Relationship Based Research

Market research is moving increasingly online. It has revolutionized the way companies get their information, the way they market, and the way they relate to customers. Innovative data management technologies put that information to work, opening up new opportunities and building strong "personal" relationships with customers.

High-speed computing and data storage technologies now allow marketers to develop complex customer marketing databases. Some companies are able to collect, archive, cross-reference, and access a mind-boggling amount of data on specific customer needs, preferences, behaviors, issues, tendencies, and actual purchasing behavior. They then use sophisticated analytical techniques to turn this

vast accumulation of data into actionable customer information. Marketers can cluster customer data by actual past behaviors as opposed to segmenting a small statistical sample.

There are multiple drivers of customer profitability. Multiple research techniques are needed to sort out the influences of each. A combination of statistical and financial analysis initiatives yields the most useful information. Marketers can combine a variety of traditional demographic and lifestyle segmentation techniques with purchasing data to create "transactional profiles." These profiles essentially enable segmentation by customer value. For example, a marketer can focus on high-value customers and, by cross-referencing innumerable data point combinations, can develop specific product strategies tailored for each attitude- or behavior-based subsegment. For instance, an affluent woman who prefers high-fashion glitz and an affluent woman who prefers conservative luxury can be motivated by entirely different things, even though they both bought the same lipstick.

To create transactional profiles, researchers first look at customers' purchasing behaviors over past years. They next look at their current characteristics in terms of lifestyle, life stage, and income, and then project potential scenarios of profitability in the future. Finally, they segment by profitability over time. By understanding how need and purchasing behavior patterns change, marketers can better understand how to stay on target with each profitability segment.

To best evaluate and target customer profitability segments, researchers should consider questions such as the following:

How often and when does she buy related products? How much did the products cost?

What and how much does she buy within the product category? How loyal is she? How long has she been a customer for a given set of products?

Why and when does she move to the competition? What is her financial situation in terms of income, liquidity, security, and risk?

How does she respond to different marketing and promotions tactics? How does all this change over time?

This new way to segment the market is exposing opportunities for new multifunctional product ideas. Companies can develop extremely targeted products, optimizing multifunctional bundles, positioning, and pricing. They can also support these products with equally targeted marketing and promotions strategies. Transactional profiling is proving to be a successful methodology, showing that it can yield a significantly improved customer response, more incremental revenue, and increased profitability.

Finally, the personal care industry can get really, really personal, as can any company now, in any industry. Internet and other new data management tech-

t nologies are so advanced that they allow marketers to acquire, analyze, and organize an astounding amount of personal information from each customer to create a niche segment of "one." Each data-rich personal dossier enables marketers to customize the functions, forms, and features of their products for each individual consumer, "one-to-one."

One-to-One marketing helps by growing relationships with customers, one at a time. Sophisticated interactive websites, combined with new, highly adaptable design, manufacturing, and delivery technologies, are what make this incredibly personal connection possible. The personalized aspect of this kind of research can be advantageous for MFP development because it can deal so well with multiple scenarios, to mix and match super-quickly and effectively.

Traditionally, the marketer has been the aggregator of functions and features, selling integrated multifunctional products. With the level of customization that new technologies now deliver, customers can create their own personal mix of functions and features to form their own personal MFP. This means that the marketer is actually now unbundling functions and features and offering them in pieces, which has new implications for product formulations and design.

Customized MFPs need customized packaging, marketing, and communications. The universe of data collected, mined, and organized can help customize it all. For example, there can be 10 different communications strategies, based on the new, more finely sliced customer segmentation strategy. Now, with rich purchase behavior and preference information to beef up data profiles, the marketer can construct offers, communications, and even packaging templates with dozens of variable data fields in each.

The more personal a relationship is, the more carefully that relationship needs to be managed. Some companies use websites to probe and monitor customer activity. Some are interactive. Some maintain a 24/7 online dialogue with current and potential customers, often in real time, asking them questions and requesting feedback.

Customer Relationship Management (CRM) programs manage a steady inflow of customer information, which companies use to help keep their customers happy and loyal. CRM allows companies to quickly learn about changing needs and quickly develop new fitting solutions. Data management systems are so robust that they can set up an interactive information flow between every key department and each customer to dramatically improve product development initiatives. Beyond marketing, divisions such as R&D, sales, customer service, manufacturing, and even finance, can be in touch with a consumer, for an enterprise-wide relationship.

One example of a successful relationship-based MFP line is Procter & Gamble's reflect.com, sold exclusively online. P&G uses Internet-based research ^

techniques via the reflect.com website to gather super-detailed personal informa- a tion, from a variety of consumers, which may affect their cosmetics preferences t and interests. P&G offers consumers the chance to create their own customized multifunctional or multifeatured cosmetics products.

Reflect.com is one of only about 50 online sites that offers customized products. Each customer can design her own combination of product functions and attributes. And, consumers have been jumping at the chance to craft the functional and feature bundles they want most. As of October 2000, reports showed that about 10% of the reflect.com site's 500,000 monthly visitors customized almost 50,000 combinations of products. About 20% were repeat purchases, and revenue has been increasing by over 50% each month.

P&G is attempting to build a relationship with each woman. They begin by asking each site visitor quite a few questions, creating an individual profile for each visitor. For example, a visitor interested in hair care will be asked to answer questions about her hair, product formulation, packaging preferences, and graphics. Every time the visitor returns to the site, she is asked additional personal questions, so that gradually and unobtrusively, P&G builds a rich bank of information that can be used to develop new and improved offerings. The profile can provide a better sense of the type of products and bundles in which each person may be interested, so the site can direct that person toward particular options and help her to make her choices.

With reflect.com, customers are able to communicate what kinds of products and what combinations they want, so they are really creating their own optimal multifunctional products. While still relatively small potatoes, online sales of high-end cosmetics are expected to rise from less than 1% of the $25 billion market in 2000 to 5% by 2005. Regardless of whether a manufacturer is interested in selling products online, the Internet is the unsurpassed tool for assessing multiple dimensions of consumer need and for gathering valuable information to help in multifunctional product development.

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