Why large companies cannot cultivate customer intimacy and customer relationship theory is misguided

How easy is it to large corporations to cultivate customer intimacy?

You can argue intimacy leads to loyalty and you can also argue that loyalty leads to intimacy; I see the relationship between intimacy and loyalty as depicted by the diagram that shows the relationship between yin and yang.  So it is no surprise that many business executives have an interest in cultivating intimacy and loyalty – flowing from their customers to them and not the other way round.  And of course a lot has been written about these topics by the relationship marketing school and brought into the mainstream by the CRM folks.

Customer Intimacy Doesn’t Scale that is what Barry Dalton asserts in one of his latest posts.   And Guy Letts, in his comment, makes a good point: he doesn’t want to be intimate with large companies and is not sure that he could reciprocate the intimacy.  This got me thinking about how the language around human (social) life has been adopted by the relationship marketing school and then corrupted by the CRM school.  For example here is what Wikipedia has to say on the subject of intimacy:

“Intimacy generally refers to the feeling of being in a close personal association and belonging together. It is a familiar and very close affective connection with another as a result of a bond that is formed through knowledge and experience of the other. Genuine intimacy in human relationships requires dialogue, transparency, vulnerability and reciprocity.”

And the same source (Wikipedia) sounds the warning bells of strategic (exchange) relationships masquerading as intimacy:

“It is worth distinguishing intimate (communal) relationships from strategic (exchange) relationships. Physical intimacy occurs in the latter but it is governed by a higher-order strategy, of which the other person may not be aware. One example is getting close to someone in order to get something from them or give them something. That “something” might not be offered so freely if it did not appear to be an intimate exchange and if the ultimate strategy had been visible at the outset.[13] Mills and Clark (1982) found that strategic (exchange) relationships are fragile and easily break down when there is any level of disagreement. Emotionally intimate (communal) relationships are much more robust and can survive considerable (and even ongoing) disagreements.”

And if you look up the definition of customer intimacy what do you get?  Here it is: “Customer intimacy is a concept from marketing, which describes the ability of a supplier to become accepted and known as the regular partner with its customer. Customer intimacy creates a virtuous circle: the better the supplier knows the customer company with its objectives and difficulties, the better able he is to provide an optimal solution. The more adapted the supplier’s product or service is, the happier the customer will be, and the stronger the “intimacy” between the two parties.” That sounds very much like a strategic (exchange) relationship.

All of this got me thinking about a post a wrote about a year ago when I started this blog – so you are unlikely to have read it.  I’d like to update it a little and share it with you to get your feedback.  Here it is:

“The critical flaw at the heart of modern customer relationship thinking

When I was working as a Senior Consultant with The Peppers & Rogers Group the customer paradigm was explained through the analogy of a small grocer (or florist) serving his/her local community.  The thrust of it was that the grocer got to know the customer – the person, his circumstances, his shopping history, his attitude, his values, his beliefs, his preferences – and used this knowledge to offer him the right products, at the right time, at the right price in the right way.  The end point – this is important – we have the technology to recreate that kind of business relationship with our customers.

What the analogy leaves out is the social context.  In days gone by the local grocer (or any other shopkeeper for that matter) was living in the same community as his customers.  He was likely to come across his customers in the social life of the local community.  Some of the customers used to be fellow students at school, others went to the same church, others frequented the same pub, others were friends of friends and so forth.

In short the grocer’s relationship with his customers was much a social one as an economic one; he experienced his customers as rounded multi-dimensional human beings not as one-dimensional economic objects nor as abstractions on a revenue statement. Because of the shared local context the customers also invested in the grocer – they knew the grocer in a rounded context and not just as an economic entity, a grocer.  A different way of saying this is to say: the social and economic relationship were in a yin-yang relationship (as illustrated in the diagram above).

Furthermore, the owner was also the CEO and the person having the daily contact with customers – listening, talking, interacting, serving customers. 

That situation today for Mr Multi-National Enterprise (Mr MNE) is completely the opposite.  There is no social relationship between Mr MNE and the customer – they typically live and move in very different social circles.  The customers do not have to support Mr MNE (like they did with the grocer – else no local grocer) and Mr MNE can find other than local customers – the world is full of potential customers.  And importantly, Mr MNE is completely divorced from the customers – he never has to see, talk with or serve a customer.

So whilst the technology exists to gather information, the all-powerful social context that is necessary for building enduring mutual win-win relationships is absent.  And that is the critical failing at the heart of modern customer relationship thinking.  It misses the fact that relationship are a natural by-product of a social context.  That social context  is missing from the modern corporate world and it cannot be recreated in the typical tenure of the CEO.”

One year later on I might add that there are a lot of people (like Barry and Guy) who do not want a “relationship” with large (impersonal) corporations even though they find themselves intimate with local stores that are embedded in their social lives because the owners/employees of these stores are embedded in the same community (as Barry and Guy).

What do you think?  What is your experience?

Ramblings and useful reminders on customer-centricity

Caring for existing customers is a new construct for large companies

The focus of the largest most successful companies has been on attracting new customers.  Caring for new customers is relatively recent invention and a new construct for these companies.  Today, there is more of a balance between attracting new customers and keeping existing customers.   Genuinely caring for customers and cultivating existing relationships is something many big companies struggle to embody in their day-to-day behaviour.  Yet more and more companies are making more of an effort to do better.

Why care for your existing customers?

The fundamental reason for cultivating enduring relationship with existing customers is simply that customers are scarce resources – sometimes the most scarce resources!  In a market/industry where this is not true there is no compelling reason to care for customers unless attracting new customers is more costly than keeping existing customers.  Why do I say that?  Because it is much more demanding to cultivate relationships and keep customers; attracting new customers through seductive advertising, sales promotions and aggressive selling is much easier.

Strategic implications

The strategic implication of taking a customer retention focussed approach to doing business is simple and straight forward: court your customers ongoing so as to achieve 100% customer retention.  Think of it as the zero defect ethos and practice applied to existing customers.  What does that mean?  It means that you get that “it only works if it all works” and so you set clear expectations, attract the right customers and then deliver on your promises; you do not give customers a reason to leave you because of  defects in expectation setting, product delivery, product performance, service etc.

Clearly, you have to put in place mechanism to identify and part company with customers you have taken on and with which you do not have a fit: a fit  between their needs and what you promise; and a fit between your needs and what these customers deliver to you.

Relationship based philosophy is the foundation of customer-centric strategy

Customer-centric strategies rest on a relationship based paradigm (‘relationship marketing’) which is best captured through the adage ‘don’t make a sale, make a customer – for life’:

  • If you are good to your customers you will make them feel good (about you and themselves) and they will keep coming back because they like you;
  • If they like you they will feel more comfortable with you and they will spend more money with you;
  • If they spend more money (with you)  you will want to treat them better.
  • If you treat them better they will keep coming back and the circle starts again.

Useful principles for customer-centric businesses

How do you make customers feel good about doing business with you?  The answers are limited only by your imagination, your understanding of the human condition and your understanding of your customers. Having said that here are some useful principles:

  • It only works if it all works – solve the customer’s problem completely by ensuring that everything (products, services, channels, touchpoints….) works and works together;
  • Value the customer’s time – use it wisely, don’t waste it;
  • Provide exactly what the customer wants – no less and no more;
  • Provide what is wanted exactly where it is wanted;
  • Provide what is wanted, where it is wanted, exactly when it is wanted;
  • Continually think outside the box of your product and services to come up with expanded products+services to help your customer achieve his desired outcomes in ways that are easier, quicker and more like play than hard work; and
  • Leave customers feeling good about doing business with you – what you stand for matters as much as how you treat your customers.

What it takes to deliver on the customer-centric dream?

It takes a lot to deliver on customer-centric strategies and become a customer-centric business.  As I have written before moving from a product/selling centred orientation to a customer-centred orientation requires organisational transformation akin to the caterpillar turning into a butterfly.  Put simply the steps to customer-centricity sound simple yet are tough and as such they require uncommon commitment and persistence.  And this has to start right at the top with the CEO and the Board of Directors and cascade down and throughout the organisation.

One useful framework for thinking about the capabilities that you need to put in place to deliver on the customer-centric dream has been put forward by Peppers & Rogers:

  • Identify customers at an individual level and determine how these customers can be contacted;
  • Differentiate customers by their needs and financial value;
  • Interact with customers through their preferred channels across the customer journey and set-up a two way dialogue that enables the company to learn about the customers and the customers to learn about the company on an ongoing basis;
  • Customise your products, services and ‘interaction platforms’ so as to leave each customer feeling she has been treated as an individual; and

Whilst not specifically pointed out by Peppers & Rogers, it is clear that the organisation that seeks to put this into practice has to be a learning organisation as put forth by Senge et al.  An organisation that is not able to learn will not be able to sense and respond to customer needs – especially when these needs change.

Before you run off and reinvent your organisation remember this

Your company has to make a profit to survive.  An excellent relationship with yours customers is worthy goal only if your customers offer a reasonable profit potential.  This means that you have to understand your customers and their needs and you have to take into account both the benefits and costs of investing in building relationships with these customers.   It also means that your marketing has to deliver ROI; your sales folks have to close deals in a reasonable time at a reasonable price and margin; your customer service function has to please customer and yet manage its cost base by using the right mix of interaction channels and so forth.

How the world has changed: TeleTech buys The Peppers & Rogers Group

I was a part of The Peppers & Rogers team here in the UK at the turn of the century.  That is where I met some of the people who I find to be the most passionate about advising and assisting companies in creating sustainable competitive advantage through customer-centricity.

At the height of the dot com collapse I left Peppers & Rogers – as did some of my colleagues.  Yet, I have continued to follow the company as I have fond memories and am in agreement with what the company stands for: a customer centred approach to doing business.  So it is with interest that I read that TeleTech have bought 80% of The Peppers & Rogers Group.

What I find it interesting is that Peppers & Rogers has not been bought by a marketing agency. It has been bought by a company that specialises in outsourcing including Customer Management Outsourcing.  How times have changed!

When I worked at Peppers & Rogers (200 – 2001) I would never have imagined that things would turn out this way.  Those were the days of CRM.   At that time we did almost all of our consulting for the marketing function – typically the marketing director or the CMO.  Occasionally we did work for the Commercial Director and even the odd CEO.  Yet, the people who were in the driving seat were the marketing folks.

At that time I always envisaged that if anyone would buy Peppers & Rogers it would be a marketing agency.  And at the end of the dot-com collapse the UK arm of Peppers & Rogers was sold to Carlson Marketing – they used to own the Peppers & Rogers brand name in the UK but now it is branded Carlson 1to1.

CRM fell flat on its face because too many people in business are looking for the quick fix – the silver bullet – and the software companies (like Siebel) were happy to provide it.  Out of the ashes of CRM arose Customer Experience.

Today we live in the age of Customer Experience and in this age the marketing function is not the most important one.  Not by a mile – customers rarely decide to continue doing business with a company as a result of the advertising nor the direct mail pieces that land in the letter box.  In the age of Customer Experience the Customer Services function (and contact centres in particular) play a primary role: depending on which survey you read, some 70 to 80% of respondents claim their decision to stick with or leave a supplier is based on the service that they receive.  And a significant part of that service comes out of the contact centres. So it makes perfect sense that TeleTech has purchased The Peppers & Rogers Group.

I want to make it clear that I am not against marketers, the marketing function or even advertising.  Whilst I passionately believe that marketing and marketers have to embrace a completely new paradigm I also get the value that good marketing creates.  Good marketing contributes to the customer and adds to the bottom line.

One role of marketing – indeed advertising – is to add stuff that customers want and which is not in the product itself.  Think about the classic USA adverts for the Volkswagen Beetle – they took an odd-looking car and made it sexy.  Think about the Avis advertising – it took a number 2 position and made it into a virtue: we are No 2, we try harder.

Some brands – especially luxury brands – depend critically on good marketing: customers are buying status and the marketing has to continue to create that status.  Automotive insiders tell me that the quality of Honda cars is just as good as anything on the market yet no-one looking for status buys a Honda, they buy Mercedes, Audi, BMW….