Why do only a handful of companies excel at cultivating customer loyalty?

The story state of Customer Experience

Dave Brocks latest post (selling disguised as relationship management) and Beyond Philosophy’s Global Customer Experience Management Survey (2011) which made the point that a lot of stuff that is not Customer Experience is being badged as Customer experience got me thinking about this sorry state: lots of talk, lots of people with the right titles, lots of spend on technology and yet the same old organisational behaviour.   Which begs the question: why it is that only a few companies truly excel at Customer Experience and customer-centricity?  Now I can list all the usual candidates: spaghetti like systems, silos, channel proliferation, organisational design, conflicting agendas & metrics and so forth.  That is exactly what I am not going to do because I believe that these are red herrings that are used to paper over what is so.  So let’s take a skeptical look at business and see if this sheds any light.

The smuggler, the border guard and the wheelbarrow

Every day a man turns up at the border with a wheelbarrow and some stuff in it.  Every day the border guard examines the stuff in the wheelbarrow convinced that the man is smuggling something.  Some days the stuff is clothes, other days footwear, sometime watches, sometime blankets yet none of the stuff in the wheelbarrow is contraband and so the border guard reluctantly allows the man across the border.  This goes on and on until the border guard retires.  Shortly after that the border guard and the man meet accidentally and the border guard asks him to say what he was smuggling.  The man replies “Wheelbarrows!”

Let’s stop for a moment and look at the whole customer stuff: customer satisfaction, customer focus, customer loyalty, customer relationship management, customer experience and customer-centricity. And ask the question: what is right in front of us that we are missing?  What is our ‘wheelbarrow’?

The name of the game is neither Customer Experience nor customer-centricity

Is it easy to do well in a truly competitive industry?  No, it is hard work.  What is the ideal scenario for every company in a competitive space?  To become the monopoly supplier.  Why is this appealing?  Because, you can dictate terms to the customers and they have to play ball.  When you are in that position you do not have to bother with all this nonsense about customer focus: customers are difficult, being customer focussed is hard work and besides it stops you from making monopolistic rents.  If you cannot have a pure monopoly then you can get something like it – and oligopoly.  This is where a small bunch of companies control the market: they sell similar products, at similar prices, in similar ways and have the same business models.  In effect, they ‘agree’ to carve up the market and the profits.  Often these industries have high barriers to entry and so there is no real competition: think banks, utilities, telecoms…….The last thing that any CEO, Board of Directors or shareholders want is a truly competitive market.  Why? Because you have to fight for customers and their wallet.  Which brings us to an important point.

What has changed is that the traditional means of attaining this outcome no longer work as well as they used to.   Originally there was control over valuable natural resources and distribution channels. Later, control of intellectual property and shaping the mind of the consumer through advertising, branding and PR. Since the rise of the internet the traditional means (resources, distribution, IP, advertising..) have not been working that well.  Just think of the disruptive power of the internet: you no longer need stores and all the capital that goes with that; your market is the whole world and you do not even have to setup a website – you can pitch your tent at ebay and sell to the whole world; and customers are awash with useful information that makes them better informed, smarter decision makers and more discriminating buyers.  This is why we have heard and read so much talk about targeted marketing, relationship marketing, permission marketing, personalisation, customer focus, customer service, customer experience, customer-centricity.

Does that mean that there has been a wholesale transformation of the heart (love of the customer) or of the head (change in worldview)?  I am think that there has been no such change.  The game is still the same: to orchestrate the levers of power to become monopolistic suppliers and thus extract monopolistic rents.   And if that is not possible then many businesses do the utmost to get the better of customers (too many option, complicated pricing, misleading advertising, dumbing down customer service etc) to maximise short term profits.  If it is the ‘age of the customer’ (IBM says it is) then we are talking about many businesses being dragged kicking and screaming into the ‘age of the customer’.  Many if not almost all would prefer the good old times when customers had no voice, no power and simply put up with what they were given.  Take a good look at the laggards (you know who they are) and you will notice that they still hold monopoly type positions, accrue monopolistic rents and continue to pay lip service to customer service and ‘the customer is king’.

If you see this then you can see the ‘wheelbarrow’ that is right in front of us and which we may have been missing: the vast majority of businesses want and strive to become monopolistic suppliers so that they can monopolistic rents without the hard work of being customer-centred.   If you accept this then you can understand that whilst the titles of changed from “Sales” to “Relationship Manager” the hidden objective is the same: sell more, increase “share of wallet”.   You can also understand why business process management, lean, cost-cutting via self-service technology, customer service, marketing etc  have all been rebadged as Customer Experience – changing labels is the easy part and Drayton Bird has an excellent/witty post on this.   Put differently, all the talk of customer focus, customer service, CRM, Social CRM, customer experience and customer-centricity is simply the bric-a-brac in the ‘wheelbarrow’ that prevents us from seeing the ‘wheelbarrow’ for what it is.   Any real form of customer-centricity (as opposed to the talk) is being brought on by new entrants to the battleground.  And by the power wielded by customers who now have the technologies and platforms to be better informed, make smarter decisions and make their voices heard

To excel at customer-centricity, Customer Experience and customer loyalty you have travel along the road less travelled

Which bring me back to my original question: why do only a handful of companies excel at cultivating customer loyalty?  Because by design or by accident the people who started these companies  operate from a customer centred paradigm and have built customer-centred business models, cultures and organisations.  And the leaders of these companies were willing to play the long term game.  How long did it take for Amazon to become profitable?  What about Zappos?   Is USAA simply a vehicle for churning out profits for shareholders or an organisation with a mission to service members of the armed forces?  Starbucks is a great example of a company that made it fortune by understanding customers human needs and delivering them (“the third place”)  and then got itself into trouble by forgetting this mission (and associated values, operating practices) and chasing growth and profitability targets set by the analysts.  Starbucks had to go back to the basics to connect with their customers and win them bac

Perhaps this handful of companies (Amazon, Starbucks, USAA, Zane Cycles, Zappos..) will provide the inspiration for authentic customer-centricity:  O2 (UK mobile telecoms operator who does not think of itself as that) is a company that has embraced customer-centricity with a fervour that is necessary to be an experience services brand and organisation.  In the process it has become the leader in the UK telecoms industry: brand, revenues, subscribers, profits. The recent Ofcom results show that “The least complained about mobile provider….was O2, with 0.02 complaints for every 1000 customers compared to 0.14 in the case of 3UK.”  This is remarkable when you consider that O2 was spun off from a former state monopoly BT in 2001.  And birth O2 was viewed as a second rate player in the telecoms market and some doubted its future prospects.  Maybe more executives will follow the lead of O2 and genuinely orient their companies around customer, customer experience and customer-centricity.

A final word

To excel at Customer Experience and customer-centricity you have to have an affinity for people as human beings.  I will go further and say that you have to connect with and care about your customers as human beings first and wallets second.  Going even further I’d say you have to love your customers and show them that you love them.  In my view this is and has always been the great (hidden) strength of Steve Jobs and Apple:  a deep affinity for the misfits, the rebels, the people out to create a more beautiful world.  If you can see merit in what I am saying then I recommend that you read the following insightful post by Pete Abilla: How to be human

What do you think?

Better World Books: a great example of hi-touch relationship marketing

Better World Books is a customer-centred company

We like customer-centric companies because they leave us feeling good.  And also because the kind of behaviour that we label as being customer-centred is rare.  It is the combination of the two that put Better World Books on my emotional radar back in December 2010 when I received an email from Better World Books that took me by surprise and delighted me.  I was so impressed that I wrote the following post which I encourage you to read: ‘Better World Books: a great example of customer-centricity’.

Their latest email is a great example of hi-touch relationship marketing

Today I opened up an email from Better World Books that left me smiling, laughing and just delighted.   In fact, this email is such a good example of hi-touch relationship marketing that I want to share that email with you.  Here it is:

Dear Maz,

We’re just checking in to see if you received your order (The Hidden Connections: A Science for Sustainable Living). If it hasn’t arrived please respond to this email and let us know.

We aim to flabbergast our customers with impeccable service so do let us know if we haven’t achieved this in your case by responding to this email. Amazon.co.uk gives you the opportunity to leave us feedback. You can do this by visiting http://www.amazon.co.uk/feedback . We would be grateful if you would take the time to rate us on the order and service received.

Thanks again for buying from us.

Humbly Yours,

Indaba (our super-cool email robot)”

Straight after reading the email I went to Amazon and gave Better World Books a five star rating – the maximum.  And here I am sharing it with you. 

What makes this email so effective, so delightful?

The vast majority of business communications strike me as dull, inhuman (corporate speak) and the communicator pushing stuff at me.  And as such I tend to ignore them – I suspect that you do the same and that is why direct mail response rates are around 1 – 2%!   So what makes this email so effective?

“Dear Maz” Maz is what I call myself yet it is not my first name and it is not on Amazon’s records.  So it is clear that Better World Books have gone the extra mile to figure out, record and use my preferred first name.  That is a great first touch – only friends and colleagues call me ‘Maz’.

“We’re just checking in to see if you have received your order.. – the way that I relate to this is wow here is a company that cares about me and is checking to see if all is ok and if not it is inviting me to get in touch with them.

“We aim to flabbergast our customers with impeccable service… – this sentence has such a resonance because of my past experience with Better World Books, the fact that the book that I ordered arrived before it’s due date and because of this email.  Put differently, I totally believe that Better World Books are being straight when they say that they aim to flabbergast their customers with impeccable service.  Lastly, I am simply flabbergasted that I company would make such a statement in writing.  I have never read that kind of statement from any other company that I do business with!

“Amazon.co.uk gives you the opportunity to leave us feedback..” – they are inviting me to leave feedback and it really does occur as an invitation that I can accept or decline, there is no hard sell.  Yet by the time Better World Books are making this invitation they have done all that is necessary to get that feedback, positive feedback, from me;

“Thanks again for buying from us. – as human beings we do like to be acknowledged and a simple thank you is great way of acknowledging our customers and making them feel good about us;

“Humbly Yours,  Indaba (our super-cool email robot)” – I cannot tell you why but at some emotional level I simply love this ending.  It is so unpretentious and it is something that one of my best friends would write.  And there is a wonderful twist: it really would be something if a robot was writing such a personal email that pushes so many emotional buttons!

It is short and it is easy to understand – it probably took me less than 30 seconds to read it and get it both emotionally and rationally.

Conclusion

In the west we live in and are immersed in a technology centred world and this technology has brought us great benefits.  The downside is that it has encouraged businesses to act like machines.  In the process many of us, especially as customers and employees, are starved of the human touch that reaches into our emotional core.  So there is gaping hole waiting to be filled by smart companies like Better World Books who use hi-tech to practice hi-touch!

One more thing to mention

There is world of difference between relationship marketing and database driven direct marketing practices by most customer marketing groups.  Relationship marketing aims to build relationships  through emotional bonds like this email from Better World Books.  As such relationship marketing communications are not all about selling.  This is sharp contrast to database driven direct marketing masquerading as relationship marketing.  How can you tell the difference?  You only hear from the latter when they have something to sell to you in part because these marketers cannot demonstrate ROI on service centred communications.



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.

A great example of using Relationship Marketing to deliver a memorable customer experience

On relationship marketing

About ten years ago relationship marketing was in vogue.  Marketing departments were abuzz with the talk and the promise of relationship marketing.  And I noticed Seth Godin’s Permission Marketing in many a marketing department.  Since then the word relationship has been jettisoned and today we are left with customer marketing, customer life-cycle marketing and CRM (marketing).  Why?

I believe that many who started on the path of relationship marketing have collapsed two distinct categories of marketing into one.  In one form of relationship marketing you use marketing to cultivate and grow relationships – the emotional bond between you and your customers. This form of relationship marketing I refer to as Relationship Marketing: it is the real deal – at least in my book.

There is a world of difference between Relationship Marketing and Customer Life-Cycle Marketing

In the second form of relationship marketing you use the ‘relationship’ – the customer life-cycle, the customer journey – to organise and execute your marketing to customers.  This second form of marketing is simply a different, perhaps a cleverer, way of doing direct marketing.  Whilst it may drive up response (because of getting the timing right) it does not necessarily increase the bond between you and your customers – that is to say that it does not strengthen the relationship and increase loyalty.  This form of marketing is best described as Customer Marketing or Customer Life-Cycle Marketing.

It is a shame that so many marketers have settled for Customer Life-Cycle Marketing rather than Relationship Marketing. I get lots of direct mail and I throw most of it away before opening it up.  I am on the Dell database (as I bought a computer from them many years ago) and they continue to send me a catalogue.  When I receive it, I throw it away.  I am a Sky (pay TV) customer and part of their customer marketing database.  So I receive the magazine, I read it and then I put it in the bin.  The magazine does not build any emotional loyalty between us.

Practiced correctly, Relationship Marketing packs an emotional punch, generates a memorable experience and drives up customer engagement and loyalty.  Allow me to share an example with you.

Direct Recruitment: a great example of Relationship Marketing

About two days before my birthday I received some post, one looked like it contained a birthday card so I opened it eagerly.  And this is what I saw:

On touching the card I realised it was a top quality card and I was immersed in trying to figure out which of my considerate friends had been the first one to send me such a fine card.

So I opened up the card and was greeted with a handwritten personal greeting from Sarah Owen who runs the Direct Recruitment agency.  I was surprised and delighted at the same time.  Sarah and I met back in 2007/2008 and each year she sends me a birthday card and each year it comes as surprise. No other company remembers and celebrates my birthday – arguably the most important day of the year for me.

Once I came to grips with my surprise and my delight I noticed the third piece of the card – see below.

This is a great piece of direct marketing:

  • It offers me an opportunity to help a friend;
  • It spells out the benefits for me of helping out a friend; and
  • It compliments me in the very first sentence “..someone as talented as you….”; and
  • The last sentence is a great finish “We really do value your recommendation, so thank you in advance for thinking of us.”

What Impact Did This Have On Me?

Frankly, I feel valued both as a human being and as a professional.  And in return I value Sarah and Direct Recruitment.  More than that I feel indebted to Sarah and I feel a desire to find opportunities to refer people to Direct Recruitment.  I have absolute confidence in their professionalism.  Indeed  I have phoned Sarah to thank her.

The Lesson and the Opportunity

There is a wide open space to deliver knock-out customer experiences for your customers through Relationship Marketing. That means using marketing to build relationships by creating emotionally engaging customer experiences that matter to your customers. How about using special occasions like birthdays, Christmas and anniversaries (first time the customer bought from you)?

So few companies who claim to be customer focused actually take advantage of these opportunities. I wrote a post on that back at Christmas time: “With so much customer focus why am I not drowning in thank you cards?”

Finally, please do remember that there is world of difference between Relationship Marketing (as I have described here) and what too often passes for relationship marketing: Customer Marketing, Customer Life-Cycle marketing and CRM