The Meaning of CRM and DM

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Customer Relationship Management (CRM) systems are software programs designed to work with databases that contain information on customers and prospects. CRM goes far beyond names and contact information, however, as it can include the history of a company's interactions with customers, their preferences, purchase histories and even information from their social media profiles.

Direct marketing (DM), on the other hand, is when a company sends advertising, promotions and sales offers that are tailored specifically for each customer. Of course, the more you know about each customer, the better you can customize offers to them. So it should be no surprise then that CRM and DM should be a perfect fit for each other.

TL;DR (Too Long; Didn't Read)

The CRM abbreviation stands for Customer Relationship Management, while the DM acronym stands for Direct Marketing.

DM and CRM: Working Together

Direct marketing can be defined as the opposite of mass marketing. While one TV advertisement can be viewed by thousands or even millions of people, a direct mail flier or a direct marketing phone call is received by a single person. Direct marketing can include newsletters, letters, emails and phone calls.

The objective of direct marketing is to create new customers and to increase loyalty with existing customers. Customers are informed of specific products or services that should appeal to them in the hope that they will make a purchase. A direct marketing campaign is measured by its response rate.

Direct marketing has been a successful way of doing business for centuries, however, with the advent of CRM software and other innovations like email and the internet, direct marketing has become a highly profitable endeavor for companies who may not have even considered it 20 or 30 years ago.

The Origins of Direct Marketing

The history of direct marketing can be traced back over 3,000 years to a piece of papyrus now at the British Museum, displaying an advertisement of gold being offered for the return of a runaway slave. Ancient shopkeepers in the Roman forum wrote direct marketing ads on stone tablets to generate business. With the invention of the printing press, pamphlets and posters became a common way of getting your message out to the people. Author Samuel Clemens (Mark Twain) was a master of direct marketing techniques, including his use of door-to-door sales reps to sell advanced copies of his novels directly to his readers.

With an inexpensive national mail service in the United States, a few companies began offering products directly to consumers with mail-order catalogs, bypassing retail stores. By the end of the 19th century, Aaron Montgomery Ward was bringing in over $1 million per year through his direct mail catalog business, while over 300,000 people were getting Sears catalogs in the mail.

The term "direct marketing" wasn't used until 1967, when it was coined by Lester Wunderman during a speech at the Massachusetts Institute of Technology (MIT). Wunderman was a pioneer in the field, establishing loyalty programs for the financial services industry. By this time computerized data was also being used to leverage marketing efforts.

Direct Marketing Meets the Database

Back in 1969, long before CRM became a business technology and when databases themselves were still rare, The Reader's Digest Association created a revolutionary way to use data with its direct marketing efforts. They placed each of their 50 million customers into a computerized database to track such things as:

  • List of purchases
  • Promptness of payment
  • Promotional offers received
  • Promotional offers resulting in an order
  • The number of promotions sent before an order was placed

With this information, Reader's Digest could develop different lists of customers for future offers. For example, customers who purchased history books would be sent a promotional offer for a new history book. Those who paid promptly could be sent an offer at one price, while those who didn't pay promptly could be offered the same promotional item at a different price. Those who had a track record of buying an item immediately could be offered future items at higher prices than those who required more coaxing before making a purchase.

Of course, this was not technically CRM, but Reader's Digest's approach to managing customer data and target marketing is still used today.

  1. Gather customer records.
  2. Transform those records into standardized data.
  3. Model reactions through sample marketing tests.
  4. Analyze the results of those tests.
  5. Modify marketing as needed

Types of Direct Marketing Today

Internet Marketing: Combined with online sales, internet marketing has revolutionized direct marketing for the sale of products and services to specifically targeted customers. Geography becomes almost meaningless with direct marketing as well as for the delivery of electronic products like e-books, videos, online courses and software, which can be bought and downloaded by customers within moments of receiving a compelling offer. Direct marketing with the internet can be easier, much more targeted and flexible, more responsive, less expensive and thus more profitable.

Face-to-Face Marketing: This is a personal approach to DM, meaning it involves having a sales rep directly in front of each customer. This includes door-to-door sales reps selling things like vacuums and magazine subscriptions or having representatives on the sidewalk talking to passers-by, often asking passers-by to do a survey or to donate to a charity. Companies like Avon, Amway and Mary Kay still use face-to-face marketing today.

Direct Mail: Using the USPS to mail out special promotions or to advertise upcoming products and sales is still a popular form of direct marketing. This is often a cost-effective way for local businesses to contact prospective customers by mailing offers and announcements to households according to ZIP code, or by mailing to existing customers on their mailing list.

Email Marketing: Almost any business can take advantage of email for their direct marketing campaigns at almost no cost. Emails can be highly personalized and sent to existing customers or to prospective customers, most notably those who sign up for a company's newsletter.

Catalogs: While most companies use their website as a product catalog today, there are still many companies that find customers still prefer having printed catalogs mailed to them. Companies like Spiegel, JCPenney, Pottery Barn and Ikea use catalogs in their direct marketing efforts.

Telemarketing: Unlike spam phone calls, telemarketing involve calling people who have been qualified, often existing customers, to notify them of new products and services or special offers. The average household receives 19 legitimate telemarketing calls each year. Banks and telephone service providers use telemarketing as a major component of their direct marketing endeavors.

Direct Marketing and CRM

Customer Relationship Management (CRM) software can give direct marketers an edge in that they are able to know more about each customer and groups of customers by tracking data about them. CRM software can gather and manage data on each customer including such things as

  • Name and address
  • Telephone numbers
  • Previous sales
  • Marital status
  • Income
  • Past marketing offers
  • Successful and unsuccessful marketing efforts

The cost of investing in a CRM solution today is almost laughable compared to what it was several years ago, particularly for small businesses. No longer is there a need to invest in a dedicated server with a database to manage yourself. Subscriptions for cloud-based CRM solutions often begin at about $10 per month, with the cost escalating based on the number of employees who will use the system, or based on how many thousands of people you want in your database.