This was my first official blog post on the Canadian Marketing Association blog back in September 28,2007. With some gentle editing I have brought it here.
With economic conditions impacting ever more constrained budgets and the increasing pressure to drive transactional results – it’s easy to fall into the short-termism trap. But I think smarter marketers will come to recognize that it’s not impossible to combine strategic and tactical programs.
I hope you take the time to read and share your thoughts.
1. Organically grown brands develop deeper roots.
Brands that have a greater emphasis on organic growth have no choice but to develop a more complete understanding of how well their brand promise is delivering existing needs. It forces brands to constantly look forward toward the innovation stream that will keep the brand promise relevant and fresh with its customers. Organic growth does not preclude acquisition – merely seeks to create a better balance between the two – of fixing the holes in the bucket. A study by Media Marketing* found that the probability of making a sale to new customers was 5-20 % compared to 60-70% of a sale to active customers – provides further support to this view.
Addendum: Retention is the new Acquisition
2. Consistency is 99% of the solution.
Without consistency there is no possible foundation for a brand to keep its promise. We sometimes take for granted the ability of the human link to perform as envisioned. And because of any number of reasons – motivation, training, buy-in, challenging interactions etc… there are disconnects. To understand their challenges, their motivation and the tools they have for delivering the customer programs you develop, set a period of time each month to work alongside the customer facing staff.
3. To keep customers for life – first you need a plan, second you need a plan, third…
Keeping customers engaged with your brand for longer periods of time requires a commitment in understanding and evolving with their needs while keeping the brand fresh and relevant. As part of your long-term plan, consider creating a tenure incentive (membership has its privileges) benefit program to show your customers you are serious about wanting them to stay.
4. Needs change. Innovate or die. See rule # 3 If one has a strong brand/customer centric ethos, the evolution of a brand’s promise is a natural outcome. It’s based on staying current with the things one’s consumers find value in, fixing the things that are broken, throwing away the superfluous and move forward with evolving future needs. Those interested might find The Game Changer (Lafley & Charan) to be of value.
Given the advent of social media – anyone not taking advantage of the ability to co-create the brand with one’s partner (see point #9) deserves their fate.
5. A good solution solves the problem.
The right solution leaves them wanting for more. Look beyond the immediate problem and try to understand the upstream and downstream ecosystem of the problem – at all the things that are impacted by the problem and then seek to develop extended solutions to address this. When you succeed, the customer will elevate you to partner status.
Case in point. Tide ColdWater…clean clothes and save energy cost and help reduce GHG
6. Listen, Focus & Astound.
Making an impact – a lasting impression on the consumer is critical. The innovation by itself is usually not enough to make quick headway in the market- for that we need to bring in integrated marketing into the mix. The challenge is to make the communication and experience multi-channelled and simple by helping customers Visualize the End Result or Benefit (VERB).
7. PULL is more powerful than PUSH.
8. People are 90% of the brand.
Ask your customers where they place the greatest accountability for the brand’s performance/satisfaction both positive and negative – chances are they will point at somebody. Product failures are relatively infrequent because of the standards that go into the production process. But there is no way of engineering people. Somewhere along the way a person-to-person interaction will occur for which the consumer will hold the brand’s representative accountable – both positive and negative. Having responsibility for your brand actually means taking ownership of your customers and their end-to-end experience with the brand. See rules 1-7 and 9-14.
9. Not everyone buying your product is actually your customer.
A lot of people buy our products, only some of them are actually the customers we have developed our brand promise to deliver against. When filtering down to this group – you may be surprised by how few brand customers you may actually have. Congratulations – you have just taken an important step in reclaiming your brand. The big debate (at least in my mind) is how to manage the rest, the non-customer buyers who by some twist of fate are giving you money you never asked for – but your CFO is planning on. One approach seeks to integrate significant sub-segments into the fold – but only insofar as it doesn’t dilute the core brand platform. A more purist approach would minimize resource expenditures against non brand customers wherever possible and seek to create a self serve channel – even to the point of ‘firing’ their customers. However the first priority is always your brand’s customers, make sure you continue to grow with them and measure your progress because they are probably someone else’s target.
Addendum: Consider segmenting your franchise into:
10. The weakest link defines everything. Today matters most.
11. Actions speak, feelings resonate.
Learn how to make your customers feel your thanks. A perfect solution delivered by a surly attendant will not endear the kind of repeat business that an attentive helpful attendant can with an imperfect solution. Neither situation is ideal – but as long as the solution is satisfactory – I believe most people would go with option B.
One of the most power transformational differences you can make for your brand is to let customers feel they are appreciated. Not the polite “thank you have a nice day” discourse – but the actual sincere sentiment. So how does one manage to convey gratitude on a relatively large scale and still make it seem sincere and not some ploy? Providing some brand related benefit is not a wise path – because it lends itself to your customers putting a financial value and then wondering to themselves – “So after all these years and all the money I spend with Brand X, I only warrant $Y?” To avoid this, consider a gift that is ‘priceless’ by nature such as a good works program that allows your customers to define which charity they would like to have supported. You’ll be in excellent company since American Express did a program like this in 2007. And through it all remember that you are doing this because you in fact want your customers to understand they are appreciated and your thanks are just a small part of it.
12. A Brand is a Promise Kept.
Brand Affinity is a relationship strengthened.
Continuity without emotion is just a sequence.
Continuity with emotion is loyalty
I have already spoken about the brand promise and brand affinity in earlier posts. The important thing to remember about continuity programs is that by themselves they are only a series of conditioned responses. That you have purchase continuity is great as it proves you have a workable value proposition for the customer. But to leverage continuity programs one needs to engage the customer and transform the behaviour into a memorable experience. And therein lays the challenge we all have.
* The original research was done by Dr. Terry Varva who now is a principal with Ipsos. The original statistics where published by Doug Proden, Terry’s associate, in an article entitled “How to Win Back Lost Customers” in Direct Marketing to Business Report , October 1995, on page 7.
In any customer facing organization, things are never perfect. Try as we might, by error of omission,commission and yes even deliberate design, there is a real or perceived discrepancy in the delivery of customer service.
A severe enough dissatisfaction, as we are all painfully aware – can sometimes result in a lost customer along with the investment put into acquiring and maintaining them as well as the loss of future profit. To add insult to injury there is also the specter of negative Word of Mouth.
Academia has been trying to answer the question of whether a successful recovery from a service failure can ‘paradoxically” lead to a stronger customer bond. In other words can failure lead to success?
There have been many studies with various sample sizes, longitudinal and cross sectional in design and so its not really surprising that some studies will affirm the paradox, others not.
I recently came across this downloadable study of online banking customers at a Swiss Bank which stands out for its sheer size and scope.
Key sample sizes:
Total customers involved in study: 11929
Customers reporting no service failure: 9166 (8174 in study, 452 non response)
Customers reporting one failure: 2638 (1189 in study, 1025 resolution pending, 424 non response)
Customers reporting two failures: 125
Its key findings:
1) consumers are accepting of minor deviations in service
2) service failures are relatively rare
3) Customer Satisfaction impact hierarchy: exceptional service is better than exceptional recovery is better than nondescript service
4) Recommendation intention hierarchy: exceptional service is equal to exceptional recovery in scoring high intent to recommend and both are better than nondescript service
Other studies (Service Recovery Paradox: A Meta-Analysis) have pointed out that recovery is possible if the failure is not too severe, if the customer has a longer term relationship, if the customer perceives that procedural changes will be forthcoming as a result.
So at the end of the day it seems the studies agree on a few key points, namely that
To Err is Human…but divine forgiveness depends on sincerity and severity.
Many companies have therefore tried to implement process standardization at every critical juncture, but in the view of Hall and Johnson at Harvard Business Review
“The movement to standardize processes has gone overboard.
Some require an artist’s judgment—and should be managed accordingly.”
In their view when a ‘standard’ input is inherently variable (ie wood to make a violin), or when output variability is desired by the customer, the process needs to be managed from an ‘artistic’ perspective allowing for judgment and context while ensuring frequent feedback and mentoring oversight.
So what’s your experience with the service recovery paradox, is it something that needs to be managed scientifically or artistically?
What is your incidence of service failure?
What escalation processes do you have?
Do you allow front line staff to resolve issues directly?
Do you have (financial) limits on the resolution, or do you follow the Nordstrom rule “do what is right for the customer”?
What about preemptive measures, are you proactively informing customers about deviations that they may not even be aware of and the steps you took to correct the situation?
looking forward to the discussion.
John Hagel III, The Big Shift,and Lang Davison have started an intriguing conversation at HBR regarding
…discuss how the world is speeding up. Peter Drucker probably started the trend in 1968 with The Age of Discontinuity. The most persuasive might be Ray Kurzweil’s The Singularity is Near, which observes that displays “ in the rate of exponential growth,” which in turn fuels faster-changing events, practices, and processes–while, over time, accelerating economic expansion.
Do yourself a favor and spend the next 23 minutes to watch this amazing video
In their most recent conversation they broached the issue of Managing Resources in an Uncertain World,
We’re moving from a world of push to a world of pull. Push programs operate on one key assumption – that it is possible to forecast future demand. When demand can be forecast, we can efficiently push resources to where they will be needed when they will be needed.
to which I add my limited contribution to the conversation;
JJL, you are absolutely right about the demand/pull – offer/push transformation. But this has been underway since the introduction of the internet which gave consumers/customers access to more information and choice options.
I question your suggestion thatis somehow a driver for that change. If I were to somehow unleash an army of forecasters (lets say the quants at Wall Street 😉 and managed to come up with more robust forecasting techniques- do you really think the “Push vs Pull” dynamic would change or stop?
The dynamic is an evolutionary transformation that stretches back from the roots of central, to production driven corporations, to the customer responsive global corporation evolving still from a central to decentralized command/control system…to where value is created…the consumer.
I have always been amazed that corporations can predict their results as well as they do, when we as individuals can’t predict what we are going to eat tonight. I think there’s always been a certain hubris to forecasting, that somehow we were able to capture the DNA of profit inside a formula. Need more profit…run the formula. Need more (loyal) customers…incentivize purchase continuity.
It’s all a zero sum game unless you develop deeper, more personal connections with customers, which then opens up new possibilities for cooperation and collaboration all along the value chain and within the industry as co-opetiton becomes a strategic option. (see Moore: The Death of Competition, Nalebuff & Brandenburger: Co-opetition)
Technology has progressed to the the point that it enables us to listen, communicate and inevitably …..let go. This fear of ‘letting go’ is no different than a parent teaching their child to ride a bicycle, we feel the apprehension but the child only feels the excitement of their new found freedom. Giving customers more direct access to the levers of change ultimately fulfills the old prophesy of the “Customer is King”.
Your point about logistics/resource planning is powerful, but it is a ‘management constraint’ that can be eradicated whenever desired. As long as one is prepared to work with heightened speed, scale and adaptability ….the inventory cushion provides the means to the end. The enterprise can unleash the certainty of real-time purchase data via interconnected just-in-tine systems.
Unfortunately most production systems have a higher volume requirement for economic scale. And so the challenge isn’t buying into the heightened profitability of the demand-pull side of the equation as much as pushing down the cost scale of production/resourcing/logistics.
This oped piece was published in the January 2009 issue of Direct Marketing (www.dmn.ca)
I. S.P.I.E.D. a customer centric campaign – by Miro Slodki
It’s a new year. The slate is clean. Staring in front us is the new budget and the last approved 12 month matrix of key projects and initiatives. The traditional way of organizing this activity centers on crafting targeted programs to deliver against the budget and its ROI metrics. But if you’re wondering if there is a better way to integrate relevance with customer centricity, then you might be interested in reading a little further.
In light of current events, I doubt many would argue that the need to promote offers has been ‘supplanted’ by the mission critical requirement of creating value for our customers and indeed that this path helps us achieve both relevance AND success.
The problem (as I see it) is the difficulty, if not impossibility, of managing value-based messaging in a campaign centric approach as these events are designed to trigger a response to short-term (typically price led) activities. The shift to ‘telegraphic’ messaging media (search engine, SMS, Twitter and mobile) further exacerbates the issue as the constraints of these media limits marketers to essentially BARGAIN-based messaging. In the end, there is a significant black swan risk that the actions taken by marketers can actually detract from the value they are seeking to create.
But we’re putting the cart before the horse.
Before you can attempt to create value for your customers – you first need to know what it is they want. As you would expect, there are any number of specialists that can guide your organization in defining and operationalizing the consistent delivery of customer value. But this shouldn’t stop us from moving forward on a smaller scale because some of the value components are marketing and not process, supply chain or design related.
I offer this basic framework in the hope that it helps guide you in where you might look for value creation and communication opportunities for your brand:
Iconic value – How desired the brand is
Societal value – What benefits it enables/supports in the community
Priced value – Purchase price plus installation, warranty, service, financing
Integration value – How it contributes to creating a greater value by being part of a larger system
Experiential value – How it enhances a shared experience
Design consumption value – How well it functions in solving the primary problem
Each of these I-SPIED dimensions will have greater or lesser importance in the value matrix the customer seeks, defined relative to some primary competitor. Relying on just one dimension undersells and gradually, inevitably weakens the brand making it increasingly necessary for sharper pricing to trigger a customer response. And as long-term events in the auto sector have shown, if the underlying value of the brand is eroded, sometimes no amount of pricing (or marketing) can help.
Leaving that basic overview, we turn to the implementation.
The first order is to have the current value (i.e., revenue, gross margin, net profit) segmentation of your customers at hand. The next task is to reallocate your marketing promotion budget against each of your key customer segments reflecting the relative investment and effort allocation. It is also important to understand how the enterprise was able to generate value both for and from its customers, in order to uncover the potential up-sell, cross-sell and frequency of purchase opportunities for the coming year.
Using the traditional campaign/task oriented approach we would see a series of programs (sometimes integrated) executed to accomplish the desired behavioral/transactional response across a spectrum of customers. All of the thinking however is centered on the campaign. Will it yield the X% response rate, generate the $Y we have budgeted? But, if we pivot this approach we get a customer centric orientation.
In the customer centric method, within the database, we strive to look at both the immediate and future needs and solutions our customers will seek. Rather than having “10x$10 transactional conversations”, we change the focus and instead have an ongoing $100 conversation (using as many of the I-SPIED dimensions) with our customers.
Doing so energizes the message we send our customers because we let them know we see them in a bigger context and seek to offer the value/solutions they need to address their ongoing requirements. This in turn changes the scope of our activity from simply messaging to effectively communicating, which then requires the coordinated management of a broader expanse of communication (C), experience (E) and offers (O) to support the value of the relationship. We mustn’t forget that the value management of the relationship is a bi-directional flow, just as we see the $100 customer; the customer must look at our brand and see it as the $100+ “GO TO” brand for solutions.
Putting it all together yields a simple equation (Purchase (P) = xC + yE + zO), which I have elaborated and created some CRM calculations you can perform within a basic spreadsheet.( see here)
This is not news to large portions of the B2B world that routinely function in this manner. As a result of their extended purchase cycles, multiple stakeholders and more complex value chain requirements, they have been forced to learn how to effectively manage their customer acquisition/retention processes using a variety of touch points. For them, establishing value comes before pricing it.
Knowledge of value communication is tantamount to helping brands understand how to effectively manage going forward and answering questions like; are there different sequences that will be more effective or less costly, is the communication reinforcing the value AND the price? The B2C world seems to take for granted that pushed messages have no/little adverse impact on their brand, that consumers are resigned to irrelevant noise. This is why a customer centric value communication approach is so important in what is like to be a protracted recovery period. The traditional campaign bargain-based messaging approach will still work and generate sales – but in time will fall behind in creating the longer term value that is needed to sustain viability. Unless of course, you happen to be one of the few that are too big to fail….
The world revolves around value. Creating it. Selling it. Buying it. We all know it when we see it, solid as the Rock of Gibraltar where moments before there was nothing. But what exactly is value?
Critical to our understanding is the realization there are two parts to the process, the first being the creation of appreciated value which is separate from and followed by the pricing of it. In today’s economy where so much monetary value has been eradicated there is a heightened urgency for all things related to value (re)creation. Important as these new activities are to rebuilding, we must not lose sight that much of how the consumer deems things to have value is grounded in psychology as much as the tangible.
While value is a dynamic construct that can be created, destroyed or transferred with the speed of thought, we don’t often see or report on its full dynamics. As a consequence of our measurements* we end up with an constrained view of the free market fluctuations consumers otherwise communicate to us regarding the proffered value.*most retail pricing tends to be fairly static (within a prescribed range) and the lack of reporting on failed purchases
Fittingly our starting point begins with what economist call the subjective (marginal utility) theory of value which holds an item has no inherent value, until there is a shared and agreed upon:
- need or want that is satisfied by the value source, and
- a perceived or real constrained supply of the value source, otherwise an over-supply (ie free goods) can lead to de-valuation.
Perhaps the greatest contribution this theory brings is the formal recognition that value (creation or transference) can only thrive in a win-win environment. While economist debate value and point to its ‘invisible hand’ guiding the upward transformation and redistribution of economic resources from lower to higher value states, business tends to be more pragmatic.
Michael Porter’s seminal work, Competitive Advantage advocates conducting a ‘value chain‘ analysis of a company’s internal processes and the interactions between key elements of the firm (inbound and outbound logistics, operations, marketing/sales, service) and customers in order to determine how and where value opportunities might exist. But to understand the context in which the value chain competes in, one must appreciate the generic strategy (Competitive Advantage Vs Competitive Scope) the enterprise is embarked upon as well as the Five Forces (Bargaining power of Suppliers and Customers, Threat of new entrants, Substitute products and Competitive rivalry within the industry) acting upon it.
Treacy & Wiersema (The Discipline of Market Leaders) put forward a customer centric model more reflective of the current competitive global technological landscape.
Customers today want more of those things they value. If they value low cost, they want it lower. If they value convenience or speed when they buy, they want it easier and faster. If they look for state-of-the-art design, they want to see the art pushed forward. If they need expert advice, they want companies to give them more depth, more time, and more of a feeling that they’re the only customer. pg 4
In their view a firm must select and excel at one of three value disciplines as a core operating model, while remaining adept at the other two:
operational excellence – executional excellence featuring an unmatched combination of quality, price and ease of purchase/hassle free service.
product leadership – the pursuit of innovation to continually redefine the consumers view of the category to one’s advantage.
customer intimacy – the pursuit and actioning of customer centric insight and sensitivity into the client’s underlying problem to deliver a personalized brand offering that helps customers achieve their success transforming the way the customer does business.
Each path then frames the key value activities the enterprise has to complete in order to consistently deliver the customer’s desired value.
However structural and technological market changes have led to refined thinking (see Moore: The Death of Competition, Nalebuff & Brandenburger: Co-opetition) . The broader view is that competition can lead to mutual cooperation that helps keep new entrants at bay, reduce total cost among participants and drive creative destructionism. This helps motivate a higher degree of customer relevancy that firms acting on their own volition might not have otherwise evolved fast/far enough and keep customers from seeking out alternative solutions. This reflects Taleb’s (The Black Swan) notion of ‘hidden’ risk where the absence of healthy competition is an unnatural economic reality… eliminating or weakening the enemy one knows can/will lead to emergence of an enemy one does not know…or as the saying goes “Keep your friends close and your enemies closer”.
Emerging also from this body of knowledge is the shift toward co-creational value building. What was once a top-down activity – where value happened “TO” or “FOR” a customer (operational excellence and product leadership) as a result of the enterprise’s ability to create the desired widget or experience, now includes a full circle/ecosystem of cooperation to create superior value.
This broader perspective appreciates the supremacy of the customer’s viewpoint of the value exchange. This is important because it runs counter to the management practices of many enterprises, where speed and metrics of business success have forced the enterprise to configure itself and its activities to generate immediate results for shareholders. Consequently marketers have drifted from pursuing value enhancement and value communication and instead, focussed more on the price management of value.
But in this new economic and market landscape – the price and value assessments of brands , not unlike the stock market have undergone significant transformation due to changed personal economic circumstances, priority realignment and de-leveraging of personal credit. McKinsey characterize this environment a structural break and opine that,
The wrong way forward in a structural break during hard times is to try more of the same. The break and the hard times are sure indications that an old pattern has already been pushed to its limits and is destroying value.
Hence there is a new imperative and window of opportunity to rebuild the value and value perceptions of one’s new/changed brand franchise. To do so marketers will need to rebuild the brand value dimensions available to them and take this opportunity to establish a more compelling pricing of that value.
In the next section we will review the 6 dimensions (Iconic, Societal, Potential, Integration, Experiential and Designed Consumption) available to them. See: The Six Forces of Brand Value