Developing relationships with the best customers By Richard Morga

A woman, in need of a brassiere, dials an 800 number and phones in her "prescription." Hours later, in less time than it takes to rinse and dry an

A man, hopelessly lost in matters of interior design, borrows a digital camera from the nearest Ethan Allen. He returns the camera with the film still in it after having shot every room in his house. In this way, Ethan Allen not only reconstructs the home’s interior but sets about decorating it. “Here’s the chair with the blue floral damask rather than cotton stripes. And here’s what the side tables will look like next to the bed. Too wide, perhaps. But how about these side tables?”
Welcome to The One to One Future that awaits us all. The phrase is the title of a new book written by Don Peppers and Martha Rogers and published by Doubleday. As suggested by its subtitle, Building Relationships One Customer at a Time, the book explores the world after mass . . . after mass production, after mass marketing, after mass media.
It’s a world driven by technology, whose galloping pace Peppers, the former Madison Avenue rain maker, and Rogers, a former ad executive who teaches marketing at Bowling Green State University, have well in mind. “Today there is more computational power in a new Chevrolet,” the authors report, “than there was in the Apollo spacecraft that went to the moon.”
That’s a lot of computational power, and marketers who fail to harness it might as well pilot themselves to the moon, too. “The old paradigm,” the authors explain, “is being replaced by a total new paradigm, a one-to-one economic system.” Its emergence, they go on to promise, will “be every bit as disruptive to our lives, and as beneficial, as the Industrial Revolution was to the lives of our great-grandparents.”
In some ways, the new paradigm will return us to the lives of our great-grandparents. Society will still distinguish between the haves and the have nots. But technology will kick in with its own variation–the theres and there nots–depending on one’s liberation from the workplace. “Some people will have jobs that require them to be there–somewhere–while others will be able to work mostly from their homes, without having to be anywhere.”
More relevant still are the changes this transition (or “paradigm shift,” as the authors call it) will impose on marketing. Even micromarketing will get miniaturized, and it’ll do so for the same reason the music-listening experience did by way of the Sony Walkman or the cooking experience did by way of the microwave. It’ll get miniaturized by technology, the effects of which will reduce the relevant market segment to a single individual.
This focus on the individual will, in turn, produce a new set of marketing principles that up-end those mass marketers have accepted for decades as articles of faith. Consider, for example, the comparisons drawn by Peppers and Rogers:
* Mass marketing requires product managers who sell one product at a time to as many customers as possible, but 1:1 marketing requires customer managers who sell as many products as possible to one customer at a time.
* A mass marketer tries to differentiate his products, while a 1:1 marketer seeks to differentiate his customers.
* A mass marketer tries to acquire a constant stream of new customers, but a 1:1 marketer also tries to get a constant stream of new business from current customers.
* A mass marketer concentrates on economies of scale (getting the most out of the manufacturing process), but a 1:1 marketer focuses on economies of scope (getting the most out of the individual customer).
The 1:1 marketer, by focusing on the individual, will by design be able to separate good customers from bad. This is something mass marketers–through frequent-flyer, “friends and family” and other usage-based programs-have only recently started to do. “At (1:1 marketing’s) core is the Pareto Principle,” the authors state, “the idea that 80% of any company’s business comes from 20% of its customers.” A good-bad distinction of this sort seems especially overdue in light of ratios the book attributes to American Express: “The best customers outspend others by ratios of 16 to 1 in retailing, 13 to 1 in the restaurant business, 12 to 1 in airlines, and 5 to 1 in the hotel/motel industry.”
This isn’t to say The One to One Future is completely free of technobabble or fully complete in its vision; it’s not. But it is leavened with enough common sense to make for plenty of substance throughout and an action-provoking thought at the end: “All your products are ephemeral. Only your customers are real.”
Copyright Adweek L.P. (1993)