-1-

e-Marketing Fundamentals: the Customer Relationship Curve

By Mark D. Thompson Chief Technology Officer RappDigital, Inc.

Introduction Practice makes perfect. This is especially true of Web-based marketing, given the confluence of skill sets necessary for the execution of state-of-the-art, ROI-generating e-Marketing solutions. In order for the interdisciplinary web marketing team to succeed, each team member must share a common vision and execute their specialty within the context of that shared vision. This means practicing the fundamentals. Let us revisit one of those fundamentals here, the Customer Relationship Curve (CRC), and model it as a Finite State Machine (FSM), a conceptual device that takes specific inputs and performs specific actions based on those inputs. In doing this, we will arrive at a common representation of the customer relationship curve in a form directly useable by team members from each of the disciplines of the team. At the same time, this technique elevates the customer to become the focal point of all activities of the e-Marketing team, including marketing, creative, technical, information architecture and analytics.

The Customer Relationship Curve The customer relationship curve, or Customer Lifecycle (CL), was popularized by the Customer Relationship Management (CRM) movement in the 1990s and is likely derivative of the sales curve model of the post war era. Although specific implementations may vary in level of detail and nomenclature, all CRCs implement three phases or states: customer awareness, customer conversion and customer retention.

Customer Retention

Customer Awareness

Customer Lifecycle

Customer Conversion

-2Diagram 1. Generic Customer Relationship Curve: The generic CRC consists of three states, customer awareness, customer conversion and customer retention.

These states represent the targets state of mind at a particular moment in time in their relationship with the brand and/or product(s). The markeers objective is to move a target from one state to the next, enriching and enhancing the relationship with the target in order to maximize the value exchange between the offering(s) and the targets perception of those offerings.

Mapping Communications to the Customer Relationship Curve In order to move targets from one state to the next, we must focus the marketing communications voice, message and placement on the state of mind of the targets. For example, to identify targets that are candidates for transition to the acquisition state, targets who may be interested in becoming customers, we must first create awareness about the product(s) or service(s), define who we are and what we stand for as a company, as a brand. We can map the communication emphases appropriate for communicating with a target in each state of our customer relationship curve in a CRC State Communication Matrix (SCM) as follows: CRC State Customer Awareness Customer Conversion Customer Retention Communication Emphasis Brand/Product Awareness Brand/Product Attributes, Intent-To-Purchase Loyalty, Post-Sale Service/Support

Table 1. Generic CRC State Communication Matrix: Each state on the CRC requires a specific emphasis of voice, message and placement to facilitate the transition to the next higher state in the CRC.

Taking these states as your starting point, begin the model by identifying each of these three states in the language of your industry, and identify any sub-states that may be appropriate. For example, in many cases, the customer awareness state is labeled anonymous and the customer conversion state may be sub-divided into suspect and prospect states, each with differing communication emphases.
Customer Retention

Anonymous

Customer Lifecycle
Prospect

Suspect

-3Diagram 2. Four State CRC

CRC State Anonymous Suspect Prospect Customer Retention

Communication Emphasis Brand/Product Awareness Brand/Product Attributes Intent-To-Purchase Loyalty, Post-Sale Service/Support

Table 2. Four State Communication Matrix: The Acquisition state can be broken into two psychological thresholds, Suspect and Prospect. Suspect can be characterized as meeting the segmentation criteria for a particular target group, but have not yet identified themselves to us. Once a suspect target self-identifies, they complete their transition to the Prospect state of the CRC.

The customer retention state is frequently broken into three or more sub-states: up-sell, cross-sell and attrition, where cross-sell and up-sell represent the customers increasing investment in their relationship with the brand and attrition represents losing the customer, at which point that ex-customer would need to be re-acquired.

Prospect

Suspect

X-Sell Customer

Up-Sell

Anonymous

Attrition

Diagram 3. Final State CRC

CRC State Anonymous Suspect Prospect Customer X-Sell Up-Sell Attrition

Communication Emphasis Brand/Product Awareness Brand/Product Attributes Intent-To-Purchase Loyalty, Post-Sale Service/Support Product/Brand Attributes, Intent-To-Purchase Product/Brand Attributes, Intent-To-Purchase Brand/Product Awareness

-4Table 3. Final State Communication Matrix: Customer Retention has been broken down into three constituent thresholds, cross-sell, up-sell and attrition.

Triggering the Transition from One State to the Next At the intersection of each state within the customer relationship curve lies a point at which the individual begins the transition from one state to the next. The conditions that must be met for an individual to transition from one state to the next can be captured in a State Transition Table (STT). This state transition table provides the information we need to identify where a particular individual is in the customer relationship curve at any given time, what inputs are necessary to move them to the next state and what the output of completing that transition is.
Present State Anonymous Suspect Prospect Customer Customer Input 0 1 2 3 4 Next State Suspect Prospect Customer Prospect Anonymous Output 1 2 3 2 0

0 = responds to awareness communication (enters funnel) 1 = requests more information via form or call center (registration) 2 = completes a purchase (sale) 3 = responds to x-sell/up-sell communication by requesting more info (enters funnel) 4 = purchases competitors product (attrition) Table 4. Customer State Transition Table: The STT maps the input triggers to the output states of the customer throughout the CRC.

This state transition table, together with the customer relationship curve and state communication matrix provides a complete model of the target, which we can capture as a finite state machine diagram. This also provides the communication map necessary to trigger the target from state to state, a representation useable by everyone on the team, from the marketing to the creative and developers, information architects and analysts; allowing them to execute their respective tasks toward the fulfillment of a state-of-the-art integrated e-Marketing solution.

-5-

Anonymous 0

Suspect

Prospect

Customer

X-Sell

Attrition

Up-Sell

Diagram 5. Customer Finite State Machine Diagram: The FSM diagram allows Technology and Information Architecture team members to model the dynamic behavior of the solution including all navigation and target data attributes.

Optimizing the Model By categorizing all content according to the state communication matrix and coding every content element according to the trigger input values in the state transition table, we can use standard analysis techniques (log files, pixel tagging, etc) to assess the effectiveness of both our model, the content, and the customer relationship curve model weve developed for our e-Marketing program.

The Customer as a Finite State Machine By going through the exercise of modeling the customer as finite state machine, the interdisciplinary e-Marketing team generates a set of synchronized views of the customer, the focal point of the e-Marketing solution. This allows each team member to execute their specific workflow within the context of the customer, ensuring traceable individual contributions to the customer centric whole.

-6The effects of this are manifold, but perhaps most importantly, it allows us to trace the technical implementation back to the marketing model and to directly measure the results of the program against that model. This, in turn, provides the direct optimization mechanism historically absent from integrated solutions to date. Team Role Marketing Creative Artifact CRC SCM Use Understand the customer lifecycle, segmentation Define voice, message and design of creative and copy Categorize content and develop optimal navigation flows through the content Define session object attributes and customer database fields Define data points for analysis and optimization

Information Architecture SCM, FSM Technology Analytics STT, FSM SCM, STT

Table 5. Artifacts generated by modeling the CRC as a Finite State Machine

Next Steps We now have the theoretical tools to tightly synchronize our e-Marketing teams efforts across disciplines. Part two of this tutorial will walk through a concrete example to illustrate how they can be used in practice.

Mark Thompson Chief Technology Officer RappDigital Thompson manages technical planning and implementation for the RappDigital network, internally and externally, including clients such as, Pfizer, Kaiser Permanente, UPS, SBC and Novartis. He also plays a key consulting role, providing technical insight for holistic IP-based solutions. Prior to Rapp, Thompson was the Chief Technology Officer for OgilvyInteractive, where he grew the technology department some 400%. He has developed technical strategies and deployments for partners: IBM, Ford, GTE, Nokia, Perrier, The Sci-Fi Channel/USA Networks, The American Museum of Natural History and the New York Hall of Science. Having over eight years experience in the industry, Thompson has designed and developed multiplatform system architectures and solutions for Web e-Commerce, interactive television and scientific visualization systems. He attended Wayne State University for his BA in German Language and Literature, post-graduate studies in Instructional Technology and Cognitive Psychology Linguistics, Thompson holds a Masters Degree from New York University's Interactive Telecommunications Program, where he holds the position of Adjunct Professor.

-7-

CONTACT: VISIBILITY Public Relations Len Stein 212.777.4350

lens@visibilitypr.com