one-handed handstand
PHOTO: Stephen Leonardi

Consumer brands have long understood the importance of marketing to people who already use their products. As the chairman of Procter and Gamble put it back in 1977, “Only when satisfied customers have had firsthand experience with the product will the elements of the marketing mix, such as advertising and selling, be fully productive.”

This much hasn’t changed. What has changed is pretty much everything else.

Across every consumer category, the path to purchase has become multithreaded, involving smartphones, voice assistants and connected TVs, among other channels. Each touchpoint leaves a trail of data that, when properly leveraged, can be used to improve future interactions. At the same time, supply chains have become, in the words of the Interactive Advertising Bureau, “rentable, flexible and affordable,” providing brands with unprecedented access to their consumers, without middlemen.

Together, these changes have given rise to a new breed of direct-to-consumer (DTC) brands, distinguished by their ability to superserve existing customers. By taking advantage of new data streams, these companies have built personalized customer relationship strategies that are responsive to every consumer interaction — regardless of where it occurs. And with their newly flexible supply chains, DTC brands are even using customer data to change how they deliver products and services.

These next-generation organizations don’t just represent the latest evolution of customer relationship management (CRM), they’re changing the face of consumer marketing itself.

Related Article: Do Marketers Really Need CRM?

What Is a Direct-to-Consumer Brand?

When the Interactive Advertising Bureau (IAB) and Dun and Bradstreet published their list of the top 250 DTC brands earlier this year, it was no surprise when ecommerce brands like Glossier, Warby Parker and Jet.com made the list. But while it’s true that many DTC brands come from ecommerce roots, the distinction between “direct” and “indirect” is more nuanced than just “physical” versus “digital.”

In fact, DTC brands like Allbirds, Casper and Amazon are investing in physical presences, just as historically indirect companies like Adidas and Unilever are growing their DTC offerings. The key difference is that direct brands know who their customers are individually, and they use that knowledge to build enduring, ongoing customer relationships.

Indeed, while relationship marketing has been around for some time, DTC brands are applying it in new ways, creating sophisticated, precision marketing at a scale the world has never seen before.

Different Folks, Different Spokes

What makes this new customer relationship management different is that it’s being executed by new kinds people who bring different skills, goals and technological frames to the table.

Traditionally, CRM was practiced by B2B marketers and a small subset of B2C brands (catalog retailers, loyalty programs and the like). Now it’s everyone, from consumer packaged goods companies to post-cable networks and coffee shop chains. This new CRM is built on the basic premises of traditional CRM, but it has modernized its principles to such a degree as to transform them beyond recognition.

One of the primary reasons so many legacy CRM programs failed was because they didn’t set their sights high enough. They were optimizing for productivity metrics, not strategic ones, and such efforts were largely put under the auspices of IT projects. When the going got tough, which it inevitably does for something as complex as CRM, companies couldn’t muster the C-suite commitment to continue investing.

While the complexity has not gone away, the new CRM is owned and led by front-line business groups — typically marketing — and therefore is focused squarely on growth-oriented objectives like revenue and customer experience. Its leaders are using customer relationships to drive metrics such as the following:

Marketing

New customer acquisition, customer engagement and retention.

Sales

Revenue growth, cross-selling and upselling.

Customer experience

Customer lifetime value, net promoter score.

In DTC companies at least, the leaders of the new CRM have the organizational clout to not only commit the resources necessary, but also rally the stakeholders needed across the organization to achieve their objectives.

For example, when marketers at Gilt wanted to measure the lifetime value of the company’s various acquisition channels, they collected and connected data from not only marketing systems, but also commerce, customer support and content systems. Gilt could not have met its goals had the marketing team been unable to access companywide data, or if it could do so only via weak and brittle integration methods.

Related Article: Personalization Isn't the Goal, Conversion Is

How to Succeed at the New CRM

This table summarizes some of the other key differences between IT-controlled CRM and the more modern, growth-oriented paradigm:

 

Old CRM

New CRM

Practitioners

IT, mostly B2B

Business, mostly B2C

Customer Journey

Single-threaded

Multithreaded

Targeting

Segments

Individuals

Data

Batch

Stream

Technology

Closed

Open

Privacy

As required

By design

Here’s a look at some of the characteristics that distinguish the new CRM from the old CRM.

Open and extensible

The old CRM was typically built upon monolithic vendor implementations, with inflexible data models. You couldn’t import whatever data you wanted into them, and you certainly couldn’t get data out beyond their walls. In contrast, the architectures that support the new CRM are open and extensible.

When Overstock went in search of new CRM partners, it opted for a modern customer data platform (CDP) with a flexible data model and hundreds of productized vendor integrations. Taking what Gartner has described as a “smart hubs, dumb spokes” approach, Overstock now uses best-of-breed vendors for everything from machine learning to messaging and personalization. The result is a system that allows Overstock to create and iterate from a single, one-to-one engagement platform.

Multithreaded identity

The old CRM assumed a single customer identifier, rendering brands incapable of handling customer journeys across multiple channels. The new CRM takes complex, multidevice journeys as a given.

For example, when Jet.com set out to understand its customers, it started by creating a single view of the customer record across its web and mobile app platforms. Since being acquired by Wal-Mart, the brand has begun integrating this view with other records and systems.

Data in motion

The old CRM managed customer data at rest, focusing on relationship history data points like phone calls, meetings and past purchases. Managing real-time data was not a priority — nor was it even technically feasible until only a few years ago.

The new CRM takes advantage of advances in real-time data to serve relevant offers in the moment. The Chick-fil-A mobile app, for example, uses location data and push notifications to predict when it should submit orders to the kitchen. The ride-sharing company Via uses its app data to optimize vehicle distribution and minimize rider wait time. In addition to triggering faster marketing messages, data in motion is a powerful weapon for exceeding consumer expectations.

Media CRM

The old CRM helped companies engage customers through email, call centers and direct mail, but advertising (paid media) was not widely a factor. The new CRM connects to advertising technology and people-based marketing platforms, ranging from Facebook and Snapchat to a host of data management platforms (DMP) and demand-side platforms (DSP).

For example, the sneaker marketplace GOAT uses its segmentation to target new customers through owned and paid channels, guiding people toward purchase within the first 30 days of app interaction. This past holiday season alone, GOAT’s strategy of targeting lapsed users via Facebook resulted in millions of dollars in incremental sales. That’s a lot of sneakers!

Privacy by design

Because the old CRM was limited in its ability to identify individual customers and their journeys, privacy was not a central design consideration. But as companies implement sophisticated systems that track personally identifiable information (PII) and real-time location data, privacy has become a critical concern for consumers — and legislators.

The new CRM is built with privacy at its core. This allows brands to personalize their customer interactions while simultaneously respecting consumers’ rights when it comes to how their data is collected, used and shared. The new CRM — when done correctly — is part of the solution, not the problem, for laws like the EU’s General Data Protection Regulation (GDPR).

Related Article: Will There Still Be Marketing After the GDPR?

The Identity Revolution Has Come to Consumer Marketing — Are You Ready?

The rise of DTC brands is evidence of a larger trend — the rise of the new CRM. While marketers were once content to advertise to broad swaths of consumers, today’s fastest-growing brands are focused on marketing to people whose identities are known.

To say that this shift has already had a profound impact on the marketing landscape would be something of an understatement. Thanks to the power of personalized CRM, DTC companies now exist in every consumer category, and IAB research suggests that almost all of the growth in consumer brands is being driven by these new business models. As IAB chairman Randall Rothenberg has noted, successful DTC brands are no longer “interesting curiosities,” but are instead representative of an “enduring shift in the way the consumer economy operates,” to the point that they’re now supplanting the indirect brands that dominated the U.S. economy for nearly 140 years.

In the years to come, people will increasingly expect every company they patronize to deliver the personalized, seamless experiences they receive from their favorite DTC brands. It will be a tall order to meet these expectations while also maintaining customer data privacy standards, but that is exactly what every brand must do.