Friday, February 06, 2009

Measuring the Value of Relationship Marketing

Relationship marketing, unlike direct marketing, is about cultivating a customer (in the case of B2B, this could mean many different audiences inside one company) over the long-term, and ultimately driving loyalty. Customers’ attitudes change in a positive direction; they become satisfied with the brand; they ultimately perceive the brand to be high-quality, caring, etc. and will stay a customer for life. At least, that’s the idea. The problem with relationship marketing is that you can’t try too hard. The dangers of spamming, coming across false or fake, engaging in only one-way communication, or being too pushy have sunk many well intentioned relationship marketers.

Measuring relationship marketing can be a good way to get a handle on how to do relationship marketing right. I’ve seen a lot of companies troll around for best practices and never truly understand what impact they’re making on customers until they start truly tracking spend, engagement and resultant attitudes.

There are three important components of measuring relationship marketing:

  1. Develop an RM taxonomy and track spend. This is basically carving out your vehicles into meaningful categories. It is not tracking campaigns. In fact, a relationship marketing “campaign” is a bit of a misnomer. The goal of RM is to keep consistent engagement going, with no gaps longer than six months. So you want to divide your vehicles up into things that are really different in the mind of customers. I’d also recommend using a hierarchical approach. A simple example is shown below. Once the taxonomy is established, start tracking spend, by audience, at a granular time scale. Weekly is good, but monthly is probably fine too.

  2. Track engagement. Engagement is different than spend. Spend will be really useful to track ROI, but engagement tracks two-way interactions. Use the same taxonomy you use for spend, but this should be the actual interactions with the customers. Engagement is an “in process indicator” for the success of relationship marketing. It is a good leading indicator for success, and can be tracked frequently, giving marketers frequent updates on their efforts. Important: Don’t just track outbound activity—track both inbound and outbound. People in relationships talk to each other, at least those whose relationships last. It’s also a good idea to track reach over a total audience.

  3. Track core attitudes and the ultimate attitude. Core attitudes and perceptions need to be determined by market research. I talk about SEM and how to do this here. But once these attitudes are defined, these should be considered as the ultimate goal of RM. Advertising has an effect too, so these metrics will be shared, but people in good relationships feel good about their partners. It’s important to track both the “ultimate attitude”—something like net promoter—and predictor / component attitudes that marketers can message too. Once again, the goal is to provide guidance back to marketers on where they should be re-mixing their efforts.

With the three above metric families in place, relationship marketing can become much less of a mystery. Tactics can be chosen on the basis of empiricism vs. gut feel, and companies can truly improve their relationships with customers. After a time, you’ll realize that your taxonomy for parsing out vehicles can be improved. Core attitudes measured will also change with changing business objectives and customer landscape.


Authority Networker said...

In general people dislike being "sold". People want the freedom to choose and feel comfortable when purchasing any product or service. A related internet network marketing technique called attraction marketing is getting a whole lot more attention and deals with that. One primary focus of the attraction marketing formula is developing personal relationships with existing clients and become a person of value, so that they have the underlying feeling of attraction and want to come back for more. The results of integrating this new authority networker method will be much more favorable than if you were to try to hard-sell everything.

Anonymous said...

This is so true. We have to show people we genuinely care for them.