Is Your Manager Ready for One to One Marketing

8/8/2019 Is Your Manager Ready for One to One Marketing

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Is Your Company Ready for

One-to-One Marketing?by Don Peppers, Martha Rogers, and Bob Dorf

Reprint 99107


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JANUARY FEBRUARY 1999

Reprint Number

JUDO STRATEGY: THE COMPETITIVE DYNAMICS 99110OF INTERNET TIME

CREATING NEW MARKET SPACE 99105

DISCIPLINED DECISIONS: ALIGNING STRATEGY 99101WITH THE FINANCIAL MARKETS

ORGANIZING FOR EMPOWERMENT: AN INTERVIEW 99109WITH AESS ROGER SANT AND DENNIS BAKKE

THE NEW LANDSCAPE FOR NONPROFITS 99108

A REPORT CARD ON DIVERSITY: LESSONS FOR 99102BUSINESS FROM HIGHER EDUCATION

HBR CASE STUDY

CAN THIS MERGER BE SAVED? 99103

perspectives

MANAGING IN THE EURO ZONE 99111

thinking about

THE HUMAN MOMENT AT WORK 99104

managers tool kit

IS YOUR COMPANY READY FOR ONE-TO-ONE MARKETING? 99107

books in review

WHAT MAKES A COMPANY GLOBAL? 99106

david b. yoffie and

michael a. cusumano

w. chan kim and

renee mauborgne

Martha amram and

nalin kulatilaka

suzy wetlaufer

william p. ryan

william g. bowen, derek bok,

and glenda burkhart

sarah cliffe

introduction by

nicholas g. carr

edward m. hallowell

don peppers, martha rogers,

and bob dorf

BRUCE KOGUT


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IS YOUR COMPANYREADY

FOR ONE-TO-ONE

MARKETING?

racticed correctly, one-to-one marketing can increase thevalue of your customer base.

The idea is simple: one-to-one mar-keting (also called relationship

marketing or customer-rela-tionship management) meansbeing willing and able to changeyour behavior toward an indi-vidual customer based on whatthe customer tells you andwhat else you know about thatcustomer. Unfortunately, too manycompanies have jumped on the one-to-one bandwagon without properpreparation. The mechanics of im-plementation are complex. Its onething to train a sales staff to be warmand attentive; its quite another to

identify, track, and interact with anindividual customer and then recon-figure your product or service to meetthat customers needs.

So is your company ready to im-plement a one-to-one marketingprogram? In large part, the answer de-

pends on the scope of the program.For some companies, being readysimply means being prepared tolaunch a limited initiative. Substan-

tial benefits can be gained from tak-ing steps even small ones towardone-to-one marketing in specificfunctional areas. For others, beingready means being positioned to im-plement an enterprise-wide program.To help you assess the type of pro-

gram you should begin with anddetermine what you need to do toprepare weve developed a list ofactivities and a series of exercisesdesigned for executives, managers,and employees at all levels in yourcompany, as well as for your cus-

tomers and channel partners. Review-ing the list and working through theexercises will help you determinewhat type of one-to-one marketing

program your company can

implement immediately, whatyou need to do to position itfor a large-scale initiative, andhow to prioritize your plansand activities.

Why One-to-One?

Before determining the correct scopeof your companys one-to-one mar-keting efforts, you need to under-stand the rationale for undertakinga one-to-one initiative and the basiccomponents of such a strategy. Rela-tionship marketing is grounded in

the idea of establishing a learningrelationship with each customer,starting with your most valuableones. (See B. Joseph Pine II, DonPeppers, and Martha Rogers, DoYou Want to Keep Your CustomersForever? HBR MarchApril 1995.)

Copyright 1998 by Don Peppers, Martha Rogers, and Bob Dorf. All rights reserved. 3

M A N A G E R S T O O L K I T

Implementing arelationship-marketing program

is a complex endeavor.This will get you started.

by Don Peppers, Martha Rogers, and Bob Dorf

Don Peppers and Martha Rogers are partners, andBob Dorfis president, of Peppers and Rogers Group, the one-to-onestrategy consulting firm in Stamford, Connecticut; see http://www.1to1.com. This article is adapted from their book TheOne to One Fieldbook: The Complete Toolkit for Implementing a 1 to 1 Marketing Program (Currency/Doubleday,1999).

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Think of a learning relationship asone that gets smarter with eachinteraction. The customer tells youof some need, and you customizeyour product or service to meet it.Every interaction and modificationimproves your ability to fit your

product to this particular customer.Eventually, even if a competitor of-fers the same type of customizationand interaction, your customer wontbe able to enjoy the same level of con-venience without taking the time to

teach the competitor the lessons yourcompany has already learned.

There are four key steps for puttinga one-to-one marketing program towork: identifying your customers,differentiating among them, inter-acting with them, and customizing

your product or service to fit eachindividual customers needs.

Identifying your customers. Tolaunch a one-to-one initiative, yourcompany must be able to locate andcontact a fair number of its customers

directly, or at least a substantial por-tion of its most valuable customers.Its critical to know customers in asmuch detail as possible: not justtheir names and addressable charac-teristics (such as addresses, phonenumbers, or account codes), but their

habits, preferences, and so forth.And not just a snapshot a onetimequestionnaire. You need to recognizethe customer at every contact point,in every medium used, at every loca-tion, and within every division of

4 harvard business review JanuaryFebruary 1999

one-to-one marketingM A N A G E R S T O O L K I T

The following activities are keyed to the four

steps of a one-to-one marketing program:identifying customers, differentiating among

them, interacting with them, and customizing

your product or service to meet each customers

needs. Most companies should be able to

accomplish these activities fairly readily. If you

have not yet identified your end-user customers,

you can apply these suggestions to your

channel partners. At some point, however, you

will need to identify and interact with your end-

user customers to get the most out of your

relationship-marketing program.

I D E N T I F Y

ACTIVITY STEPS TO CONSIDER

Collect and enter more Use an outside service forcustomer names into scanning or data entry.the existing database Swap names with a

noncompetitive companyin your field.

Collect additional Use drip-irrigation dialogue:information about ask your customers one oryour customers two questions every time

you are in touch with them.

Verify and update Put your customer files

customer data and through a spring cleaning.delete outdated Run your database throughinformation the National Change of

Address (NCOA) file.

D I F F E R E N T I A T E


Identify your organizations Using last years sales or othertop customers simple, readily available data,

take your best guess at

identifying the top 5% ofyour customers.

Determine which customers Look for simple rules to isolatecost your organization money the bottom 20% of your

customers (such as customerswho havent ordered in morethan a year or those who alwaysbid you out) and reduce theamount of mail you send them.

Select several companies Add them to your database,you really want to do and record at least three contactbusiness with next year names per company.

Find higher-value customers Baby-sit their orders: put awho have complained about product or quality-assurance

your product or service more person in touch with them ASAPthan once in the last year to check on your progress.

Look for last year s large Go visit them now, before yourcustomers who have ordered competition does.half as much or less this year

Find customers who buy only Make them an offer they cantone or two products from your refuse to try several more itemscompany but a lot from other from you.businesses

Rank customers into A, B, and Decrease marketing activitiesC categories, roughly based on and spending for the Cs andtheir value to your company. use the savings to fund(Dont try to isolate the top increased activities for the As.5% or bottom 20%any blunt

instrument criterion such asannual spending or years doingbusiness with the companywill work.)

Getting Started


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I N T E R A C T


If you are focusing on Dont try to sell just talk and make surechannel members, call they are happy.the top three people at

your top 5% of customers

Call your own company Test eight to ten different scenarios as aand ask questions; see mystery shopper. Record the calls andhow hard it is to get critique them.through and get answers

Call your competitors to Repeat the above activity.compare their customerservice with yours

Use incoming calls as Offer specials, closeouts, and trial offers.selling opportunities

Evaluate the voice Make the recordings sound friendlier, beresponse unit at your more helpful, and move customers throughcustomer information the system faster.

center

Follow the interaction Seek to eliminate steps: reduce cyclepaper trail through times to speed up your response timesyour organization to customers.

Initiate more dialogue Print personalized messages on invoices,with valuable customers statements, and envelopes.

Have sales reps sign personal letters rather thanmass-mailing letters signed by a senior manager.

Have the right people in your organizationcall the right customer executives. (That is,have your CIO call another CIO, or have theVP of marketing call the business owner.)

Call every valuable customer your companyhas lost in the last two years and give thema reason to return.

Use technology to Gather the e-mail addresses of your customersmake doing business in order to follow up with them.with your company Offer alternative means of communication.easier Consider using fax back and fax broadcast systems.

Scan customer information into the database.

Improve complaint Plot how many complaints you receive eachhandling day and work to improve the ratio of complaints

handled on the first call.

C U S T O M I Z E


Customize Use regional andpaperwork to save subject-specificyour customers time versions of catalogs.

and your companymoney

Personalize your Use customerdirect mail information to

individualize offers. Keep the mailings

simple.

Fill out forms for Use laser equipmentyour customers to save time and

make you looksmarter.

Ask customers how, Use fax, e-mail, postaland how often, mail, or personalthey want to hear visits as the

from you customer specifies.

Find out what your Invite customers tocustomers want focus groups or

discussion meetingsto solicit theirreactions to yourproducts, policies,and procedures.

Ask your top ten Respond to theircustomers what you suggestions.can do differently Follow up and repeatto improve your the process.product or service

Involve top Give them lists of

management in questions to askcustomer relations based on the history

of individualcustomers.

your company, no matter whichproduct line is involved. Remember,however, that the customers whobenefit from your one-to-one pro-gram may not be limited to the endusers of your product or service. If,for example, you are a manufacturer

selling to retailers, then you willalso want to apply the principles ofone-to-one marketing to create bet-ter relationships with your channelmembers and other intermediariesin your demand chain.

Differentiating your customers.Broadly speaking, customers are dif-ferent in two principal ways: theyrepresent different levels of valueand they have different needs. Onceyou identify your customers, differ-entiating them will help you to fo-

cus your efforts so as to gain themost advantage with the most valu-able customers. You will then be ableto tailor your companys behavior toeach customer in order to reflectthat customers value and needs.

The degree and type of differentia-tion in a companys customer basewill also help you decide on the ap-propriate strategy for a given busi-ness situation.

Interacting with your customers.Improving both the cost-efficiency

and the effectiveness of your inter-actions with customers is a criticalcomponent of a one-to-one market-ing program. Cost-efficiency im-proves by directing customer inter-actions toward more automated and

harvard business review JanuaryFebruary 1999 5

one-to-one marketing M A N A G E R S T O O L K I T


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therefore less costly channels. Forexample, a company that provideshelpful, up-to-date information atits Web site wont need to spend asmuch as it once did supporting amore expensive call center. Effec-tiveness improves by generating

timely, relevant information, pro-viding either better insight into acustomers needs or a more accuratepicture of a customers value. Everyinteraction with a customer shouldtake place in the context of all previ-ous interactions with that customer.A conversation should pick up where

the last one left off, whether the pre-vious interaction occurred last nightor last month, at the call center or onthe company Web site.

Customizing your enterprisesbehavior. Ultimately, to lock a cus-tomer into a learning relationship, a

company must adapt some aspect ofits behavior to meet that customersindividually expressed needs. Thismight mean mass-customizing amanufactured product, or it couldinvolve tailoring some aspect of theservices surrounding a product per-haps the way the invoice is rendered

or how the product is packaged. Inany case, the production or service-delivery end of your business hasto be able to treat a particular custo-mer differently based on what waslearned about that customer by thesales, marketing, or any other de-

partment. In rushing to reap the re-wards of relationship marketing, itseasy for a business to overlook thiscritical fourth step, leading manyto misunderstand the entire disci-pline as simply an excuse for directmail and telemarketing. (See SusanFournier, Susan Dobscha, and David



Is Your Company Ready for

One-to-One Marketing?

Administer this exercise to a

number of people at different

levels and in different areas of

your company. Also ask a

representative group of

customers to participate,

although youll need to tailor

the language appropriately.

There is enormous value in

hearing what your customershave to say about your

companys readiness to engage

in one-to-one relationships

with them as well as in

comparing the answers from

the various constituencies.

Note: If it seems impossible to

identify even your most valuable

end-user customers, then your best

option may be to concentrate on

developing relationships with the

intermediaries in your demand

chain whose identities you can

readily acquire. If so, then completethis exercise (and The One-to-One

Gap Tool) as if it applied to channel

members. But keep in mind that

sooner or later you will almost

certainly want to deal with end users

themselves, even if your relationships

with them will always include

channel members.

The BroadView

1. How well can your company

identify its end-user customers?

a. We dont really know who our

end-user customers are or how much

business they give us.

b. We have some information about our

end-user customers in various files

and databases around the company,

but were not sure what proportion

of customers this really represents.

c. Some of our business units know many

of their customers individual identities,

but not all the units do. Our business

units dont have a central database

of customer identities, and we dont

share much data on customers with

one another.

d. We sell to businesses or organizations,

and although we know the identities

of all or most of these organizations,

we dont really know the individual

players at each business.

e. We know who most of our customers

are individually, but we dont know

much about their relations with one

another. If a customer refers another

customer to us, we dont track this in

our database. And if a customer

moves from one location to another,

our database might show this asa customer defection followed by a

customer acquisition.

f. We know most of our customers

individually, and we can track them

from place to place, division to

division, or store to store.

2. Can your company differentiate

its customers based on theirvalue to you and their needsfrom you?

a. Because we dont have much, if

any, information on our customers

identities, naturally we are unable

to differentiate our customers either

by their value or by their needs.

b. We have no real knowledge of how

to rank our customers individually

by their long-term value to us.

c. We have an idea about how to

calculate our customers individual

long-term value to us, but we dont

have enough data to generate a reliable

ranking of individual customers based

on this calculation.

d. We have identified a number of

different needs-based segments

of our most valuable customers

(MVCs), but we dont have a

reliable way of mapping particular

customers into the right segment.

e. We know how to rank most of

our customers individually by

value, and we can also identify,

at least for most of our MVCs,

their appropriate needs-based

segment.


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Glen Mick, Preventing the Prema-ture Death of Relationship Market-ing, HBR JanuaryFebruary 1998.)

These four implementation stepsoverlap considerably. Nevertheless,they are roughly in order of increas-ing complexity and increasing ben-

efit for a company. Identifying anddifferentiating customers, the firsttwo steps, are largely internal anal-ysis steps, whereas interacting withyour customers and customizingproducts and services are externalaction steps, visible to the con-sumer. From that perspective, the

four steps can be used as a kind ofgeneral checklist to guide your ef-forts in implementing a one-to-onemarketing program. If you cantidentify your individual customers,you have no hope of differentiatingthem, much less adapting your be-

havior to address each ones needs.

Starting SmallMany managers dismiss the possi-bility of one-to-one marketing be-cause they feel it is an unattainablegoal. And yes, its true that there arenumerous reasons to think twice

before launching a full-scale pro-gram. For one, your companys in-formation technology departmentmay be too swamped or not suffi-ciently developed to handle all thetasks that one-to-one marketingdemands. Maintaining a customer

database, having one system com-municate seamlessly with another,tracking each customers contactswith the company all of thoseactivities require IT development,direction, and support. In addition,one-to-one marketing requires a cer-tain amount of capital investment


3. How well do you interact with

your customers?

a. We have no practical mechanism

for interacting with our customers

on an individual basis.

b. We interact with some of our

MVCs through personal sales calls

and other forms of contact, but we

dont systematically record these

interactions through sales force

automation or contact management

systems. We rely instead on the

initiative and memories of our

account directors, salespeople, and

others to manage these customer

interactions.

c. We interact with most of our MVCs

through sales calls and other forms

of contact, and we maintain fairly

good records of those interactions

and contacts in an automated

system or customer database.

d. We have direct interaction through

mail, phone, or on-line media with

a small proportion of our customers,

but we dont coordinate these

interactions across media.

e. We interact through mail, phone,

or on-line communication with all or

a substantial number of our customers,and we coordinate the dialogue we

have with any single customer across

these different media.

4. How well does your company customize its products and services

based on what it knows about its customers?

a. We provide standard products and services and tailor few, if any, aspects

of our behavior to the needs of individual customers.

b. We offer a range of options for our customers so they can choose specific

product features for themselves, but we dont track or remember which

features each customer chooses.

c. In the case of our MVCs, we sometimes customize our peripheral services

contract terms, billing formats, delivery modes, pallets and packaging, service

options, and so forthand we track each MVCs preferences.

d. We have modularized at least a few aspects of our core product or our

peripheral services or both, and by configuring these modules in different

ways, we can produce a variety of product-service combinations fairly cost-

efficiently. For a substantial number of our customers, we track and

remember which customers choose which options, so when a customerrepeats a purchase with us we can automatically configure our product

to that customers previously stated preferences.

e. We have modularized many aspects of our core product or our peripheral

services or both, and we can render a wide variety of product-service

configurations cost-efficiently. Rather than asking customers to sort through

all the options themselves, we interact with most or all of them to help them

specify their needs. Then we map each customer into a particular needs-based

category, propose a particular product configuration for that customer, and

remember it the next time we deal with that customer.



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across the board, and many compa-nies are unwilling or unable to pro-vide enough funding to all relevantareas to make the initiative worththe effort. And, of course, there areorganizational puzzles to be solved.Its easy to assign responsibility for

a product, but who takes responsi-bility for developing a customer re-lationship across different businessunits? Which business unit ownsthe customer, anyway?

Those are serious considerations and they dont even scratch the sur-face of the scope of cultural changea one-to-one marketing strategy maydemand. But even a very modest one-to-one initiativeone that affects justone area, such as your sales force oryour call center or your Web sitecan produce substantial benefits.

Besides hinting at the value of a full-scale program, often these short-termresults are themselves enough tojustify the funding required for anincremental effort. Among them:s Increased cross-selling. A retailbank, for instance, that is able toincrease the average number of ac-counts per customer from 1.8 to 2.5will enjoy a very significant, andmeasurable, financial benefit. If youcan track just a few of your businessstransactions, you can compare theamount of added benefit youre get-

ting from cross-selling and up-selling.You ought to see higher unit marginsas well, provided youre tracking thismetric on a per-customer basis.s Reduced customer attrition. Oneof the primary, and early, benefits ofa one-to-one marketing program isthat it generates increased loyaltyamong customers. Try tracking de-fections among customers exposedto a relationship-marketing initia-tive compared with a statisticallyidentical control group not exposedto the initiative. What would it be

worth to your business, just in termsof reduced acquisition costs, for in-stance, to increase average customertenure by 10%? Or what about in-creasing the average likelihood of re-purchase by 10%?s Higher levels of customer satisfac-tion. Granted, this is a soft rating.But its easily measured and can pro-vide quick support of one of the ben-efits of a relationship-marketing

program. To get atreal customer sat-isfaction, you might want to mea-sure your customers likelihood torecommend your product, or some-thing more tangible than most tradi-tional customer-satisfaction indices.s Reduced transaction costs and

faster cycle times. One-to-one mar-keting is basically oriented aroundmaking it increasingly convenientfor a customer to buy, which trans-lates directly into a more efficientorganization. The fewer things acustomer has to specify each timebusiness is done, the more efficientthe transaction will be.

In the exhibit Getting Started,weve listed activities that mostcompanies can accomplish fairlyreadily in each of the four key imple-mentation areas of relationship mar-

keting. Some of these activities maywork for your business today; othersmay stimulate your thoughts for fu-ture initiatives. If at least some of theideas make sense to you, then youshould generate your own list andbegin to identify the most importantactivities to put into practice. In anycase, the activities weve listed heremake some of the more basic con-cepts of customer-relationship man-agement practical, and they can helpyour company take the first step.

Assessing Your SituationIf you are considering launching afull-scale one-to-one initiative, thefirst critical task is to assess yourcurrent situation. How big is the gapbetween where you are and whereyou want to be? Whatshould you work onfirst? Where are you inrelation to your com-petitors? The exercisesentitled The BroadView and The One-to-One Gap Tool will give

you a clearer picture of just howmuch work lies before you.

The principal groups whose evalu-ations would be helpful are:s anyone involved in conceiving or

developing one-to-one marketingstrategies at your company;

s all senior managers;s a selection of relevant middle man-

agers and field managers;s channel members, if applicable;

s line employees who interactdirectly with customers (salesand service people, call service rep-resentatives, and retail clerks);

s a representative group of yourcustomers.Responses will probably vary

widely among those groups, and thatis exactly the way the exercisesshould be evaluated by comparinghow different groups rate your com-pany. It is important to value the an-swers in inverse proportion to therespondents position in the corpo-rate pecking order. The best lessons,in fact, will likely come from hearingwhat your customers have to sayabout your companys readiness toengage in one-to-one relationshipswith them. Beyond that, however,there is enormous value in comparing

the answers given by different constit-uencies, in different locations andfunctions, facing different agendasand issues. Being relatively concise,The Broad View can be widely cir-culated to ensure breadth of coverage.The One-to-One Gap Tool willcapture a more robust analysis ofhow your company sees itself bothculturally and organizationally.

Setting PrioritiesOnce you evaluate your businesssability to begin implementing a cus-

tomer-relationship-managementprogram, the next step is to thinkthrough the one-to-one marketingissues that are most (or least) rele-vant to your own particular businesssituation in order to prioritize your

efforts. For instance, what roleshould a Web site play in your com-panys plan to create better relation-ships with customers? Instead ofdesigning a Web site, should you tryto customize your product offering,perhaps by lining up strategic alli-ances with businesses that providecomplementary services?

To set priorities, you need to con-sider how differentiated your cus-



The more customers needs vary,

the more attractive they will find

a learning relationship.


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tomer base is in terms of customerneeds and value. You also need to de-termine how capable your companyis at interacting and customizingthe two action steps in the four-step implementation process. Forinstance, if the needs of your cus-

tomers vary widely, then you proba-bly should focus first on custom-ization: the more your customersneeds vary, the more attractive theywill find a learning relationship.

Consider the contrast between abookstore and a gas station. If a cus-tomer who enters a bookstore is re-minded that his favorite author hasa new book out that has been re-served in case he wants it, he is likelyto become very loyal to the store.Peoples tastes in books vary widely,so its a real service for a proprietor

to remember a particular customerspreferences.

But if the same person pulls intoa gas station and the attendant an-nounces he has a new shipment of93-octane in, just the way he knowsthe customer likes it, the serviceof remembering customer prefer-ences is not nearly so attractive.

When customers value to the en-terprise vary widely, the top custom-ers account for the vast majority ofthe business. We call this a steepskew. Relationship marketing is

more cost-efficient for businesseswith a steep skew than with a shal-low one. The greater the skew, themore feasible it is to cultivate rela-tionships with the most valuablecustomers. If the top 2% of your cus-tomers generate 50% of your profit,you can protect 50% of your bottomline by fostering learning relation-ships with just the top few custom-ers. But if the top 20% of your cus-tomers make up 50% of your profit,then it will be ten times as costly toachieve the same bottom-line benefit.

There are specific strategies wecall them migration strategies appropriate for dealing with a cus-tomer base that is not well differen-tiated in terms of needs or value.These strategies involve either ex-panding the definition of customerneeds or value, or improving the in-teraction or customization capabili-ties of the enterprise.1 For example,when dealing with a customer base

that is characterized by a shallowvalue skew, one strategy would beto improve the cost-efficiency of thecompanys capability to interactadding a call center, for instance, or aWeb site. Basically, the less costly itis to interact, the less important it is

to reserve interactions for top cus-tomers only.

Consider the example of the book-store again. Although it might havea customer base with widely differentneeds, it also has a fairly flat valueskew. Very few bookstore proprietorsactually remember the preferencesof their individual customers becauseit is simply not cost-efficient to do so.Even if the proprietor could remem-ber the tastes of her top 100 custom-ers and teach her salespeople to doso as well these top customers

would probably account for less than10% of the proprietors business.

But if the bookstore were to in-crease its capability to interact cost-efficiently say, by adding a Website then the amount of effort re-quired to remember customers pref-erences would decrease dramatically.Amazon.com really does rememberits customers individual tastesandnot just for a top few, but for thou-sands. As a result, Amazon.com isable to create the kind of learningrelationship with its customers that

will keep them loyal. It will alwaysbe at least a little easier for the cus-tomer to return to Amazon.com tofind a book than to go someplaceelse and explain his preferencesanew. This is one reason 59% ofAmazon.coms sales come from re-peat customers roughly twice therate of typical bricks-and-mortarbookstores.

Of course, Amazon.com and othercompanies that do such a good job ofremembering their customers tastesneed to allow them to adjust their

preferences freely. For instance, acustomer might buy a book as a giftfor someone with different interests,or he might simply change his mindabout topics hes interested in.

A Foundation forthe Long TermIts been our experience that imple-menting even a relatively limitedone-to-one program tends to moti-

vate a company to take a more inte-grated, enterprise-wide view of itscustomers. String a few of these proj-ects together and pretty soon youllhave to deal with a series of enter-prise issues. People in different func-tions and from different business

units will be working together morefrequently on an ad hoc basis. Man-agers on one project will be trying torelate their metrics to the outcomesof other projects.

As you begin to take a more inte-grated view of the enterprise, certainorganizational issues will arise. Con-sidering the following questions maygive you some advance warning:s If you measure a customers valueacross more than one division, willone person be in charge of that cus-tomers relationship? If so, how will

this be structured?s Should the enterprise set up or mod-ify its key-account selling system?s Should the enterprise underwritea more comprehensive informationsystem, standardizing customer dataacross every division?s Should the company be thinkingabout investing in a data mart or adata warehouse?s Should the sales force be better au-tomated? If so, who should set thestrategy for how sales representativesinteract with individual customers?s Does it still make strategic sense tohave different sales forces for differ-ent divisions?s Is it possible for the companys var-ious Web sites and call centers towork together better? That is, do Webpages coming from different divi-sions and locations make sense toa customer looking at them in total?Can callers be hot connected be-tween call centers? Should you com-bine your call centers?s Should the company package moreservices with the products it sells?

If so, how should those services bedelivered?s Should the business seriously ex-plore investing in mass-customiza-tion manufacturing technologies?

To be ready to tackle issues likethese, you might want to create afew programs now. Set up a multi-department committee to agree ona standard way to report customerinformation, for instance. Agree on




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PROCESSES

1. Does the company haveestablished quality-assuranceprocesses?

a. We do not consider quality-

management practices.

b. We would like to have formal

quality-management initiatives.

c. We have some methods in place

to ensure quality-managementinitiatives.

d. We have a formal quality-

management organization.

2. Are the companys businessprocesses customer-centric?

a. We do not pay any attention

to how our customers and our

business processes interact.

b. We have some understanding

of the link between customers

and our business processes.

c. We understand most of the

interactions between customers

and our business processes.

d. We have a full understanding

of all the possible interactions

between customers and our

business processes.

KNOWLEDGE STRATEGY

5. Does the company maintain a strategyfor collecting and using informationabout customers?

a. We handle information about customerspoorly.

b. We encourage the collection and use

of information to gain knowledge about

customers.

c. We have programs to collect information and

use our knowledge about select customers.

d. We continually enhance our strategy to collect

and use our knowledge about our customers.

6. How effectively does the companycombine information on customerswith its experiences to generateknowledge about its customers?

a. We have poorly developed and inadequate

processes for combining our data on cus-tomers with our own experience and views.

b. We encourage using processes and systems

that support the collection of both customer

information and experiences about some

customers.

c. We have implemented systems and processes

that collect and combine information and

experiences about selected customers.

d. We have rigorous processes to combine

information and experiences about each

customer.

PARTNERSHIPS

7. How does the company select itspartners?

a. We pay little or no attention to whether

the partners we select are customer-centric.

b. We try to select partners that are

customer-centric.

c. We evaluate strategic partners based on

their customer centricity.

d. We evaluate all potential partners based

on their customer centricity.

8. Does the company understand therelationships among its customersand partners?

a. We have little or no understanding ofthe relationships among our customers

and our partners.

b. We try to understand the relationships

among our customers and our partners.

c. We understand the relationships among

our customers and our partners.

d. We understand and use the relationships

among our customers and our partners.

TECHNOLOGY

3. Does the company takecustomers needs intoconsideration when selectingand implementing technology?

a. Our IT department is rather

autonomous and in charge of

technology acquisition.

b. We ensure that our customers needs,

not just our own internal needs, areconsidered when selecting

technology.

c. We use some degree of customer

validation when selecting technology.

d. We ensure that all technology

selections are customer-centric.

For instance, we research how

to improve customer convenience.

4. Does the company provide itsemployees with technology thatenables them to help customers?

a. We are not particularly advanced

when it comes to technology.

b. We encourage the use of technologythat helps our daily interactions with

customers.

c. We provide technology in many areas

to improve our daily interactions with

customers.

d. We provide the most effective

technology available to all employees

who interact with customers.

How Far Do You Have to Go to Prepare?

This exercise, to be administered to employees at various levels

and in various functions, is designed to capture a robust analysis

of how your company sees itself both culturally and

organizationally. It should also be given to a representative group

of customers, with the language tailored appropriately, in order to

expose the gap between internal and external perceptions.

For each question listed below, select the statement that most

closely reflects your opinion of the company as you view it today

not as you think it should be or it might be in the future.

The One-to-One

Gap Tool


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CUSTOMER RELATIONSHIPS

9.How effectively does the companydifferentiate its customers?

a. We do not differentiate among customers.

b. We try to differentiate among customers.

c. We collect and use information gleaned

from interactions with customers to

differentiate each customer and to evaluate

the importance of each relationship.

d. We have a continuously updated customer-

knowledge database that provides all the

critical business information about our

relationships with individual customers.

10. What steps has the company takento improve the total experience ofits customers?

a. We pay little or no attention to the total

experience of customers.

b. We know all the points where customers

are in contact with the business, and we

manage these areas effectively.

c. We conduct frequent surveys with selected

customers and make improvements based

on their feedback.

d. We have a continual dialogue with each

customer and use well-developed methods

to improve our relationships.

11. How effectively does the companymeasure and react to customersexpectations?

a. We make no effort to understand our

customers expectations.

b. We have some idea of our customers

expectations and use them in building

relationships.

c. We periodically solicit customers input

about expectations and take actions to

improve the relationships where possible.

d. We work as a team with our customers

to ensure that their expectations are

met or exceeded.

12. How effectively does the companyunderstand and anticipate customersbehavior?

a. We pay little or no attention to the behavior

of our customers.b. We understand the trends and buying

patterns of our customers and consider

them when making critical decisions.

c. We collect data on our customers

preferences and other behaviors and use

that information in our business planning.

d. We maintain a profile of each customer and

refer to it when dealing with customers.

EMPLOYEE MANAGEMENT

13. To what degree are employeesempowered to make decisionsin favor of the customer?

a. We encourage employees to strictlyfollow procedures and policies

developed by top managers.

b. We encourage employees to make

independent decisions within the

guidelines set by management.

c. We strongly encourage employees

to make decisions that positively

affect our customers satisfaction.

d. We require every employee to take

whatever action is appropriate to

ensure the ultimate satisfaction of

the customer.

14. Has the company formally

linked employees rewards withcustomer-centric behavior?

a. We make no link between employees

rewards and their treatment of

customers.

b. We use ad hoc methods to reward

customer-centric behavior.

c. We make customer-centric behavior

a part of performance appraisal

criteria.

d. We make customer-centric behavior

a significant part of performance

appraisal criteria.

COMPETITIVE STRATEGY

15. To what extent does the companyunderstand how customersaffect the organization?

a. We attach little significance to theviews and opinions of customers.

b. We place some importance on

understanding the impact of our

customers on the business.

c. We place importance on under-

standing how a select group of

customers affects our business.

d. We place vital importance on

understanding how each customer

affects our business.

16. How much influence docustomers needs have on thecompanys products and services?

a. We pay little or no attention to theneeds of our customers when we

design our products and services.

b. We attempt to develop products and

services that meet our customers needs.

c. We use input from selected groups

to assist with the development of

products and services.

d. We design products and services to

meet the needs of individual

customers.

17. How effectively does thecompany build individualizedmarketing programs?

a. We build all marketing programs to

reach a mass market.

b. We build all marketing programs

to fit a perceived niche market.

c. We build some marketing programs

that are specific to each customers

needs.

d. We build all marketing programs to

be specific to each customers needs.

18. How aware is the company ofother organizations approachesto building customerrelationships?

a. We pay no attention to the customer-centric strategies of other companies.

b. We know which companies are

customer-centric regardless of the

industry.

c. We know how our competition

approaches customer centricity.

d. We know the best-in-class

approaches to customer centricity.


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a cross-divisional standard formatfor customer service calls. Come upwith a weighted measure to rankcustomers by their overall value not just their worth to one division.

Obviously, its impossible to sim-ply strap on a one-to-one marketing

campaign and continue to do businessin a traditional manner. Many com-panies Dell, USAA, American Ex-press, and Amazon.com, for in-stance will be more successful atcreating learning relationships withtheir customers because their busi-nesses were built on the basis ofdirect customer interaction.

But its also possible to makesteady, incremental progress by con-centrating on the four implementa-tion steps and applying them to

different aspects of your currentbusiness. Large, well-establishedenterprises like Pitney Bowes, WellsFargo, 3M, Owens Corning, BritishAirways, and Hewlett-Packard havebegun creating stronger, more inter-active relationships with their cus-

tomers. They implement these strat-egies piece by piece, in one businessunit at a time, wrestling with oneobstacle at a time. But they are mak-ing progress and gaining a significantcompetitive advantage as a result.

So instead of asking, Is your com-pany ready to implement a one-to-one marketing strategy? perhapsthe better question is, How muchof a one-to-one marketing programis your company ready to deal withtoday? Clearly, putting relationship

marketing to work properly involvesmuch more than simply sending outpersonalized mail, training your callcenter personnel in phone etiquette,or designing a user-friendly Web site.But when correctly executed, theprocess of making even incremental

progress toward becoming a one-to-one marketer can pay immediatedividends as you strengthen anddeepen your companys relation-ships with its customers.

1. For a more comprehensive explanation ofthese concepts, see Don Peppers and MarthaRogers, Enterprise One to One: Tools for Com-peting in the Interactive Age (New York: Cur-rency/Doubleday, 1997), especially chapter 3and chapter 13.

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Is Your Manager Ready for One to One Marketing

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