I guess we know what we mean by CRM – the process of communicating with our known customers – so what do we mean by “Collaborative CRM” and who is doing the collaboration?
“Collaborative CRM” takes place between a retailer and its suppliers. Its more commonplace in the FMCG retail sector (supermarkets, beauty, drugstores, pet stores etc) where suppliers have brands with marketing budgets that they use to build awareness, generate trial and repeat purchasing and build customer engagement. This tends not to be the case in sectors like fashion, luxury and speciality where the majority of suppliers make own label products for the retailers to sell.
“Collaborative CRM” describes the process whereby a retailer partners with a brand owner to develop content and distribute it to the retailer’s customers. The content might be information about the product, it might be advertising, a video or an offer.
It works for retailers and it works for brands.
For retailers, the prize can be mind bogglingly large, major supermarket chains can generate £100’s of millions of incremental marketing spend from their branded suppliers. According to Deloiitte, FMCG brands spend 24% of their sales on marketing. Given a global fmcg market worth £1000 billion that creates a very large marketing pot to play for - £240 billion.
It works too for brand owners as they are happy to divert monies that would otherwise have been spent with Facebook, Google or other advertising channels to the retailer’s CRM programme provided they generate positive returns.
To do Collaborative CRM well requires a number of key elements to be in place.
Retailers need to know who their customers are and be able to communicate with them individually and directly. This is reasonably straightforward for e-commerce retailers where customers must self identify when they shop. In stores its much harder and so typically requires an effective loyalty programme.
They need to be able to do their own CRM well. This requires people, technology, processes and above all a clear strategy from which customers receive relevant content delivered in a relevant way. Difficult at the best of times and made much more complicated when they need to consider the requirements of brands to participate in these programmes.
To collaborate effectively, their brand partners must understand the retailer’s CRM strategy and be able to fit in with it. Brands want to ensure that they are able to deliver their messages to their specific audience. Given that every customer is different and shops a differing selection of the 10’s of thousands of available products, these audiences can be difficult to identify and reach. Consider the eco detergent manufacturer who wants to reach audiences that have a strong interest in sustainability, the coffee brand who wants to reach consumers who use capsules, pet brands who want to communicate with puppy owners and supplement brand owners who want to reach gym bunnies.
To avoid wasted monies and ensure an effective ROI, the retailer has to enable the brand owner to identify these audiences, understand how many customers are targetable and to create a campaign budget and plan. This is harder to do than it sounds.
The retailer must also ensure that the campaigns that brands wish to generate are relevant for customers and aligned with the retailer’s overall communication strategy. They must ensure that customers are not over communicated to and are engaged and responsive. They must execute the campaigns and provide measurability and response data. If they do it well they can charge a fee for acting as the brand’s media partner. Given that the vast majority of marketing money is spend on fees to media owners then these fees can be very large.
Brands must also collaborate well. They have to understand the retailer’s customers. How frequently they shop, how much they spend and what they buy. They have to generate content that is relevant and engaging for customers whilst being aligned with the retailer’s overall strategy. They need knowledge of CRM processes and must adapt to the retailer’s tools, data and audience requirements.
The pioneers of Collaborative CRM were Tesco and they had great success in the early 2000’s as they more or less doubled their market share and increased their market capitalisation 10 fold. Click on the video to watch Sir Terry Leahy explain this.
Steve Gray was there at the start as MD of dunnhumby who acted as Tesco’s CRM partner. Steve and the team he built worked with over 300 of Tesco’s suppliers. The biggest supplier and at the time the world’s biggest advertiser was P&G. They had so much success working with Tesco that they shut down their UK direct marketing operation to focus it all on Tesco and those other retailers who could provide them with Collaborative CRM opportunities.