The Customer Loyalty Solution : What Works (and What Doesnt) in Customer Loyalty Programs

There are scores of different examples in the pages of this book. The principles are the same, but the methods have changed considerably in the past 15 years:

• When database marketing began, major databases were built on a mainframe. Today they are built on a server using Oracle or SQL Server.

• In the beginning, most databases were maintained by the information technology (IT) department or a service bureau and could not be accessed directly by marketers. When access was available, it was by terminals linked to the database by telephone lines. Today, marketers using PCs access databases over the Web.

• Data used to enter the databases in batch mode as keypunchers copied customer responses received through the mail. Even telemarketers entered data onto temporary disks, which were later used to update the mainframe database in batch mode. Today customers place their orders and update their profiles on the Web, through a Web page connected with a database on a server. Many telemarketers also work directly with live data on the same server.

• Database reports used to be produced monthly by programmers and sent to the users in hard copy. Today, marketers have a menu of reports on their screens, which they can run every day and print from their desktop PC printers.

• In the past, to select customers and prospects from a database, marketers would send detailed memoranda to the programmers. Upon receipt of these memoranda, programmers would write computer programs to select the desired records and send reports on the results to the marketers by fax. The process used to take a couple of weeks. Today, using E.piphany and other advanced applications, marketers select their own records for promotions using their PCs through the Web, without the need for IT assistance. The selected records can be automatically downloaded to the marketer through the Web or saved for downloading by the mail shop or the e-blasting vendor. The process takes a few minutes.

• Data appending was rare and was done mainly by the largest companies. Today, many companies add demographic data (age, income, presence of children, credit ratings, and scores of other facts) to their customer database routinely. Business-to-business marketers add Dun & Bradstreet (D&B) data (SIC code, annual sales, number of employees) to all customer and prospect files. These data are used for segmentation and crafting of marketing communications.

• Customer segmentation was rare. Few companies had identified their Gold customers, or knew what to do with them once they were identified. Today many companies have segmented their customer base and have developed different marketing strategies for each segment.

• Communication with customers was mostly by direct mail or telephone calls. Phone calls cost several dollars each. Letters were also expensive. As a result, communications with customers were limited to monthly statements and sales calls. Today, because of the Web, scores of additional possibilities for communication with customers have opened up. Customers order on the Web, are thanked for their order, receive a confirming email, are notified by email when products are shipped, and are surveyed to determine whether the products arrived and were satisfactory. All these messages were impossible when database marketing first began. Direct-marketing promotions were sent out by third-class mail in massive batches. They still are. But to this has been added email promotions to customers who have agreed to receive them. These email promotions cost almost nothing to send, compared to the heavy costs of direct mail. Customer preferences used to be requested through direct-mail or telephone surveys. These were expensive and, consequently, rare—they were used mostly for research rather than for customized communication. Today, customers can, and do, complete their personal profiles via the Web, so that outgoing communications can reflect their preferences.

• Customers used to call toll-free numbers to get information on product shipments or technical data, and to ask for all sorts of information that was stored in a company’s internal records. They still do. Increasingly, however, companies are making that information available to customers through the Web. This saves the companies millions of dollars per year and builds customer loyalty by giving the customers direct access to company archives.

• Models were rarely understood or used. Today all companies with products that involve churn, such as credit cards and cellular or long-distance telephone service, routinely use models to predict and forestall the canceling of service.

This is an exhausting list. It shows where we were and how far we have come. Perhaps the development that has changed database marketing most profoundly in the past two decades is the advent of the Web. Today we can do things that we only dreamed about doing 10 years ago. We can truly build customer relationships with almost as many personal communications as the old corner grocers used to have with their customers.