Interview with Don Peppers

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One-To-One With Don Peppers

One-to-one marketing and customer relationship management are well-accepted concepts by now. But the Internet is accelerating these trends, as companies move from mass production to personalized marketing on a massive scale.

In this Q&A, CRM guru Don Peppers explains how companies like Amazon.com, Levi Strauss and Mercury Asset Management are using the latest techniques to attract and keep loyal customers.

Through the magic of the Internet, one-to-one marketing is like a dream come true for consumers, manufacturers and service companies alike. Instead of limiting customers to a fixed range of offerings, suppliers can now offer customization on a massively individualized scale.

As marketing guru Don Peppers points out, the power of one-to-one marketing cannot be overstated. And companies that incorporate it into their e-business strategies will have a tremendous competitive advantage over those that don't.

But the process is rife with pitfalls. According to Peppers, practitioners of the new one-to-one marketing paradigm will have to avoid creating "faux marketing relationships" and will have to rethink their traditional mass-marketing techniques. These and other emerging e-business concepts are the subject of Pepper's One to One B2B : Customer Development Strategies for the Business-to-Business World , which he co-authored with colleague Martha Rogers.

In the following Q&A, Peppers answers some of questions about the promises and pitfalls of relationship marketing techniques.

What is one-to-one marketing, and how does it differ from traditional marketing?

In a nutshell, one-to-one marketing, also known as Customer Relationship Management or CRM, is based on the idea of treating different customers differently. Companies in all industries today are faced with the double-barreled problems of declining customer loyalty and shrinking profit margins. One-to-one marketing strategies enable companies to create long-term, mutually beneficial relationships with customers that result in greater customer loyalty and improved margins.

What are some steps a company could take to implement one-to-one effectively?

One-to-one organizations create a "customer feedback loop" in which they say, "I know you. You tell me what you want. I'll make it – and I'll remember next time." We call this process a "Learning Relationship," and it has four basic implementation steps (IDIC):

IDENTIFY your customers at all points of contact.
DIFFERENTIATE your customers based on their individual needs and value to your organization.
INTERACT with your customers in two-way dialogue.
CUSTOMIZE some aspect of your products or services based on what you learn from your customers.

Can you give us some examples of how customers are doing one-to-one right? What impact has one-to-one had on their financial health?

Organizations all over the world are adopting and implementing one-to-one strategies. Amazon.com allows you to store your shipping and order information on its website, so the next time you order a book you can get it with just one click. One secret of online businesses' success is the convenience of repurchase, which makes customers more loyal. Amazon's repurchase rate is 64 percent, roughly double the repurchase rate at a typical bricks-and-mortar bookstore.

When Levi Strauss & Co. offered "Personal Pair," a line of make-to-order blue jeans available in 10,000 different sizes for women, it experienced a 38 percent repurchase rate, compared to the normal repurchase rate of just 12 percent. This line of clothing has now been incorporated into the "Original Spin" line.

London-based fund management group Mercury Asset Management has taken mass customization in the print arena to a whole new level. To better serve its customers, Mercury, owned by the Merrill Lynch Group, just released its first mass-customized magazine, The Mercury Investor's Guide – the twice-yearly magazine mixes common pages with personalized pages in 7,700 versions!

For instance, the same article on the topic of retirement covered income protection and portfolio diversification for older clients with more substantial holdings, while for younger clients it covered strategies for retiring early. In the first three weeks, the customized guide attracted 141 percent more business than the previous generic guide did in four weeks.

What are some common barriers to one-to-one marketing that companies should avoid?

Companies should avoid "faux relationship marketing." Sending out junk mail or making unwanted phone calls does not constitute relationship marketing. Nor does "canned personalization," in which the same superficial level of individualized service is available to everyone.

The one-to-one marketer recognizes that every relationship is based on the inputs of both parties and that it continues to evolve over time. A relationship marketer should never ask the same question twice, any more than a husband should ask his wife what she wants in her coffee. And when a customer expresses an interest or states a preference over and over, a genuine relationship marketer should find a way to act on it.

One common mistake is overestimating the amount of change needed to begin the [one-to-one marketing] process. Another is underestimating the degree to which every facet of a company needs to be involved. One-to-one strategies should be implemented at all levels of your enterprise.

How does one-to-one work on the Web?

Today's customer-oriented business strategies result from a unique convergence of technological developments and social evolution. The Internet gives consumers unprecedented control over the flow of information that reaches them. To survive in the Interactive Age, companies must forge relationships with customers that make it more convenient for a customer to remain loyal than to go elsewhere.

The Web is the perfect tool for creating, maintaining and owning relationships with your end users, even if you sell to them through channels. The Web can be customized to individual visitors. It can dispense complex product or service information, qualify sales leads, complete purchase transactions and perform service tasks.

How does a one-to-one company deal with privacy and trust?

For businesses interested in practicing one-to-one marketing, there is nothing more important than protecting your customer's privacy. I would make sure that companies are aware that many of their customers have concerns about privacy. Companies should issue an explicit privacy pledge – in writing – that promises not to sell personal information to third parties and informs customers what the company is going to do with customer data. Once you create it, publicize it and live by it.

Think about enlisting TRUSTe, an independent, non-profit privacy initiative that provides companies with a simple and highly visible method of revealing how it will use individual information. BBBOnLine, part of the Council of Better Business Bureaus, is a self-regulatory online privacy program that features a variety of services for the consumer. Both have won the support of dozens of leading companies around the world.

What kinds of trends do you see emerging?

The cyber world of direct-to-consumer deliveries must be reconciled with most companies' more restrictive real-world channel structures. Using real-world strengths to leverage an online presence has proved overwhelmingly difficult for many firms. Barnesandnoble.com, for example, has never been able to pull an end-run around Amazon.

Existing companies are [however, finally] going online with the big, system-wide information tools necessary to pull off this type of integration. Consider the revolutionary step Circuit City has taken by integrating all of its 550 bricks-and-mortar outlets completely with its website. Registered customers can have all their billing, shipping and favorite location preferences stored online. They can also receive e-mail announcements about products and sales. And, if they order something via the Web that the retail outlet [had a better price on], Circuit City will automatically adjust the pricing to fit the retail price.

Real-world integration is coming quick, so bricks-and-mortar stores must learn from the mistakes their forbears made (and continue to make) in translating offline sales to the Web.

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