Direct-to-Customer Commerce

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Strategic insights into the direct commerce industry, including ecommerce, direct marketing and related fields

The True Cost of CRM?

Without the question mark, this is the title of an article by Peter Rosenwald in the June 1 issue of Chief Marketer. Mr. Rosenwald does an excellent job of reviewing the economic analysis that is appropriate for assessing how much capital should be invested in a CRM solution, especially in light of the likely return, based upon increases in Life-Time-Value, compared to the cost of acquiring new customers.

The article is an excerpt from Mr. Rosenwald’s book Accountable Marketing: The Economics of Data-Driven Marketing.

I have no particular disagreement or dispute with Mr. Rosenwald, but I worry a little that to focus on CRM as the solution to increasing LTV is getting the cart before the horse.

Admittedly, Mr. Rosenwald’s focus is the marketing aspect of the equation, and the viewpoint I’m advocating is a more holistic view.

When a customer transacts business with you for the first time, that customer is conducting a little test of their own: Will I find this product/service acceptable? Am I getting fair value for what I’m paying? Will they treat me right if there’s a problem with my order? Will they even get my order correct, without me having to contact customer service?

When new customers get the right answers to these questions, the likelihood they will become repeat customers goes up. And their LTV will increase, their tenure as a current customer will continue, as long as they keep getting the right answers.

Not to say marketing doesn’t have a role, but keeping customers is more about quality, service and execution than it is about CRM. Because quality, service and execution is what leads to great customer relationships.

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Filed under: Direct Commerce, Uncategorized

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