The Tipping Point for CRM

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The history of modern advertising and communications is a story of evolution and shifting emphasis generally from the broad, towards the targeted.

The first ‘epoch’ of this history could be characterised as the ‘media-centric’ era. Emerging mass communications channels like newspapers, radio and TV provided advertisers with a new opportunity to reach hitherto impossibly large audiences. In the media-centric era, the broadcasters broadcast, the audience gathered to watch, read or listen in rapt attention, and advertisers tagged along for the ride, seizing the moment to shout their message from the rooftops for the first time.

As the media grew and diversified, it ushered in the second advertising epoch – the ‘audience-centric’ era. Satellite TV channels catered to more targeted interest groups. A booming press printed magazines and newspapers for every conceivable demographic and subculture. Brands could now align themselves more closely with a target audience by taking advantage of the diversity of media opportunities available. High fashion brands could advertise in aspirational lifestyle magazines, teenage deodorants could advertise on MTV, and so on.

We are living in the third advertising epoch today. It is the ‘person-centric’ era, and it has been driven by the technological revolution that has transformed media and the way consumers interact with it. Simply put, mobile phones combined with social networks and digital platforms have changed the advertising game by creating the opportunity to personalize and hyper-target advertising campaigns.

You’ll often read, or hear, that ‘modern consumers expect’ tailored, personalised, one-to-one experiences delivered by brands. Perhaps a more accurate way to say it is that the best and smartest brands have seized the technological momentum of recent years to deliver those experiences, understanding that this approach would engender better results.

This boom in innovative, technology-driven advertising keeps many marketers awake at night. For every Nike+ or “Share a Coke”, there are hundreds of other brands struggling to work out how to create a 5% efficiency improvement in their digital ad performance.

For those marketers, we have a reassuring message – when you boil it down, the secret to success is actually quite simple.

What does every successful business have in common? It’s not incredibly innovative, technologically sophisticated advertising campaigns, but rather a simple equation:

Cost of customer acquisition < Customer lifetime value

The reality is that without the ability to balance the books, everything else – including brilliantly executed 1-to-1 digital ad campaigns – is just window dressing. And the easiest way to balance the books is to make sure you extract more value from your customers than it costs you to earn their custom in the first place.

Businesses often look at this equation and assume that they ought to be doggedly pursuing ways to reduce the cost of acquiring new customers.

Yet an interesting paradox is that brands should actually be looking to invest more in customer acquisition, not less. Crucially though, that extra investment needs to be laser focused on acquiring the customers with the best prospective lifetime value – and how do you identify them?

All too often, businesses have a 2-dimensional view of their customers. Let’s take an example – two individuals from the ‘high spending’ segment will effectively look identical based on the data in the CRM. User A spends $25 per month every month, User B spends $27 per month every month. It’s a challenge, based on that limited view, to understand how to acquire more of those kinds of high-value customers because as far as our CRM is concerned, they are identical.

The more nuanced reality is that User A is a single parent, living in the inner city, working a part time job whilst also caring for their children, whilst User B is married and childless, commutes in their car to work every day and spends their free time playing golf. In other words, the messaging, narrative, creative execution, promotional strategy and everything else that goes into acquiring and converting customer A should probably be different to that of customer B. The challenge is, how do you uncover all of this extra information in the first place?

This is where digital can provide a powerful solution. Data is the new oil – it gives the detail needed to bring your customer’s needs into focus – and digital platforms have been mining it for some time now.

By connecting the 2-dimensional CRM to the digital channel, businesses can significantly improve the visibility and quality of the data insights they have into their customers. They go from a “User A & User B are the same” viewpoint, to a 3-dimensional view that enables the kind of tailored marketing required to acquire more of the high-value customers you need to make your cost of acquisition reliably lower than their lifetime value.

The CRM sits at the heart of your businesses’ data strategy – all it needs is a pipeline connecting it to the deep reserves of data provided by channels like Facebook and Instagram, Twitter, Amazon, Snap or Pinterest. Once that’s done, investing marketing dollars wisely into acquiring the best possible customers becomes a far more simple task – and one that will inevitably lead to success.

Juan Carlos Ruiz Monzien

Juan Carlos Ruiz Monzien

Managing Director of North Latam Operations at Adglow
Juan Carlos is Managing Director of Adglow's North Latam operations. Adglow is a global digital advertising technology and services vendor, and an approved marketing partner to Facebook, Instagram, Amazon, Twitter, Snap and Pinterest.
Juan Carlos Ruiz Monzien

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