Relationship Marketing: Engagement & Transaction
March 8, 2013
Is Relationship Marketing Worth It?
Relationship marketing may seem like another marketing buzzword, but for many brands, keeping customers happy and being in touch more often to add value has proven to be extremely effective at marketing positioning, brand loyalty, and increasing sales.
By now, we’re all in agreement that the one-to-many or batch-and-blast approach doesn’t work in a consumer driven environment where increasingly discerning, well-informed consumers choose to opt-in. The traditional metaphor of a marketing “funnel” can also fail to capture all the touch points and key buying factors resulting from the explosion of product choices and digital channels.
Cost Advantages of Relationship Marketing
As marketers also look to lower cost per lead and cost per acquisition, the cost advantage associated with customer retention make relationship marketing worth taking seriously. However, it still appears that organizations are skittish about the impact relationship marketing could have on their bottom line. In fact, according to an recent survey by Econsultancy / Responsy2, 24% of marketers indicate that retention and engagement will be a stronger focus for investment than acquisition in 2013, while 31% will continue to focus more on acquisition.
Instead of directing consumers through the funnel with transactional-only-based messages, organizations can combine elements of both relationship and transaction marketing strategies to build stronger customer relationships yielding an increase in both sales, engagement, and retention. So, if relationship marketing seems like a no-brainer, why are organizations still investing more in transaction-based marketing?
Measuring Relationship Marketing Engagement is a Challenge
The data suggests one likely reason: measuring engagement and retention seems to be too difficult compared to transaction-based marketing. There are many ways to measure retention, but while measuring retention metrics such as customer lifetime value (CLV) might be relatively easy, many organizations don’t use it as part of their ROI analysis. If you’re interested in learning more about how to calculate CLV, there are some free CLV calculators to help. A quick and dirty CLV calculation looks something like this:
Estimated Average Lifetime Value = (Average Sale) x (Estimated Number of times customers reorder)
Remember the purpose of using CLV is to help predict the net profit attributed to the entire future relationship with a customer, but lasting impact is difficult to predict (which is why measuring short-term acquisition marketing initiatives that are more easily quantifiable is typically seen as the only true metric to measure ROI).
Yet, as we move to a more customer-centric approach and want to impact customer behavior to have a lasting impact on customer attrition rate over long periods of time, starting with a simple plan can help integrate relationship marketing metrics slowly into the fold.
A Three-Step Approach to Relationship Marketing
- Define one segment to start with
- Consider the scope and content of the customer relationship
- Create a genuine two-way relationship via the technology (marketing automation, etc.) you use to manage your marketing channels
Integrating Engagement & Transaction
I realize the steps above may seem overly simplistic, but it’s important to point out that the goal is not to be in complete control of moving a customer through a funnel. The first goal should really test your ability to respond to a target profile. By keeping customers engaged in the right channel at the right time, it will increase top of mind so that when they are ready to purchase — or their peers are ready — the primary transaction will be completed. The challenge lies in knowing how to align marketing programs with the most influential moments and channels.
One way to help make sense of engagement is to create simple customer scenarios that reflect different customers in the one segment you are starting with. Here is an example of a customer profile from a report from Forrester on engagement metrics illustrating a target profile who is to be considered a brand zealot with the potential to influence others:
For some brands, creating a specific relationship marketing program for such a brand zealot in the example above could contain transactional-like goals where the end goal is to draw users like “Sarah” closer to the company and energize their engagement with their peers across their digital networks.
As you can see, even though it’s a relationship marketing program, it still contains a transactional-like goal throughout a personalized user’s experience instead of a one-size-fits-all funnel. Creating examples like this can also go a long way toward successfully mapping content to channels and delivery — which in the end will help balance out which metrics to use and how to apply them to effectively measure your relationship marketing program.
Hopefully this helps answer what a relationship marketing program is, why it’s beneficial, and how you can start measuring engagement with transaction.