GETTING STARTED-FOCUS ON SHARE OF CUSTOMER, NOT
FIRE 70% OF YOUR CUSTOMERS AND WATCH YOUR PROFITS GO UP!
Five years ago, Don Peppers and Martha Rogers wrote a book that changed the marketing
landscape forever. Titled The One to One Future, they proposed a radical rethinking of the
way marketers treat their customers.
Peppers and Rogers presented a manifesto for how companies can increase their profits
by selling more things to fewer customers. In other words, they believe it's wiser to
focus more on increasing sales to a smaller percentage of your existing customers than it
is to find new ones.
The thinking behind their book is straightforward and it led directly to the agenda
behind Permission Marketing: Getting a new customer is expensive. It takes money to get
his attention and it takes continuing effort to educate him (interruption marketing is
expensive, and so is the process of winning a customer's trust). It's also expensive for
the customer, who has to spend time evaluating and learning about the features and
benefits of a product.
So, argue the authors, instead of focusing on how to maximize the number of new
customers, the focus should be on keeping customers longer and getting far more money from
each of them over time.
It's back to the old days, when merchants had a limited supply of customers and worked
to get the maximum revenue from each one. Except now, with technology, companies can
combine this old world thinking with the ability to dramatically grow their customer base
at the same time.
If AT&T spends hundreds of dollars to get a new long distance customer, and that
customer pays just $20 per month for AT&T's services, then they have to be figuring
out other ways to generate revenue through their interaction with that customer, not
spending all their energy getting yet another new customer.
By selling cellular phone services, home security services and an increasing array of
other items, AT&T can recoup the expense of obtaining these customers.
Levi's has built the single largest brand of women's jeans in the country. And they've
done so without having any jeans in the store.
Instead, women have their measurements taken by a trained specialist, who sends them to
a computerized factory. There, a semi-custom pair of jeans is made to order.
The shopper gets custom fit for a fraction of the cost.
Levi's has a huge savings in inventory risk and advertising costs. And best of all,
once a customer has given her measurements to Levi's, once she's endured the hassle of all
that measurement-taking, once she's worn a pair of custom jeans, would she even consider
switching brands to save a few dollars?
To elaborate a little more on the one to one marketing approach, Peppers and Rogers
would like you to focus on four things when selling to customers:
1. Increase your "share of wallet." Figure out which needs you can satisfy,
then use the knowledge you have, and the trust you've built, to make that additional sale.
2. Increase the durability of customer relationships. Invest money in customer
retention, because it's a small fraction of the cost of customer acquisition.
3. Increase your product offerings to customers.
By being customer-focused instead of retail-focused, or factory-focused, a manufacturer
or merchant can widely increase its offerings, thus increasing share of wallet.
4. Create an interactive relationship that leads to
meeting more customer needs. It's a cycle. By constantly incenting the consumer to give
more information, the marketer can offer more products.
This series of techniques isn't easy, nor is it free. If it was, everyone would do it.
It requires a huge investment in scaleable technology, along with the focus and commitment
to do it right. It puts a lot more pressure on your organization, as well, because as each
customer becomes worth more, the cost of losing one increases.
USE PERMISSION EARLY IN THE MARKETING PROCESS
Don Peppers and Martha Rogers opened the eyes of many marketers and got them to look
downstream after the first sale was made. By recognizing the huge cost of getting a first
sale and the very high lifetime value of a customer, the one to one philosophy can
dramatically increase profitability.
Permission Marketing demands that in addition to looking downstream, marketers now look
upstream. The challenge facing most companies is that they notice people too late.
The process of getting new customers needs to be reengineered. Like caterpillars
turning into butterflies, prospects go through a five step cycle:
Today, most marketers don't notice, track or interact with people until they are a
customer. And some don't even pay close attention until the consumer becomes a loyal
customer. Unfortunately, a few don't notice their customers until they become disgruntled
It's essential, given the high cost of talking to strangers, that marketers move their
focus of attention up the stream. They need to have a process in place that nurtures total
strangers from the moment they first indicate an interest.
At that moment, a suite of marketing messages must begin to be applied. The goal is to
teach, cajole and encourage this stranger to become a friend. And once she becomes a
friend, to apply enough focused marketing to create a customer.
Do you know how your company does this now? Most marketers have no idea. They rely on a
hodgepodge of randomly delivered interruptions and hope that from this primordial soup
will rise a fully formed customer.
Computers and Permission Marketing can change that.
You can now choose who you reach. When you reach them. The order of the messages. The
You can create dozens or even hundreds of paths for an individual to follow from the
first contact until the highest level of permission is granted.
If the marketing messages you send are anticipated, relevant and personal, they will
cut through the clutter and increase the prospect's knowledge of the benefits you offer.
An organization that is focused on this process early on will always outperform one that
THE NATURAL SYNERGY OF PERMISSION AND ONE TO ONE MARKETING
As you've seen, Permission Marketing is the cousin of one to one marketing. Where
Peppers and Rogers begin the process with the first sale, Permission begins the process
with the very first contact.
Permission Marketing works to turn strangers into friends and then friends into
customers. One to one marketing uses the very same techniques, incorporating knowledge,
frequency, and relevance, to turn customers into supercustomers. One to one doesn't
compete with Permission Marketing. It's part of the very same continuum. The one to one
marketer takes the permission that's been granted after someone becomes a customer and
uses that permission to create even better customers.
The better the permission, the more profit created.
The one to one marketer works to change his focus from finding as many new customers as
he can to extracting the maximum value from each customer.
The Permission marketer works to change his focus from finding as many prospects as he
can to converting the largest number of prospects into customers. And then he leverages
the permission on an ongoing basis.
You can't build a one to one relationship with a customer unless the customer
explicitly agrees to the process.
Everything from discovering a shoe size to building mutually dependent computer systems
with a major vendor requires an overt agreement from both sides.
By measuring the depth of permission you have with each customer (one may allow you to
send merchandise "on approval", another may let you call them when a new product
comes in), you can begin to track the benefits of your investment in Permission Marketing.
By focusing on how deep your permission is with your existing customers, you can begin to
recognize the value of your permission asset.
Frank Britt and Tim DeMello run a company called Streamline that is at the vanguard of
the junction between Permission Marketing and one to one marketing.
Streamline capitalizes on the technologies and social shifts that are changing our
lives, and they are building a fantastic business that serves as a model for the future.
They offer to save customers hours and hours of time each week by doing virtually all
of their routine errands.
A call to Streamline leads to a customized sales pitch by a trained Streamline sales
rep. And in a surprisingly high number of cases, that sales pitch leads to a first sale.
Then Streamline comes to your house and installs a large wooden box and a refrigerator in
your garage. Next, they ask to come into your house so they can scan the UPC codes on
every item in your fridge and food cabinet. They take down the name of your pharmacy and
where you like your clothes dry cleaned. Talk about Permission!
Then, using the Web, you log on each week and tell Streamline what you need. You fill
out a pre-automated shopping list. They pick up dry cleaning and prescriptions and photos
as well. Then, while you're at work, they do all your errands, pick up what you need, and
drop it off at your house.
Streamline does this for about $30 a month. And the more services they offer, the more
permission they get from customers. In a single year, the average customer places 47
orders and spends more than $5,000 with them.
Multiply that by millions of potential customers and you see the size of the
opportunity! As the company gains more permission, it's not hard to imagine them branching
into house cleaning, house painting, gardening and a huge range of home care and home
By "owning" permission to market new services, and by using one to one
techniques to know and remember your preferences, Streamline is creating a mega-business
for the next century. They're building an asset that has nothing to do with brand and
everything to do with their relationship with you.
Will Streamline find competition? Without a doubt. But once they've established
permission with their customers, it will be extremely difficult for a competitor to
A more familiar example is Amazon.com. Ask most sentient humans and they'll tell you
Amazon is a bookstore on the Web. Analysts will tell you that they're one of the biggest
Yet if Amazon is determined to be a bookseller, they've got big troubles. First, they
pay far more for books than Barnes & Noble because of their smaller scale. But even if
they overcome that disadvantage, other online sellers, like the new online service from
Bertelsmann (the largest publisher of books in the world), will doubtless be able to
compete on price.
So why is Amazon so busy building its customer base, losing money on each customer and
trying to make it up in volume? Why does their prospectus claim that they're losing money
and see no end in sight for the losses?
Amazon appears to be building a permission asset, not a brand asset. Amazon has overt
permission to track which books you buy and which books you browse. They have explicit
permission to send you promotional e-mail messages. They are building special interest
communities in which Amazon and its customers will be able to talk with each other about
specific genres of books. Why?
Where's the payoff?
The payoff comes the day Amazon decides to publish books. This is where the profit lies
and where Amazon is best able to leverage their permission asset.
A book costs about $2 to print and $20 in the store. A huge gulf! But most of that
money disappears in advertising, shipping and especially in the shredding of unsold books.
What if you could remove all of those?
Imagine that Amazon.com sends a note to each of the one million people who bought a
mystery novel from their site last year. (It costs them nothing to do that, of course,
since e-mail is free). In the note, they ask if you'd like to buy the next Robert B.
Parker novel, a Spenser mystery, which will be available exclusively from Amazon. And
let's say a third of those customers respond and say, "sure."
Now, Amazon can make the following extraordinary offer to Robert B. Parker. "Write
the book. We'll edit it and typeset it and ship it directly to the 333,000 people who have
pre-ordered it. We'll deduct our costs and still have a million dollars left over to pay
That's a lot of money for a mystery novel. And yet Amazon still will earn more than 4
million dollars in profit from just one book.
Multiply that scenario by 100 or 1,000 books a year.
Using permission, Amazon can fundamentally reconfigure the entire book industry,
disintermediating and combining every step of the chain until there are only two: the
writer and Amazon.
That's the way to visualize the power of Permission.
Technology enables marketers to have a perfect memory, and provides them with the
ability to customize correspondence on the fly and deliver it for free via e-mail. Combine
that with a database of customers who expect to receive marketing messages from you
because they gave you their permission, and most industry book chains should begin to see
a looming threat.
By moving strangers up the permission ladder, from that very first interruption until
the moment when the consumer gives you the permission to actually purchase products on
their behalf, marketers are able to optimize their entire marketing process. The results
can be fantastic. By dramatically increasing the measurability and efficiency of your
marketing system, your company can multiply its profits.
Traditional sales and marketing involves increasing market share, which means selling
as much of your product as you can to as many customers as possible.
One to one marketing involves driving for share of customer, which means ensuring that
each individual customer who buys your product buys more product, buys only your brand,
and is happy using your product instead of another to solve their problem. The true,
current value of any one customer is a function of the customer's future purchases, across
all the product lines, brands and services offered by you.
How firing 70% of your customers might help your business
When you have a constant stream of strangers walking through the door as a result of
Interruption Marketing, you don't have to worry as much about protecting your existing
customers. Even though it's more profitable to cater to those existing customers, many
marketers are uncomfortable with the shift in power it portends.
An online e-commerce story makes that lesson very clear.
A consumer ordered several items from a small merchant selling CDs online. The
consumer's credit card was quickly charged, but after three weeks, nothing had arrived.
The consumer sent a polite note to the customer service e-mail address. No response.
Another note. No response.
So, after four weeks, the consumer wrote to the President of the company.
He wrote back the next day. His note consisted of just three words: "Get a
Did he burn a customer? Of course. That was his intention. But what he hasn't learned
yet (and soon will, or he'll be gone) is that the act of dismissing that customer didn't
cost him just one sale. It cost him the loss of permission to sell products to this woman
for the rest of her life.
Think about it. He had her in a dialogue. He had her credit card number. He knows what
CDs she likes. If he had treated that permission with respect, it could have easily led to
$1,000 or $5,000 worth of CD sales over the lifetime of the relationship. But because the
merchant was a physical retailer, accustomed to the anonymity and unpredictability of
walk-in trade, he figured he was losing a $10 sale. Big mistake.
Compare this to the true story of a similar customer at a similar merchant, also
online. This time, the complaint about slow delivery ended when it reached the customer
service desk. The customer got a response within five minutes. The response was factual
(the CD was misaddressed and had been returned) but the letter was apologetic. AND the
e-mail announced that to make up for the inconvenience, another CD by the same artist was
going to be sent along for free.
Which merchant is most likely to earn a few thousand more dollars in incremental
business due to the level of Permission earned? Customer service has always mattered. But
now that power has shifted to the consumer, it matters a great deal more.
Based on these stories, however, there's no way to know what type of customer, or
future revenues, she represented. But given our vastly improved ability to
"know" customers at an individual level, it's important to recognize that some
customers carry a negative value, and it's sometimes wise to get rid of them. The reward
comes to the marketer in the form of an increased ability to concentrate on nurturing the
customers who represent the quality permission candidates for future business.
This means that sometimes you have to endure the entrepreneur's nightmare--you must
fire a customer. In view of optimizing customer service, sometimes that's what it takes. A
customer that distracts you, or one that cherry picks your line of products, or one that
requires a disproportionate percentage of your company's time and resources, for example,
is going to cost you money. Of course it matters how you fire a customer, too, and telling
a customer with a valid complaint to "get a life" obviously falls short of
START BY GETTING THE CUSTOMER TO RAISE HIS HAND
Not surprisingly, the first question most interruption marketers ask when they hear
about Permission Marketing is, "How do you get people to sign up?"
Because they were trained in the art of getting momentary reactions from large numbers
of people, this part of the process is the most familiar to them.
Permission Marketing almost always follows the same simple steps. Each campaign is very
different, but the concepts behind each step remain the same. Simply stated, you interrupt
the customer with a message designed to get them to raise their hand. That's the way they
volunteer, or say "yes" to begin a rewarding exchange of information
accomplished over time, which builds trust that you can leverage into a sales
But the first step is still to interrupt the consumer. That's one reason there will
always be socially acceptable interruption marketing media. We need to get that initial
Sometimes you're lucky enough that a stranger comes to you of his own accord. There
will always be a few people who straggle onto your web site, for example, or potential
customers who call your toll free number or walk into your store. These are the freebies.
Most of the time, however, you've got to use the tried and true interruptive techniques to
reach large numbers of people.
Using measurable techniques, marketers can choose television, radio, print, direct mail
or electronic media to grab the attention of consumers. But without some way to grab the
attention of a stranger, the permission process never starts.
Joanne Kates is the third generation owner of Camp Arowhon, the oldest coed summer camp
in North America. With a 70 year history, great word of mouth and a solid backlist,
acquiring new customers is not her highest priority. Nonetheless, Arowhon needs a process
to turn strangers into campers.
The camp uses permission marketing to accomplish this.
The first step is to advertise at camp fairs and in magazines that feature groups of
ads from summer camps. But unlike virtually all of her competitors, Joanne isn't trying to
sell her camp. She knows that no one chooses a summer camp for their children on the basis
of a two-inch square black and white advertisement.
Instead, her only goal in the ad, and at the trade show, is to get permission to send a
video and a brochure. The ad sells the brochure, not the camp. Call the camp's number and
her staff will immediately qualify your interest and then send a video (perhaps the best
produced camp video in the market) and the brochure (also extremely well-done.)
The only goal of the video is to get permission to have a personal meeting. It doesn't
sell the camp. It sells the meeting.
Now, fully qualified, and having seen the testimonials, the photographs, the facilities
and the happy campers, the family is ready to be sold on the camp. And that's done in
Once a camper attends for a summer, odds are that he or she will stay for more summers
and bring a brother or sister as well. Which makes the sale worth nearly $20,000. By using
Permission Marketing, Arowhon is able to make these significant step-by-step sales, with a
very high efficiency.
At each step, the only goal of the next step is to expand permission. She interrupts to
get permission to send a video using a small print ad, she uses the video to get
permission to visit, she uses the visit to get permission to sell one summer and she uses
the summer to sell six more.
By focusing media on getting permission instead of making the ultimate sale, marketers
are able to get far more out of their expenditures. The response rate to a free sample or
an affinity program or a birthday club might be five or ten times the response rate of an
ad asking for a sale.
This is a critical distinction. Step two in the process, after the consumer has been
interrupted, is to make an offer and ask for volunteers. The offer should provide selfish
motivation and offer virtually no downside.
An interrupted consumer is in no hurry to send you money or promise to invest a lot of
time. An interrupted consumer won't fill out a long demographic form or get in his car to
drive down to your automall. The less you ask of the consumer and the bigger the 'bribe',
the more likely the consumer will give you permission. The permission won't be broad or
deep. But it will guarantee that your next interaction will be significantly more
When Hooked on Phonics ran nationwide radio advertising that helped them grow from zero
to a hundred million dollars in revenue, they didn't try to sell anything on the radio.
They didn't even mention the price. They sold the benefits by asking potential customers
to call (800) ABCDEFG and get free information on how to help your kids. Free information.
Help your kids. No downside. No money. This offer enticed millions of concerned parents to
give permission to learn more about the product.
Hooked on Phonics gets far more attention from a completely qualified audience by using
this two step approach. Imagine how much harder it would have been for them to generate
the same level of sales if they had tried to make the sale on the radio.
In order to make the marketing messages you send relevant and personal you need to get
some data. Permission marketers are totally obvious about their objectives with the
consumer. They make it crystal clear what they will be doing with the data they collect,
and exactly why it's beneficial to the consumer to give this data.
Consumers who visit a web site are sometimes asked to give their phone number. But
what's in it for the consumer? Without a specific reason for the consumer to behave,
without a reward or a benefit, the overwhelmed consumer will refuse.
The reward you offer a consumer must be obvious and simple. To dramatize the importance
of this stage, to make it crasser than it needs to be, I call it bait. No one would argue
that when you go fishing, you ought to use the most effective, most obvious bait you can
find. The same is true when you try to attract consumers.
After you've interrupted, engaged in a bargain, and exchanged data with the consumer,
now you need to teach, and eventually leverage the permission you've obtained.
If you're in a medium where frequency is cheap (like the Net), take your time. Build
trust through frequency.
Patiently tell your story to each consumer who is willing to participate in the
Be personal. Be relevant. Be specific. And always be anticipated. Anticipation, of
course, is even better than expectation. Without surprising the consumer, gradually raise
the level of permission you extract.
Then, by constantly raising the magnitude of rewards you offer the prospect, you can
fight attrition and compression and keep them interested (compression is the tendency of
rewards to become less effective with repetition). By continuing the dialogue, you can
teach the consumer until a stranger becomes a friend and then a friend becomes a customer.
Of course, the process doesn't end with the first sale. It just becomes one to one
marketing. Using the permission already granted, you then work hard to expand the share of
wallet and build a permission asset that is ever deeper and more powerful.
Getting the customer to raise their hand takes planning and capital Interrupting
strangers and getting their attention in the first place is the glamorous part of
marketing. Marketers and their advertising agencies live and die by the sizzle they
create. They invest millions of dollars in a one minute commercial, just to maximize the
effectiveness of the execution.
A copywriter can make his career with a clever ad. In fact, a thirty year old clever
campaign for the Volkswagen came back from the dead to generate millions of dollars in new
Beetle sales for VW in 1998.
At the same time that interruption marketers are arming themselves with these killer
executions, they're backing them with huge media budgets. Media budgets that often dwarf
the cost of inventing or even manufacturing the product in the first place.
All of this time and money is spent with one goal in mind: interrupt people. If they
remember the interruption the next day, even better. An interruption marketer who does a
good job and boosts their direct mail response rate a tenth of a percent, or boosts
morning-after recall a bit, is a hero. The entire point of the ad is to do that.
Wouldn't it be great if we could eliminate this incredibly wasteful part of the
process? Unfortunately, Permission Marketers cannot ignore the interruption part of the
process. They can't walk away from the cost of getting strangers to raise their hands. But
they CAN leverage the expense of that interruption across multiple interactions.
This is the big win here. By leveraging one interruption across numerous
communications, the Permission Marketer has an unfair advantage. One message becomes six
or ten or a hundred. A momentary interruption becomes a dialogue that can last for weeks
Let's get specific and compare a marketer who had to make a single ad pay off with one
who has the luxury of using Permission. The Interruption Marketer must earn back the
entire cost of the ad after just one viewing. So, if it costs $2 to get one person to pay
attention to the ad, it only pays off if, on average, it generates more than $2 in new
business profits per viewing. If the impact is equal to or greater than the cost, go ahead
and run the ad.
Running the same ad with frequency dramatically increases the amount of payback
required. The marketer has to hope for $6 in new profits as a result of putting this ad in
front of a prospect three times. If the third ad can't generate enough impact to make it
worth running, it doesn't pay for itself.
Because frequency is free in an online Permission program, and much more effective
offline, the marketer has the luxury of riding the impact curve up without a matching cost
curve. Once the initial toll is paid, in other words, the rest of the ride is close to
Thus, in this example, if that one interruption (which cost $2) can turn into five
communications, the marketer gets a bonus of four extra chances to earn back that $2.