Commentary & Analysis
Better Together: VDP and CRM Part 2
by Heidi Tolliver-
By WhatTheyThink Staff
Published: February 16, 2005
by Heidi Tolliver-Nigro The number one way to build rapport with customers is to personalize the relationship, which is the very premise of variable data printing. February 16, 2005 -- Last month, we talked about the overlap between Customer Relationship Management and variable data printing, and how VDP is one way that companies can use traditional print to meet some of their long-term CRM goals, including targeting Lifetime Customer Value (LCV). This month, I want to talk more about the LCV concept. Essentially, increasing your customers’ Lifetime Value comes down to three objectives: Increasing the length of time a customer buys from you, Increasing the amount they spend on each purchase, and Decreasing the time between purchases. Working on all three of these objectives at once is what marketing expert Jay Abraham calls "working on the geometrics" of your business and building a rapport with your customers. He estimates that a 10% improvement in each of these categories can result in an increase of 34.4% in your sales. But here’s what’s interesting, and why Lifetime Customer Value is being discussed here: The number one way to build rapport with customers is to personalize the relationship, which is the very premise of variable data printing. Writes Abraham: Sometimes you communicate for the sake of communicating, which is the premise of CRM. Instead of saying, let's do business with XYZ Corporation, the customer will think, "You know, I'm gonna to do business with Joe. I like Joe. Joe's been emailing me those great tips every month because I subscribe to his newsletter. I have a good relationship with Joe. He followed up with me and made sure I was doing okay. I talked to Joe on the phone last month, he gave me some great advice. I'm gonna stay with Joe. Just because this other company's product is a few bucks cheaper, no matter, I know Joe, I trust Joe, I am going to stay with Joe." It's no longer "I'm going stay with XYZ Corporation." You have succeeded in de-commoditizing your product and have taken a very positive step towards increasing the lifetime value of your customers. Among the key ways that companies try to establish this relationship is with personalized emails, newsletters, and other long-term campaigns. But unlike traditional campaigns that are designed to sell the customer something, these campaigns are designed to make the customer feel important and appreciated. Of course, this doesn’t mean that you don’t try to sell them something, too. But it’s not always the main reason for communicating. Sometimes you communicate for the sake of communicating, which is the premise of CRM. CRM, LCV, and VDP Now here’s the real kicker. You may have noticed that automobile manufacturers and pharmaceutical companies are among the most frequent and visible users of variable data printing. Often, when you hear about successful long-term VDP programs, they are from one of these two industries. This is not by accident. Nor is it any accident that automobile dealerships and pharmaceutical companies are among the most aggressive adopters of CRM and among those that most profoundly understand the importance of LCV. For example, regarding auto dealerships, CRM magazine recently wrote: For automakers, the relationship with customers is over at the sale. However, for dealers, that’s where the relationship starts, since most of them are making money on after-sales add-ons and service. The average dealership sale is $23,000 and customer lifetime value is into six figures. According to CRM magazine, of the approximately 22,000 car dealerships across the United States, 50–70% of those are estimated to be using CRM. With such an emphasis on personalizing customer relationships and calculating Lifetime Customer Value, combined with the very high value of the product they are selling, it is no surprise that auto dealers are among the strongest proponents of VDP. Consider the example of Johnson-Sewell Lincoln Mercury dealership discussed in an earlier column. By installing CRM: 80% of confirmed appointments show up. 60% of those people purchase a vehicle. Sales increased 33% after the CRM system was installed. Understanding the how’s and why’s of personalized communications is an art form that doesn’t come off the rack. This auto dealership’s CRM system included automatic print contacts with customers. These included sending a thank-you letter the day after a car is sold; then, three days later, sending a letter to ask if everything is okay with the new car; and following up with letters to remind owners about scheduled maintenance. Its CRM system can even send birthday cards to customers. Sound Like Anyone You Know? Does tapping into all of this sound like the commercial printing industry you know? Probably not, and it’s one reason that variable data printing hasn’t taken off like expected. Anyone can buy a digital press, install variable data software, and hire a database management company to massage customer databases. But understanding the how’s and why’s of personalized communications is an art form that doesn’t come off the rack. If you listen to today’s VDP market leaders, and analyze their long-term variable data programs, these companies understand this. But it’s something that the rest of the industry doesn’t. Not yet. Next month, we’ll discuss some more industry examples of CRM and variable data print, as well as some of the challenges of implementing CRM.