant new CRM programs.
Loyalty.Com - Page 4
2. The World Wide Web and E-Mail
The Internet is now unquestionably the most powerful new tool
to emerge in recent memory for building and strengthening
relationships between an organization and its customers.
Integrating it seamlessly with CRM though, does require some
fresh thinking.
There are an amazing number of relationship building tools
available through the Internet:
• Targeted, personalized online communications.
• Customized, personal Web sites with specific information.
• Collaborative filtering -- smart recommendations.
• Online communities -- for people with shared interests.
• The biggest of all, e-mail.
While the Internet can be used to drive sales in traditional
channels, it is far more powerful in growing and managing
customer relationships -- the heart of any CRM program. Most
importantly, the Internet enables a two-way dialog to take place.
In short, the Internet is a customer-facing infrastructure which
makes it easier for organizations to build and enrich relationships
with their customers. And the workhorse of online customer
relationship building is e-mail.
Good business e-mail is:
• Personal -- with information, not clutter.
• Timely -- answered within 24-hours at the latest.
• Accurate -- error free and factual.
• Concise and efficient.
E-mail can be used in every aspect of relationship building -- in
building the brand name, in providing service and support, in
conveying content, in processing orders and more. It is
guaranteed a starring role in every online CRM program of the
future.
3. Call Centers And Telemarketing
While most consumers have been conditioned to regard
telemarketing as intrusive, it doesn’t have to be. Used properly,
it can form an integral part of CRM. Most likely, organizations will
establish call centers where customers can use their phones to:
• Have their questions answered by a live person.
• Respond to marketing offers or seek further information.
• Talk with the organization about other value-added services.
Telephone dialog is excellent for building mutual trust and
respect with customers. More importantly, it allows real-time
marketing to occur. Organizations which provide their agents
with access to the customer’s information stored in the database
can find personalized ways to respond to that customer’s needs
as they speak.
Telephones are excellent tools for managing customer
relationships, particularly when the customer initiates the call. As
the technical distinctions between voice and data blurs in the
next few years, many hybrid combinations which combine the
best features of the Internet and telephones will come together
well for CRM. Already, features like push a button on a Web site
to initiate a conversation with a real person are proving to be
popular. Many more applications will come.
Call centers work well because humans like to communicate by
voice. They don’t have to key every thought, every wish in
through a keyboard. They can respond instantly to what has
been said. They can express themselves efficiently and
effortlessly.
Any CRM program which fails to allow for call centers and voice
communication misses the mark.

4. On-Demand Printing
Digital printing means it has now become economical to print
four-color marketing materials that are completely and totally
tailored for each customer. In other words, high quality direct mail
pieces can be customized with specific messages, products and
offers for each customer.
Print-on-demand changes everything about direct marketing
and opens a whole new world for CRM. For example:
• Personalized catalogs can now be made.
• Mailers can be more specific and better focused.
• Service manuals can be produced in smaller runs.
• Customized brochures and mailers can be produced.
• Printed materials for special occasions can be prepared.
These are just a small selection of the on-demand printing
applications currently in use, but CRM will suggest many more
in the future. This is exciting as true 1-to-1 documents will be
able to be used.
Savvy CRM marketers are certain to combine digital printing with
other relationship building activities in new and original ways in
the future. Conceivably, new customers might be secured
through a Web site, delivered personalized professional quality
print materials and then invited to respond via call centers where
a consultant can provide assistance with product selection. Or
numerous other CRM business models become feasible.
5. Data Mining
Data mining is the process by which information is extracted from
raw data.
The customer database contains every piece of data that is
known about each customer. Data mining transforms that data
into information about characteristics and trends, for example.
That information can then be used to guide CRM programs.
Data mining can:
• Profile the characteristics of profitable customers.
• Target customers who are likely to move to a competitor.
• Analyze probable complimentary product purchases.
• Develop knowledge about why things are happening.
• Build a model of the real world.
• Identify patterns and linkages.
• Forecast how much past events will influence the future.
• Cluster together similar customers.
While it is true data mining has attracted much attention in recent
times, it’s not a magic bullet for CRM. Most of the real benefits
from data mining come from incremental learning rather than
dramatic breakthroughs. And quite often, the ability to learn more
will be highly dependent on the skill of the staff who are closely
involved in the data mining exercise. They must have the insight
and the experience to develop the right data mining tools for the
project at hand. This is a highly subjective area.
At its very heart, data mining is more about the process of
discovering more knowledge about your customer base over
time. It’s not a single technology -- this is a long-term business
process. Data mining will be one piece of the puzzle, but not the
entire solution.
Data mining can’t save a business which is failing to market itself
effectively. It can, at times, be a competitive advantage, although
more and more it’s simply becoming a normal part of the way
everyone in an industry does business. As more and more
organizations develop expertise in the data mining disciplines,
expect those trends to increase in the future.
Loyalty.Com - Page 5
So what new CRM tools are likely to become available in the
next few years? Some possibilities:
Cell phones will become more powerful and more useful as
marketing tools.
Wireless phone services will supersede wired phones.
Interactive television will finally arrive.
Interactive electronic books will become widely available.
Personalized newspapers will gain momentum to replace the
one-size-fits-all current approach.
Computers will be programmed well enough to predict what
customers want even before they know it themselves.
At least a portion of each and every transaction will use the
Internet somehow.
Broadband technologies will enable extremely rich two-way
dialogs to take place via the Internet.
Call centers will expand and grow.
In short, a huge array of new digital relationship building tools
will become available. The future will belong to those
organizations who can reinvent they way they work to use those
new digital tools effectively to drive CRM.
Key Thoughts
‘‘Our job is to create services and products that will give
customers more reasons to buy from us. That means active
1-to-1 learning in order to customize offers.’’
-- Frederick Newell
‘‘Originally, the Internet captured the attention of mass
marketers. They rushed in, spent billions of dollars applying their
interruption marketing techniques, and discovered almost total
failure. CRM is the tool that unlocks the power of the Internet.
The leverage it brings to this new medium, combined with the
pervasive clutter that infects the Internet and virtually every other
medium, makes CRM the most powerful trend in marketing for
the next decade.’’
-- Seth Godin, vice president of direct marketing, Yahoo!
‘‘We are certain to see lots more inventions. We can still dream
of new ways to manage customer relationships. What will be
needed to make those dreams come true? It won’t require more
inventions. All the tools we need are either here or on the way.
All we will need is the creative management to use these new
tools to develop CRM in the ways that will be most valuable for
the consumer. This will require active learning Relationships.’’
-- Frederick Newell
‘‘The Web is not a medium; it is a marketplace. It’s a place where
people can meet. It’s a place where people can transact. It’s a
place where people can relate, and it’s a place with an
experience that is unmatched anywhere else, because you’re in
touch but you haven’t lost your privacy, despite what people say.
The Web is bringing us into a different dimension of buying and
selling. It’s the first medium in which the buyer and seller can say
to each other, we have done well together because it is a
relational transaction.’’
-- Lester Wunderman, founder, Wunderman, Cato & Johnson
‘‘Dialog is the most important word in the CRM lexicon.’’
-- Frederick Newell

Section 3
Customer Relationship Marketing Case Studies
Main Idea
Companies that have succeeded in implementing high
performance CRM programs have followed these strategies:
1. Use the Internet to generate in-store traffic.
2. Apply micromarketing.
3. Develop multiple relationships.
4. Migrate from transactions to solutions.
5. Combine customer knowledge with brand power.
6. Let customers drive the CRM program.
In the end, your organization’s actions will always speak louder
than its words in any CRM initiative. Quite simply, you have to
find new ways to show you care.
Supporting Ideas
Some real-world applications and ideas on how companies are
using CRM effectively:
AutoNation and the American Booksellers Association are
successfully using the Internet to generate more in-store
traffic for retail outlets rather than to create an all electronic
shopping experience. With the ability of Internet based
booksellers to position themselves as having huge,
searchable selections, retailers are using CRM to focus on
providing smart solutions for customers. In other words, CRM
is driving retailers to customize their products more effectively
to match the needs of their customers. Instead of becoming
‘‘category killers’’, CRM retailers are becoming ‘‘solution
killers’’.
Neiman Marcus and Wal-Mart are putting all the resources of
their companies behind CRM inspired concepts like
integrated marketing communications. By taking these
strategies down to the store level and making store personnel
partners in the CRM programs, all the marketing programs
become aligned in the same direction.
Brand name manufacturers and packaged goods marketers
-- from Coca-Cola and Ralston Purina to Quaker Oats, Power
Bar and Seagrams -- are using CRM strategies in
micromarketing initiatives targeting niches. They are
beginning to move away from coupons and instead are
learning how to build ongoing relationships with the most
profitable customers. (The Internet is even making it possible
for coupons to be reinvented altogether. The network makes
it possible for personalized coupons to be delivered at the
time customers are considering swapping brands).
Numerous other CRM style activities which build the brand
are beginning to gain momentum.
Financial institutions are quickly learning the key to providing
better service is to know your customers better than anyone
else. For them, that means developing fewer but better
relationships with profitable customers rather than having
large numbers of marginally profitable customers. It also
means swapping from a product-focused business model to
a CRM business model. For example, Citigroup uses CRM to
cross-sell products profitably. Chase, New York, has
established a central data warehouse so it can analyze how
better to serve its customers. Key Corp. has launched a CRM
project centered around increasing the depth of customer
relationships. But even these ideas are being challenged by
the next generation of Internet based banks who are
developing some impressive new 1-to-1 marketing ideas and
Loyalty.Com - Page 6
services such as:
• Sending e-mail alerts when insufficient funds are available.
• Putting the entire loan process online.
• Posting tax forms online and alerting people of any changes.
• Providing automated financial planning advice.
Business-to-business marketers are using CRM to change
the way they operate. Instead of trying to be product-focused,
cost-focused or technology-focused, the savvy operators in
the business-to-business field are building long-term,
interdependent relationships with customers. In other words,
the emphasis is moving from transactions to solutions. A
common bond is being built in which the marketers and
individual customers develop relationships to ensure:
• Products and services meet the customers specific needs.
• An ongoing competitive intelligence system thrives.
• Effective sales channels are established.
• Efficient distribution channels are developed.
• New business is being built up around current customers.
Media companies are using CRM to increase audience
involvement, reduce churn and identify the best prospects for
associated advertisers. For example, Fairwest Direct uses a
‘‘Listener Points’’ program which allows radio listeners to gain
points automatically, and then print coupons direct from their
own computers. The Chicago Tribune applies CRM to
fine-tune offers made through a retail chain to its best
subscribers. Many other innovative ideas are under
development in this industry to unlock the lifetime value of the
audience through good CRM programs.
Hallmark Cards launched its Gold Crown Card program in
1994. Five years later, this CRM program has over 20 million
members. Hallmark uses the program to create dialog,
manage customer relationships and learn what customers
value about everything Hallmark sells. The company
communicates with its customers through a Web site, an
800-number, e-mails and letters. Since the launch of this
program, Hallmark’s retail stores have had 51 consecutive
months of gains in same store sales year-to-year. Hallmark
believes its CRM program added about $1.5 billion in sales
revenue in 1998, and that this year, club members will
account for 45-percent of total store sales.
Boots the Chemists, the U.K.’s largest health and beauty
retailer, reorganized its entire business around a CRM
program called the Advantage Card in September 1997. The
whole program is centered around customer development --
learning what new products and services consumers will
welcome. As a result of this CRM program, Boots has become
a leader in health insurance, travel insurance and direct
selling. The company is also involved in rolling out new
interactive kiosks for card members, launching the largest
circulation magazine about health and beauty in the U.K. and
finding other innovative ways to meet the specific needs of its
customers.
RadioShack is using CRM to increase the depth of
involvement between customers and stores. RadioShack
does that very directly -- by surprising and delighting
customers. Their entire CRM strategy evolves around
something they call ‘‘POA’’:
P -- participatory products like computers, stereos, TVs, etc.
O -- opportunity products like telephones, hand held devices
A -- anchor products like wires, cables, batteries, etc.
The RadioShack CRM program attempts to migrate
customers from the A business into the P & O areas.

In short, the companies that are presently succeeding with their
CRM programs have found the keys to success are:
The actions you take to add value to the customer relationship
speak far louder than the enticing words you use in any
communications.
Constantly and consistently finding new ways to show
customers you care is essential and necessary.
In developing a CRM program, get ideas from everyone --
from sample customers, your own staff, your business
associates and partners, your competitors, etc.
In the end, acknowledge your CRM program comes down to
service and people.
Key Thoughts
‘‘Traditional incentive programs are usually reward driven and
characterized by one-way communication. True
business-to-business frequency programs are data driven and
distinguished by sophisticated two-way communication.
Rewards aren’t absent from these programs, but they’re not the
"star". Instead, the relationship is the star in that the rewards and
other benefits are configured as evidence of the value of the
relationship between the customer and the brand.’’
-- Richard Barlow, president, Frequency Marketing
‘‘Where mailing programs are built on discount coupons as the
core, instead of building a relationship focused on the product or
the manufacturer’s established name and reputation, they are
doomed to failure. Solid relationships built through database
marketing are immune to discounts. Your customers prefer you
because you are an old friend who recognizes them, who
provides personal services and delivers a well-known quality
product. You would be insulted if a friend gave you a tip for doing
a favor. A database should aim at that same kind of relationship.’’
-- Arthur Hughes, vice president, Database Marketing Institute
‘‘The secret to true innovation lies not in doing things just to be
different but in doing things to be better. The future of retailing
isn’t about providing large selections of shelved products. It’s
more about providing smart solutions to the customer.’’
-- Robert Tillman, CEO, The Lowe’s Companies
‘‘It is the new consumer’s demand for convenience, choices and
control that is at the core of the emerging retail revolution. When
a brand moves from a cluster of values around a product to
fulfillment of customer’s needs, this creates meaning, which then
modifies behavior that generates deeply felt attitudes.’’
-- Frank Britt, vice president of marketing, Streamline Inc.
‘‘Dell Online gives Dell a chance to have a continuing relationship
by providing Web service and support to our direct customers.
Have a problem with your Dell? Go to the site and plug in your
PC code number. The site will then reconfigure to reflect only the
information applicable to your system. These efforts develop
long-term customers. Using the Internet, we get to personalize
your experience with Dell, and that develops a relationship, an
affinity, between you and Dell.’’
-- Bill Morris, director of content and marketing, Dell Online
‘‘Being competitive today requires a renewed focus on building
long-term relationships with customers to build long-term loyalty.
The more customers value their relationship with you, the more
you can show added value through the relationship, the more
loyal your customers will become.’’
-- Frederick Newell
Loyalty.Com - Page 7
Section 4
Long-Term Strategies For Successful
And Profitable Customer Relationship Marketing
Main Idea
Over the long haul, CRM always:
1. Turns products into services.
2. Requires a two-way dialogue to grow and expand.
The two key long-term issues every CRM program builder must
address effectively are:
1. Protecting the privacy of everyone involved.
2. Accurately measuring CRM profitability.
Supporting Ideas
The long-term effects of CRM are:
1. Products are always turned into services.
A prodice is something that looks like a product but acts like
a service.
Customers today buy products in order to achieve the
desired results of using that product. In other words, they
value services more highly than possessions. For example,
someone who buys a satellite dish doesn’t want to be the
only person on the block with their own satellite dish -- they
want to communicate more effectively. Similarly, consumers
want healthy teeth when they buy toothpaste, clean clothes
and not soap powder, and so on.
Therefore, a good long-term CRM program will come up with
some innovative ways to generate prodices -- hybrids that
look like products but act like services.
2. A two-way dialogue grows and expands.
A CRM program is never a self-help sort of interaction.
Instead, it must be a two-way dialogue which become better
and more productive over time as the organization learns
more about the preferences of the customer.
That requires the organization to keep in touch with the
customer frequently enough but not so much that it becomes
an irritant. Each contact must help convince the customer the
organization cares about them and is interested in their well
being. In other words, each contact must add rather than
subtract value to the relationship.
The best ways for a CRM program to achieve those
objectives are:
Each customer must have a personalized communication
strategy -- a game plan of the best approach for
deepening the relationship between the organization and
the customer.
The organization must be proactive with its
communications programs -- it needs to reach out and
draw former or potential customers into it.
Clear and specific goals are required, as well as
measurements which will show how well those goals are
being achieved.
The CRM program itself must be a learning process for
the organization. It must be willing and empowered to
enhance and improve the program over time as a deeper
understanding of customer needs become clearer. Each
successive generation of the CRM initiative must build on
and expand on what the organization previously knew.

The key long-term issues every CRM program must address are:
1. Protecting the privacy of everyone involved.
Consumers today are passionate about the confidentiality of
any information that is collected. Most believe the companies
gathering information about them have power over them, and
can, without permission, use that power unwisely.
Since CRM programs can only be built on a foundation of
trust, privacy of data becomes a key CRM marketing issue.
The Internet is having the effect of magnifying the absolute
importance of privacy.
The current best practices in the privacy field (which CRM
marketers should adapt) are:
Companies will make customers aware that they may
rent, sell or exchange information with others.
All consumers must be given a chance to opt-out of such
exchanges of marketing information if they wish.
Centralized databases will be maintained by trade
organizations such as the Direct Marketing Association to
allow consumers to opt out of all unsolicited marketing
offers with a single request.
Privacy is truly a global issue. Smart CRM programs make
their privacy policies explicit, prominent and comprehensive.
They acknowledge the greatest long-term threat to
developing successful customer relationships is privacy.
2. Accurately measuring CRM profitability.
At its heart, CRM is about making it easier for customers to
do business with you. Real value is derived from the
customer knowledge you have, and how you use that
knowledge to enhance customer relationships.
Since CRM is really a business process rather than a
marketing campaign, the whole organization must ultimately
claim ownership of the CRM effort. To achieve that, effective
ways must exist by which progress is measured. This is
usually the biggest challenge in initiating and sustaining any
CRM program.
For CRM to prosper:
The top management of the organization must become
intimately involved. They must champion the program.
The emphasis must change from selling products to
building relationships with customers.
The ideal must move from utilizing the latest technology
to determining what problems the new tools will solve for
customers.
Dialog between the organization and its customers must
become the predominant business activity.
It must be becoming easier and easier for customers to
do more business with the organization.
Listening to the customer to learn must outweigh attempts
to talk to the customer to sell.
© Copyright 2000 All Rights Reserved Summaries.Com
Loyalty.Com - Page 8
Key Thoughts
‘‘Loyalty marketing implies that we can market to people and
make them loyal to us. The truth is loyalty is the result not the
object of a successful relationship in business and in life. When
we try to make another person loyal without providing a
relationship that works for them, we waste time, money and
trust.’’
-- John Groman, executive vice president, Epsilon
‘‘For successful Customer Relationship Management, we must
design the business to start with the customer and work back
from there. We start with data capture and move through the
process of editing and analyzing to create meaningful
knowledge. Finally, we use all this customer knowledge to build
relationships that will create loyalty and build profits.’’
-- Frederick Newell
‘‘Many marketers will continue to look for short-term ways to
generate results, but they will be surpassed by a new breed of
dialog marketers who embrace the concept of ongoing dialog to
build relationships. Dialog over time. It takes time to prove
yourself and build loyalty with customers. Over time, your dialog
will evolve and become more focused. You will get to know your
prospects, and they will get to know you.’’
-- Steven Krein, president, Webstakes
‘‘CRM requires the care and the commitment to take the time,
invest the money and have the patience to listen to the customer,
to create a mutually beneficial dialog to learn what the customer
really wants from your company, and finally, to deliver your
promise of personalized caring consistently with every customer
contact and communication.’’
-- Frederick Newell
‘‘Each of us is born with only a certain amount of time on this
earth, and figuring out how to use it wisely is one of life’s primary
activities. Paying attention to something -- anything -- is, in fact,
a conscious act, requiring conscious effort. So one way to sell a
consumer something in the future is simply to get his or her
permission in advance. You’ll do this by engaging the consumer
in dialog -- an interactive relationship, with both you and the
customer participating.’’
-- Seth Godin, author, Permission Marketing
‘‘Without CRM, a firm will have a difficult time existing profitably
in the twenty-first century.’’
-- Frederick Newell
‘‘Committing to the lives, needs and wants of customers is what
makes CRM successful. Transforming your business processes
to enable you to excel at Customer Relationship Management
is not an easy assignment, and the new era of the Internet will
require a lot of learning. As you tackle the challenges, remember
the words of that wise old philosopher, Anonymous: "Much of life
is like skiing. If you’re not falling down, you’re not learning".’’
-- Frederick Newell