The secret's out: the one marketing rule you absolutely must know for the new millenium - relationship marketing - includes related articles on marketing ideas and marketing techniques of industry giants - Cover Story

The secret's out: the one marketing rule you absolutely must know for the new millenium - relationship marketing - includes related articles on marketing ideas and marketing techniques of industry giants - Cover StoryWant to grow your small company with the brilliance of a marketer from Mensa? Want a business-building strategy that would have Bill Gates groveling at your feet? Want to pull it off without breaking a sweat or breaking the bank? No problem. Just reach out to your existing customer base - whether that's three customers or 3,000 - as Entrepreneur's marketing experts have long recommended. As we begin a new era of more sophisticated company-to-customer interactivity, this approach becomes even more potent as a marketing tool . . . and, we felt, merited a special update to brief you on all the possibilities as we quickly approach the new millennium.

We've all seen and admired examples of marketing genius over the past few decades - like that of Walter E. Diemer, who died recently at age 93 and who sold us on a gooey pink substance called "Double Bubble" chewing gum. And let's not forget whoever talked us into potbellied pigs for pets. But in 2000 and beyond, the golden statuettes for marketing genius will be handed out to entrepreneurs of another sort: those who realize the smartest marketing move is to develop unbreakable relationships with their current customers.

Yes, start-up companies will always need to beat the bushes for new customers. But once you're up and running, selling more goods to fewer people is not only more efficient, it's also far more profitable. Plus, for many companies, old customers are often the best source of new customers. But more on that topic later.


You've heard it before. It costs at least five times as much to get a new customer as it does to keep one you already have - or to reactivate an old one. Yet the majority of companies still spend a fortune chasing after new customers and concentrating on that first sale.

Add it up. You offer deep discounts to get new customers into your bakery. You create loss leaders to increase traffic in your minimart. You offer a duplicate item for just a penny or a dollar more. Or you start giving stuff away: free ice tongs to the adults and face painting for the kids. All this costs money, not to mention the expense of promoting it through advertising. And it's all done without an ounce of assurance that even one new customer is going to pledge allegiance to your business.

On the other hand, staying in touch with your satisfied customers and making them devotees costs you relatively little. The idea to keep in mind is that a happy customer is like a perennial in your garden: With proper care and feeding, you can usually count on it to bloom year after year. When a customer buys from you the first time, he or she is saying "I like you; you have my trust." This is an invitation not just for a sale, but for a relationship.


The revelation that it is often costlier to obtain new customers has caused many small-business owners to take a step back and look at their most priceless yet overlooked business builder - their current customer base. And from this enlightenment has sprung a whole new branch of marketing called relationship marketing. It's a field of vast profit opportunity for even the newest entrepreneur, and it's ultra-easy to implement. Best of all, there are a number of experts on the subject whose knowledge can help you maximize your use of relationship marketing.

Martha Rogers, Ph.D., co-author with Don Peppers of The One to One Future: Building Relationships One Customer at a Time (Currency/Doubleday), is one of those experts. Rogers, a founding partner of management consulting firm Marketing1to1/Peppers and Rogers Group in Stamford, Connecticut, believes your goal, rather than to increase your customer base, should be to ensure that each customer who buys your product or service buys more of your product or service, buys only your product or service, and is happy always choosing your company over others. In a word, loyalty. In four words, a customer for life.

In the future, says Rogers, more businesses will focus on the "lifetime value" of each customer rather than the short-term profits they can get from new customers. She says creating one-to-one relationships is key and will be helped by evolving interactive technologies that small businesses can take advantage of. Today's fax machines, cell phones and e-mail technology are just the tip of the interactive iceberg that you and your customers can use to stay chummy. And interactive television is just around the bend.


The key word to etch in your mind, insists Rogers, is "remember." Remember the dress that needs special handling for your regular dry cleaning customer without her having to remind you. (You can note this on your computer or on a 3-by-5 card you make for each customer.) Remember the occasion that prompted your flower shop customer to buy a bouquet so next year you can send a reminder that you'd be happy to send one again. Remember the rattle in the wheel well that your gas station customer was complaining about last time he or she was in, and ask about it the next time that customer comes in for a tune-up. Remember to ask your plumbing customer if that upstairs sink is still leaking and if he or she would like you to take a look at it.

Just as a doctor writes down details of a patient's health on his or her chart, so should you record information about your clients. Then the next time you connect with a client in person or by e-mail (you are routinely asking for their e-mail addresses, aren't you?), ask how the customer's daughter is doing in her first year of college, inquire about that nagging lower lumbar problem he or she previously mentioned, ask if he or she has been happy with that new sport utility vehicle . . . Well, you get the idea. In this increasingly impersonal world, every me-to-you query adds strength to a customer relationship that no amount of discounting from your competitor can weaken.


Another relationship marketing enthusiast is Patrick Daly, who oversees the Customer Care Program for the huge international courier DHL Worldwide Express in Redwood City, California. "Most profits in most companies [are generated] through current customers; new customers cost money to develop," Daly says flatly. However, he points out, the monies come not just from the customers themselves but from others they steer your way.

"Many businesses, such as contractors and other home-service providers, find that referrals from loyal customers account for up to 80 percent of their new business," says Daly. "[Plus,] the 'close rate' - turning a prospect into a client - from loyal-customer referrals is far higher than from new customer leads from advertising." However, Daly warns that just getting a satisfied customer into the fold is not enough to ensure loyalty.

"Studies show that even customers receiving good service and good value can't be counted on to stay loyal," Daly says. "Earning loyalty requires the relationship to reach a whole new level of involvement."

Daly recounts that his first lessons in relationship marketing started with his father, Dennis, the owner of a printing company in Sacramento, California. "He was thinking of buying an expensive new press," Daly says, "and he invited his most loyal customers to a luncheon to discuss the pros and cons of buying the equipment. By the end of the lunch, his customers not only reassured him he was making the right decision but gave him enough unsolicited orders to book the press six months in advance."


Daly offers the following four commandments to develop truly loyal customers:

1. Naming names. In today's detached, "just-give-me-your-account-number" world, nothing is more well-received than individual, personalized attention. Even though you may already be courteous and friendly to customers, greeting them by name is valued 10 times more on the worthy-of-loyalty scale.

2. Custom care. Customers pretty much know what they do and don't want from your company. If you always ask and remember what they want on an individual basis - even if it's something as simple as knowing a dry cleaning customer likes light starch in his collars - then you have in place one of the key elements of a strong loyalty program.

3. Keeping in touch. You can't communicate enough on a me-to-you basis with your customers. And don't just connect to make a pitch. Clip out a newspaper or magazine article that pertains to a customer's business and send it to him or her with an attached note saying "FYI - thought you'd be interested." When customers know you take time to think about them, they don't forget it.

4. "Boo-boo research." Part of any customer loyalty program is taking the time to reach out to lost customers to learn why they went elsewhere. In many cases, just the contact and showing you really care about getting their business will win them back - along with their contribution to your profits.