- Explain how companies manage customer relationships.
- Describe social media marketing and identify its advantages and disadvantages.
Customers are the most important asset that any business has. Without enough good customers, no company can survive, and to survive, a firm must not only attract new customers but, perhaps more importantly, also hold on to its current customers. Why? Because repeat customers are more profitable. It’s estimated that it costs as much as six times more to attract and sell to a new customer than to an existing one (Bean, 1999). Repeat customers also tend to spend more, and they’re much more likely to recommend you to other people.
Retaining customers is the purpose of customer-relationship management—a marketing strategy that focuses on using information about current customers to nurture and maintain strong relationships with them. The underlying theory is fairly basic: to keep customers happy, you treat them well, give them what they want, listen to them, reward them with discounts and other loyalty incentives, and deal effectively with their complaints.
Take Caesars Entertainment Corporation (formerly Harrah’s Entertainment), which operates more than fifty casinos under several brands, including Caesars, Harrah’s, Bally’s, and Horseshoe. Each year, it sponsors the World Series of Poker with a top prize of $9 million. Caesars gains some brand recognition when the twenty-two-hour event is televised on ESPN, but the real benefit derives from the information cards filled out by the seven thousand entrants who put up $10,000 for a chance to walk away with $9 million. Data from these cards is fed into Caesars database, and almost immediately every entrant starts getting special attention, including party invitations, free entertainment tickets, and room discounts. The program is all part of Harrah’s strategy for targeting serious gamers and recognizing them as its best customers (ESPN Poker, 2010; Fitch, 2004).
Sheraton Hotels uses a softer approach to entice return customers. Sensing that its resorts needed both a new look and a new strategy for attracting repeat customers, Sheraton launched its “Year of the Bed” campaign: in addition to replacing all its old beds with luxurious new mattresses and coverings, it issued a “service promise guarantee”—a policy that any guest who’s dissatisfied with his or her Sheraton stay will be compensated. The program also calls for a customer-satisfaction survey and discount offers, both designed to keep the hotel chain in touch with its customers (Hotel News Resource, 2011).
Another advantage of keeping in touch with customers is the opportunity to offer them additional products. Amazon.com is a master at this strategy. When you make your first purchase at Amazon.com, you’re also making a lifelong “friend”—one who will suggest (based on what you’ve bought before) other things that you might like to buy. Because Amazon.com continually updates its data on your preferences, the company gets better at making suggestions. Now that the Internet firm has expanded past books, Amazon.com can draw on its huge database to promote a vast range of products, and shopping for a variety of products at Amazon.com appeals to people who value time above all else.
Permission versus Interruption Marketing
Underlying Amazon.com’s success in communicating with customers is the fact that customers have given the company permission to contact them. Companies that ask for customers’ cooperation engage in permission marketing (Godin, 1999). The big advantage is focusing on an audience of people who have already shown an interest in what they have to offer. Compare this approach with mass marketing—the practice of sending out messages to a vast audience of anonymous people. If you advertise on TV, you’re hoping that people will listen, even though you’re interrupting them; that’s why some marketers call such standard approaches interruption marketing (Bianco, 2004). Remember, however, that permission marketing isn’t free. Because winning and keeping customers means giving them incentives, Caesars lets high rollers sleep and eat free (or at a deep discount), Norwegian Cruise Line gives members of its past guest program, Latitudes, discounts on sailings, priority check-in, and members-only cocktail parties. Customer-relations management and permission marketing have actually been around for a long time. But recent advances in technology, especially the Internet, now allow companies to practice these approaches in more cost-effective ways.