Brand-Customer Relationship Strategies – Valutrics
A satisfied customer will buy new products or new versions that become available. By investing in customer retention programs, a company can increase its income without high acquisition expenses. The reason is simple: it costs several times more to attract a new customer than it does to keep an existing one.
Achieving brand loyalty typically is a four-step process: awareness, consideration, conversion, and postsale. These stages represent the degree of the customer’s proximity to the brand in
relation to the exchange value.
In the first stage, the marketer’s objective is to make the individual aware of the brand as a potential partner. The aim is to
create a positive perception of the brand’s reliability and quality in the consumer’s mind so as to enable future communication. It is in the consideration stage that the first contact between the company and the newly interested consumer occurs. To foster the possibility of a first purchase, the company must invest in the relationship. As a result, the marketing department must initiate a more personalized communication, introducing more detailed information about the brand and the products and services being sold. It is also important to show the connection between the price and what the product or service is offering. Although determining the price of the goods is not within the purview of the marketing communication department, establishing the link between the price and the product is one of the profession’s most critical roles. When marketers make this argument effectively, it can advance (and help enhance) the relationship between the customer and the brand.
After this stage, it is natural for some individuals to lose interest in the products and services being offered. There are many reasons why this happens. After the initial contact with the brand, people may decide that the products or services are not of interest. Or, it could be that the marketing message during the consideration stage was inadequate and failed to present the necessary information. Sometimes other factors come into play: the price, distribution, or quality, for example, could fall short of what consumers desire. But there will be consumers who show real interest, and it is imperative that they be engaged in a highly personalized manner. These people are truly interested in acquiring the product or service offered. For this reason, they are often called prospects or hot leads. Typically, they require minimal sales effort in order to be converted into customers, but they do require a specific, individualized response from the company. This can range from more proof of the efficacy of the product to financial incentives, including discounts or more payment options. From the awareness to the conversion stage, the size of the base of potential customers will shrink dramatically as the process identifies those individuals who are truly interested in a value exchange with the brand. Marketers have to customize their message so that it has more depth and relevance to individual consumers. Relationship marketing uses the prospecting relationship marketing (PRM) program to develop these three initial stages and guarantee a systematic and structured process for acquiring new customers, as we will see in detail in this chapter. Postsale is the final stage It comes after a sale has been achieved and reflects a mature—i.e., close—relationship with an existing customer. Although keeping current customers satisfied with a brand involves a great deal of work, it brings recompense to the company. Building loyalty is critical because often the costs incurred in bringing in new customers are considerable and are offset only when they make additional purchases.
The objective of a loyalty program, then, is to extend the living relationship between the company and its customers for as long as possible. As a result, it is necessary to rank customers in order of importance and develop corresponding marketing actions. Companies need to prioritize, devoting the most marketing efforts to those customer segments that offer the company the highest value.
There are loyalty programs that work on customer retention by focusing exclusively on identifying those individuals who are most likely to abandon the brand. In such cases, the marketers first try to understand what is driving customers to leave and then develop specific strategies to reverse this trend and communicate them clearly to this group. There can be many reasons for customers abandoning a brand, including dissatisfaction with support services or a better offer from the competition. What is key is that the company identify those individuals who are most at risk of leaving and then takes actions immediately to prevent their departure. Recovery programs are used for customers who have already left the brand. Using statistical models for data analysis, companies can identify the most common reasons for leaving and then develop appropriate marketing campaigns to bring back the deserters. It is important to acknowledge that abandonment may not have anything to do with the company; it could be, for instance, that the customers have moved out of the state and no longer frequent that point of sale, or they may have experienced a dramatic decrease in disposable income.
The postsale stage offers tremendous opportunities. Satisfied customers trust the company and the brand enough to not only make repeat purchases when finishing products but also will acquire new versions and complementary solutions. In general, a product update provides some new benefit or additional features, while complementary solutions can satisfy a customer’s need that hasn’t been addressed by the existing product or service. Besides the immediate financial advantages from this practice, the company also gains increased customer loyalty. Customers who use a greater range of products and services from one company recognize that there are costs involved in searching for, analyzing, and buying a competing brand. the customer’s learning relationship with the brand is an additional barrier to abandonment that can be further reinforced by the sale of a broader set of solutions. Using a variety of techniques, relationship marketing employs cross-selling and upgraded programs and develops a consumption map of its customer base. It is thus possible to project customers’ future consumption habits and then offer products and services geared to those customers at the time they are likely to be most in need of or wanting those items.
In addition to acquiring more goods and services from the company, the satisfied customer also can refer other potential buyers. This is so-called word-of-mouth marketing, which also is known as a member-get-member program in relationship-marketing circles. Here, the objective is to develop a targeted program, not simply to reap the benefits of a spontaneous phenomenon. The company uses its own loyal customer base as an inexpensive publicity arm by first identifying the biggest influencers among the base and then creating mechanisms that will facilitate their making a referral or indication. How to accomplish this? The key is building upon the pillars of recognition and reward. First, the company needs to identify the customers who are seen as knowledgeable on the subject in question and who have the connections to disseminate the information. According to Gladwell,1what makes these people so influential is the fact that they know things that the rest of us do not. Then the company offers financial incentives to motivate these people to identify new potential customers. The reward could be a gift that is perceived as being of high value. In general, the greater the number of referrals made and turned into sales, the greater the rewards offered. The difference between the member-get-member program and the PRM program is that in the former, the awareness stage is handled chiefly by individuals who already have some link (and thus credibility) with the consumer in question. Consequently, the leap to the final stages of the relationship can occur in a faster and more effective manner. In some industries, such as medical and hospital services, a referral from a reliable source is the determining factor in whether a consumer uses the offered solution. The objective of relationship marketing programs is to move the customer straight to the most advanced stages of the relationship. For consumers who are unfamiliar with the company, the objective is to stir up brand awareness fast. For those who already know the company, the goal is to first take them to the consideration stage and then bring them to the conversion stage and make them customers. In the loyalty stage, the major challenge facing a company is to keep customers exercising their greatest purchase potential for as long as possible.
PRM—Prospecting Relationship Marketing
Until the 1960s, the public’s buying patterns were more homogeneous and easily accessed, and the solution that mass marketers used to reach new consumers worked generally well. However, today there is an abundance of niche markets, each with its own unique demographic and behavioral characteristics, and as media costs continue to skyrocket, marketers need to make sure that their messages are appropriately tailored to the niche they seek to reach. The biggest disadvantage of the mass media approach is that resources are being expended on reaching a segment of the customer base that may not have any interest in the product or service being offered. As John Wanamaker, the eponymous founder of the Wanamaker department store chain, supposedly quipped, “Half of everything I spend on advertising is lost; the problem is, I don’t know which half.” The pressure for greater returns on investment will force companies to increasingly supplement mass media strategy with a more efficient one.
Another prospecting possibility is to use several niche radio programs, magazines, and cable TV shows that target specific communities. Spreading communications over many smaller vehicles that are aimed at the special interests of small markets increases the marketing professional’s chances of reaching the desired base effectively. This approach should also include renting lists that address specific communities, but in a direct manner. these lists can be commercialized by the vehicles themselves, associations or clubs, credit card companies, and public service companies, among others. After identifying the best way to reach the target public and then employing that method of communication, the company needs to analyze the results of this action. If the outcome is positive—the number of prospects or customers reaches the projected quantity—then you can consider the strategy successful and keep using it until you notice the return rates begin to fall to unacceptable levels. It does not matter if there are individuals in this group who have already become customers or who have no interest at all in acquiring the products and services offered. The idea is to repeat the original message, or use a variation of it when necessary, so that a new crop of consumers becomes interested in the brand. Conversely, if the results from the initial media campaign are negative and far fewer customers result than expected, then look for other, more appropriate vehicles or lists. In both cases, the logic of the process assumes that the actions are completely independent of one another. They resemble a series of sporadic campaigns that do not use what was learned about individual behavior to refine future programs. There is no individualized management of the base to permit adjustments and improvements. The alternatives are concentrated in the search for new vehicles or lists and the creation of communication pieces. When these options run out, the company assumes that it has reached the inflection point for the product or service in question. Variables that are exogenous to marketing communication, such as the development of advanced versions of the solution or more competitive price policies, are used in an attempt to stave off the imagined end of the product’s life cycle. PRM’s objective is to improve the return on investment in conquest marketing, preserving the history of contact with the base through communication management throughout the conversion cycle. It provides a systematic focus for acquisition marketing, with all actions developed with the base being carefully structured and related to one another. An attempt is made to improve and refine the relationship based on knowledge of the previous result. All answers are individually stored and updated. PRM’s strategy begins with the base’s demographic and behavioral data. The relevant attributes of prospects are studied using descriptive analysis so that marketers can develop direct communications based on multiple factors. There also is an attempt to identify the groups that would find the brand most relevant and allocate communication resources accordingly.
Several companies make lists available for rental or purchase that provide information on consumer and company markets. In general, the data are comprehensive, covering the entire nation; they also are relevant, introducing a broad range of demographic, behavioral, and transactional attributes. Equally important, these lists are updated periodically, guaranteeing that the segmentation being used will classify the individuals correctly. An additional part of the potential customer base can also come from other contact lists that the company may have developed in the datagathering process, such as at promotional events, points of sale, or Internet sites.
Once a list of prospects has been created, the company can make a range of brand communication channels available to the potential customer. A variety of channels will ensure that individuals will have the most convenient method at their disposal in order to develop the relationship.
PRM concentrates on differentiated procedures for each of the first three relationship stages: awareness, consideration, and conversion. In the first stage, most company efforts are aimed at making individuals aware of the brand and promoting a response. Direct mail, active telemarketing, and e-mails with links to the company’s Web site are examples of direct communication methods that could be applied during this first stage. However, the database often lacks enough customer registrations to develop this campaign. In such cases, the media can be used as an additional tool to increase critical mass. It is important to observe that, contrary to conventional advertising’s goal of brand building, relationship marketing’s aim during this phase is to direct the consumers’ response to specific contact points, such as phone service centers or Web sites. The consideration stage involves a more directed handling of information. As a result of the initial communication, individuals now are interested in knowing more details. Internet sites are excellent channels for this purpose. With multimedia and interactivity capabilities, they can offer testimony from satisfied customers and details about products and services. Telephone service systems, points of sale for companies that wait on final consumers, and sales forces that service other companies (B2B) are other channels that can provide individualized treatment.
For the conversion stage, the relationship should be even more customized and the information provided even more targeted to the consumer. The use of personalization resources on the site permits the user to receive pages that are of interest immediately after being recognized, without having to navigate as in the previous stage. At the call center, the attendant recognizes the individual through the relationship history chart and goes more deeply into issues of greater relevance. The same thing happens at the point of sale or when the client is in contact with the sales force. In all of these cases, it is important to record each individual’s behavior activity and store the observed information in the databases:
• Which consumers are still in the initial stage and have not responded to communication actions?
• Which are in the consideration stage, and what is the most requested and sought-after information?
• Which are in the conversion stage, and what are the possible reasons that they have yet to migrate to the final postsale stage?
These data will be used to elaborate future, more refined strategies. Rather than discarding the portion of the base that did not become brand customers, the extension of the acquisition program will develop new direct actions called rebounds. The objective is to rewrite the communication by making an offer that is more directed toward the non converted base’s objectives and needs during each of the awareness, consideration, and conversion stages.
With PRM, detailed communication planning should be implemented first, by specifying which actions should be developed in which channels and in which time unit. The results should be recorded and analyzed vis-à-vis the developed plan, and any discrepancies should result in the plan’s being amended.
An initial objective is to use each channel in the most efficient manner possible, eliminating unnecessary costs in the contact phases. For example, use of the sales force is often one of the most expensive resources allocated. It should be employed only in advanced stages, when its presence can be a critical factor in the relationship’s evolution. The primary objective is to convert the largest number of individuals into customers, using the method with the most advantageous cost-benefit ratio for the company. Information on potential customers who have yet to decide on whether to buy the product or service is stored in the company database to be used for future programs. Current non engagement does not justify removing these individuals from the prospect base. Companies should specify the consumers’ reasons for reluctance or negativity so as to create strategies that will overcome those objections in the future. Prospects that are already in advanced stages of the relationship should not receive communications as if they were unknown to the brand. Different people respond at different times. By understanding their behavior, it is possible to apply actions at the most opportune moments for each individual. By focusing on the prospect’s perspective and using the PRM strategy, the marketing professional can attract new consumers in a more rational and intelligent manner. The key is enhancing both the content and the form of communications, rather than using homogeneous and uniform communications over and over again, thinking that the audience’s behavior will somehow change by osmosis. Redirect the enormous media costs required by conventional prospecting into building more effective communication material and response channels. The database will then become a competitive differential. Unlike those vehicles that are available to any company that is willing to accept the costs involved, the prospect information bank is a comparative advantage that gives the brand a leg up on its competition. The prospect information bank is not reproducible, as every database is unique, nor can a structured PRM solution be bought or developed quickly. Like any learning process, it demands time. And in competitive industries, time is a resource that many companies do not have.
Where and when to measure
Where and when to measure customer satisfaction depends upon the type of business and the prevailing market conditions. Measurement can take place in any location that the customer is based – in the organization’s own outlets, at home, at their office or place of work, in the street, in a shopping mall, at competitors’. Every organization must decide when it will receive the most accurate picture of customer opinions. Some companies prefer to take a snapshot or to evaluate customer satisfaction before and after a pilot service quality scheme. Others undertake ongoing monitoring on a monthly, quarterly or yearly basis.
One disadvantage of undertaking too frequent monitoring, eg weekly or monthly, is that trends do not have time to emerge. Our experience is that managers tend to react to individual survey results rather than looking at the bigger and longer-term picture. It is helpful, for example, to set specific improvement targets on a quarterly or six-monthly basis and to monitor the effectiveness of these improvements. Importantly, customer research results need to be communicated to employees so that improvements can be made. One research study showed that this only happened in 40 per cent of cases.
When the Grid System Management (GSM) Division of power supplier National Grid undertook a survey to establish customer perception, what emerged was a high regard for GSM by their customers and satisfaction that their system worked. However, GSM was seen by some as rather arrogant and not offering good value for money. Managers within the business did not like the criticism but recognized its value. The survey became the impetus of a customer care programme, whose key aim was to reinforce the organization’s professionalism and raise awareness of customer issues by involving as many staff as possible in focusing on customer requirements and perceptions. The measurement became an ongoing and critical feature of the programme which has enabled the organization to successfully monitor and manage the change process.
Measuring customer loyalty
In the United States an organization called the American Customer Satisfaction Index (ACSI) tracks customer satisfaction on an annual basis. Like other organizations of its kind, it has found that satisfaction scores are unlinked to sales growth. K-Mart is an example of this: showing high customer satisfaction score and no growth. So, just because customers are satisfied with your product or service does not mean that they will buy more from you or recommend you to their friends.
Potentially the satisfaction surveys on which organizations spend so much time and money are a weak tool for measuring whether customers really will be loyal unless the surveys ask a question around loyalty: do customers remain with you, spend more with you and recommend you to their friends?
Frederick F Reichheld, guru of the loyalty industry, is quoted as saying: ‘I’ve given up on satisfaction surveys. They don’t work.’ His two books The Loyalty Effect (1996) and Loyalty Rules! (2001) have spurned a greater focus on customer loyalty as a driver of profit and growth.
The six most common mistakes in customer research according to Reichheld are:
• asking too many questions;
• surveying the wrong customers;
• inappropriate timing and frequency;
• lack of responsibility within the organization for acting on the results;
• not working through the consequences of the findings;
• inadequate ‘gaming safeguards’ so people can work the system to produce favourable results.
Continuous improvement
Once a measurement system has been developed it needs to be continuously reviewed to ensure that the information it provides is valid. It is also advisable to adopt a range of ‘listening’ mechanisms to obtain a wide variety of views. Air Miles, for example, uses a mix of customer panels, staff panels, mystery calls and field or desk research as feedback tools.