Emerging Marketing: Companies Don't Need State-of-the-Art Tools, Huge Volumes of Customer Information, and Armies of Experts to Use Continuous-Relationship Marketing Effectively

Thanks to microchips, companies in developed markets routinely collect and store huge volumes of information about their customers. Thanks to continuous-relationship-marketing (CRM) tools, this valuable resource doesn't lie inert but is instead used to fashion sample customer segments that can be used to test new offers. The winning ones are then turned into full-scale marketing campaigns. It seems unlikely that CRM would work this well in emerging markets, where accurate customer data, advanced IT systems, and marketing experts are all in shorter supply. Yet it does. Overall, from 10 to 60 percent of the customers targeted in well-designed CRM-based campaigns in emerging markets sign up for the offer they receive--far more than the 5 to 20 percent norm in developed markets. Although CRM activity in emerging markets accounted for only 11 percent of the worldwide total in 2000, it has been growing by 35 percent a year since then. Why? For a start, consumers in developed markets have wearied of unsolicited mail, sales calls, and spam, but for many consumers in emerging markets, personal attention from companies is still a novelty, and a welcome one. Second, success in CRM depends more on applying its principles creatively than on marshaling massive databases, complex software, and armies of experts. Indeed, some companies that use the fanciest CRM tools available have yet to see any result: in one recent survey of mainly North American retail companies, 69 percent of the respondents said they had gained little or no benefit from their CRM investment. (1) But in emerging markets, we have seen substantial value accrue to companies that effectively used whatever skills and data were at hand. A pragmatic approach to CRM One mobile-phone operator in Asia, for example, cut customer churn by more than 40 percent by offering a special discount to just the customers identified as the most likely to cancel. An East Asian retail bank increased its credit card profits by at least $5 million and perhaps as much as $6 million by targeting a direct-marketing campaign at high-income customers who were heavy ATM users, having discovered through the use of CRM that they were four times as likely to take up a credit card offer as the people in a control group. If consumers respond so enthusiastically, why are so few companies in emerging markets launching campaigns? One reason is that these successes are not well known among senior managers--many marketing directors included--because few companies in emerging markets track the effect of their individual marketing and promotion activities. Second, many companies that know about CRM and are keen to apply it believe, mistakenly, that only the IT-heavy, deluxe version will do; they are still building the perfect database and acquiring the latest propensity-modeling skills. Even some less technically ambitious marketers worry that they have neither the data nor the human resources that CRM textbooks say are essential. The textbooks are wrong. In any market, CRM aims to capture increasing amounts of the lifetime value of high-value customers by creating offers that respond to their individual needs. The two most essential resources in any CRM program are a wealth of hypotheses about the composition of possible target segments and a variety of offers to test these hypotheses. A company's first CRM customer database therefore need only be big and accurate enough to support well-thought-out, statistically relevant test campaigns. We have found that a GRM database containing records on 50,000 to 300,000 active customers encompasses enough diverse groups of around 2,000 customers each to make it possible for companies to develop an extensive series of distinct tests that avoid tapping the same customers twice. If a company can reach larger samples of customers by e-mail, it can test and roll out new ideas more quickly. …