Can permission based marketing save CRM from commodity street?

Data and direct marketing have become commodity products – but will CRM head the same way? Simon Davis of MarketDeveloper argues the case for its potential saviour: Permission Based Marketing.

It seems a crying shame, but the direct marketing industry has lost the plot. What should have been the twin driving forces of the future of marketing – good data allied to sound pinpoint Customer Relationship Marketing – have failed to live up to their initial promise.

The reasons for the demise are complex, of course, but for the data industry the end result has been the transformation of what should have been a high value market trading in high quality customer information, into a commodity product where there is little innovation or excitement. And the management of the customer relationship is headed the same way. Or is it?

On one level companies have not lost their love of 'cheap' and 'quick fix' solutions. Where once the universal panacea was the application of a splendid CRM software solution, now it is the outsourcing of the customer management process to a distant call centre. Both, I would argue, show a certain contempt for the whole process of managing the customer 'relationship', and both are terribly short sighted. The trouble is, once they have been grasped as 'solutions' it isn't easy to go back. Even if you do (and there are some signs that the 'outsourcing' solution has back fired in places) the spectre of 'commoditisation' still remains. Even if the call centre 'relocates' back again, the natural desire will be to claw savings back from somewhere.

How can we fight it off? How can we demonstrably add real value to CRM and avoid the pitfalls of becoming a price lead commodity? I'd argue that first step is a greater focus on the customer themselves and their unique needs. Permission Based Marketing (PBM) has been around since the late 1990s. In essence it recommends that the real commercial effort should be focused on marketing what the customer has said he or she has an interest in, to market it at the appropriate time the customer chooses, and, finally, via the most appropriate channel for the customer and their lifestyle.

To establish this we need a number of things to be put into place. Firstly, we need the customer’s trust. Before we can begin a dialogue, we need to have the right to communicate – and we need the first to establish the second. We also need to answer the very simple consumer question: 'what's in it for me?' We need to build relevance and show reward. To gain permission to build the dialogue, we need to ensure there is an incentive to begin that dialogue – even a whole range of incentives, all appealing to different customer needs.

Once the trust and dialogue are built, we can then increase the level of detailed understanding we have on each customer. They’ll gladly co-operate provided they are confident the rewards will commensurate. We are also able to build and continue to develop this relationship. The value of CRM is in the management of this far more complex, trust-based relationship.

The rise of online channels has clearly benefited the rise of PBM. The world of SMS and email allows for swift communications to and from customers. And by simple linkage to CRM systems, we should have the ideal vehicle to engage the customer who has long ago tired of endless 'junk' being thrown at them. We replace the throw it at the wall mentality with a culture of listening and responding – and CRM is ideally placed to manage this relationship, and manage it profitably for all parties. But it will it be able to deliver?

In the first place it requires a huge cultural about face for many companies. But with the alternative dm approach dying on its feet - with response rates fading fast - the 'chuck it at the wall' mentality can only survive by squeezing margins and forcing us further into the commodity approach to doing business. It's a downward spiral but as CRM, direct marketing and PBM converge, we can break out, and those with the right skills and ability are already doing just that. But we need the skills, and need those skills in themselves to be valued.

The problem is it's not just the data which has become a commodity, but also many of the people dealing with it and the clients. With any market, it's not only the commodity but the cost of entry which becomes a problem. If anyone with a laptop and a phone can start to advise clients on the best ways to manage their customers, then the value of that advice also becomes a commodity. It takes years of training to rise from being a doctor to being a consultant. As a result the advice given is seen to be of high quality and valuable. But what of that coming from so called ‘CRM experts’? Do they have real knowledge and leaning - recognised by relevant and accredited industry bodies - coupled to hard gained experience? Or are they simply sales people who have acquired a certain ‘gift of the gab’? The trouble is, we can’t tell – and there is no way independently to verify the level of knowledge and achievement.

This is an industry wide issue. Of course it is all too easy to argue that the 'powers that be' need to act, but as the financial returns which pay for the membership fees fall they will have to act – or risk having very little left to represent. This is one moment when having a fractured trade structure is a real and continuing weakness, and one I would argue we cannot afford to support for much longer.

The opportunities to transform the future of CRM and deliver high value returns through the building and application of effective PBM approaches are there to be grasped. The danger is that in a business which is more and more running towards commodity pricing, and built upon low cost entry levels and poor levels of training and development, we will not only miss the boat, but have it sink right out from under us. There is a real, challenging and profitable future if we can bring these disciplines together, there is little future except a slow decline if we cannot.