With the scandals plaguing Facebook this year – plus the changes to the algorithms that are severely limiting organic reach – many digital managers are realizing: the volatility of digital ecosystems is eliminating the ROI of many digital strategies. No longer can we put our trust in the social networks where our audiences are. In less than two years, Facebook has restricted organic reach so much that reach is measured in decimal points.

Unfortunately, brands are doing the exact same thing with Instagram, pouring in focus and investment to build up audiences. There is no surprise. Before 2020 digital managers will be scrambling to find another platform to pour their money into.

Each time, brands are trying to get closer to their customers, to build communities, nourish them, and provide a base to which to sell their wares. But each time, the platforms shift like sand in an earthquake, crumbling the business efforts to the ground. The only option is to rebuild.

Smart businesses wont rebuild on a fault line. Smart businesses will find solid ground to build on. If there is one thing that has proven to be more solid in digital than anything else, it’s email.

Email is without a doubt the foundation of the Internet. People check their email more frequently than they check social media. Whether you are on Snapchat, Facebook, or some other obscure network, you have one thing in common with every other internet user: you have an email address.

The other thing that doesn’t change are the people themselves. Having your own database of your clients and prospects is the single most valuable asset your business can have. Don’t trust that to Facebook or other networks, you need to own this data.

Owned Ecosystems Are The Only Way

A few years ago, the common way to look at digital was the Owned, Earned, and Paid model.

  • Owned are assets that you control 100%, like your website and email list
  • Earned are assets that people post for you, like when people talk about your brand on social networks or when journalists cover your product launches
  • Paid is influencers and media – you get space and attention in exchange for cash

Many businesses made the mistake of thinking that social network audiences were owned. This was never the case. In the best case, it was borrowed. Now that organic reach on Facebook is essentially zero, these platforms have definitely moved over to the paid category.

The only true owned ecosystem that a business can have is a CRM program. In its simplest form, CRM is a database that serves as the basis for email marketing campaigns. You own the database, and you decide when you send communications.

The more data that you have, the more you can do to create a stronger relationship with your customers. The relationship looks like this:

the relationship between data and actions in CRM programs

Once you have purchasing information you can create a loyalty program which rewards people for staying faithful to your brand. This is crucially important in 2018 because our in our highly visual digital ecosystem people are often attracted to a new product and ask what the brand is later. It’s easier than ever to shift between different brands in a way that wasn’t as common before.

Personalization is Key to Creating a True Brand Relationship

Email marketing campaigns only work when the content of each email is customized to the person it is being sent to. Too often brands send our blanket product emails that are irrelevant to the majority of the people who receive it. As soon as someone receives one or two irrelevant communications, they will stop checking to see what is inside of those emails.

The promise of digital is the ability to use data to create customized experiences, and CRM has pioneered this capability. It can be as simple as sending different messages to men and women, or people who live in certain areas, or different age groups.

The mecca of CRM is to understand behavioral data and use that to communicate about your products in a hyper-relevant way. This is the basis for Google’s strategy, finding affinity groups and targeting micromoments when people are the most susceptible to messaging. It’s great that Google does that, as long as you have a nice media budget. The problem is that the more targeted you get, the more expensive it gets to reach those people. Brands have to find the trade off between targeting and the reach that they need in order to meet commercial objectives.

A CRM database that is constantly nourished by customer data – and particularly information about how people use products, when they buy them, and why – can eventually give you a better level of potential targeting than what Google offers, and the cost of the communication stays the same.

You have to get to this point though. People don’t just give out information without getting something in return. Brands have to animate their databases and reward them in exchange for getting valuable customer data. But once you have that data, it’s yours and you can maximize your communication strategy accordingly.

The Most Important KPI: LTV (Lifetime Value)

A shift to CRM-focused marketing is really about changing how you view your relationship with customers. Instead of marketing goals like reach and sell out, a CRM-based approach provides the best possible KPI for businesses: Lifetime Value.

LTV is how much people will spend on your brand throughout their lives, instead of looking at each purchase individually. CRM programs enable access to this KPI because you can see how people interact with your brand over the long term. By encouraging people in your database to tell you about the products they buy (or, even better, integrating CRM into e-commerce/e-retail) you can understand how your customers behave, identifying people who buy more and learning why that is. You can use those learnings to stimulate other customers with a smaller LTV in order to generate incremental sales.

Gathering data is not necessarily cheap. In many cases the cost per contact can run quite high depending on your industry. You need a tool to manage your database and send your communications, those software subscriptions can cost a pretty penny too. Rewards programs also cost money, so when you add these three elements together you have your level of investment. If you are not using LTV to calculate your ROI, CRM can seem prohibitively expensive.

What’s important is to calibrate your CRM business model so that there is a clear ROI. I recommend segmenting your database into different parts so that for clients with less data you invest less in communications and rewards and invest more heavily in people on whom you have more data and purchasing history. This way you don’t spend extra money on customers for whom you haven’t established a clear LTV.

Are you working on CRM for your brand or business? Get in touch


8 thoughts on “The Importance of Bringing Your Customers into Owned Ecosystems

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