By Thomas Denegre
In a famous presidential election the candidates tagline said, “It’s the economy, stupid.” In today’s business, “It’s the customer.”
The latest rage in marketing today is becoming customer centric versus brand centric.
Years ago as a magazine publisher I learned very quickly that I had a finite amount of customers and if I didn’t hold onto to them I could never grow the business. Customer service became paramount to our business. We became evangelists in customer service and even when our magazine produced poor results, our customers’ loyalty gave us the benefit of the doubt. Consequentially, our customer retention rate always exceeded 95%. We grew and our profits exceeded 35% after EBIT.
Each market had a fixed amount of large customers and it took years for new ones to appear. I use to tell my sales people that our market was similar to a high school class where everyone knew one another and word spread quickly; especially bad news. When we lost a customer based on poor results or service it could take years or a new customer replacement to get the account back. Today this experience has been translated into word of mouth dissemination on the internet. We see it every day in Amazon book recommendations, hotel and restaurant reviews.
Fortune 1000 companies have recently re-discovered that a strategy based on customer service versus building share holder value increases profits, whereby a long term strategy based on product value and customer service will yield sustainable growth and profits. Here are a few lessons I learned along the way of building successful magazines in multiple cities.
- Customers are the dog (so to speak) profits are the tail. You are in business because you offer value to a person his/her organization. You have a relationship with a person; not a clientele or market share. Develop a process and mechanism to build and manage your customer relationships. If I can manage several thousand relationships before the internet, now you can manage more with the internet and interactive software tools.
- We sell and market to people. People are emotional beings with a layer of rationality. People buy emotionally first and then justify the decision rationally.
- Word of mouth is a key component to growth or death. The internet today offers your customers forums, blogs, product recommendations, and other community. Develop mechanisms to capture word of mouth and respond accordingly. Always respond ASAP to bad feedback. People will appreciate your understanding, respect, and response.
- As Jacquline Kennedy once said, “I never react, I respond.” When negative events occur, fear and reaction are your enemy. Think it through. Understand the other person’s position. Respond with understanding and empathy. Be in control.
- There are three types of customers. (1) Raving fans, (2) Quiet satisfied customers, (3) Militant dissatisfied customers. Develop scoring profiles to monitor, manage, and respond to these types of customers. Always respond quickly to militant dissatisfied customers. They will inflict much harm if not appeased. Encourage your raving fans to say more about your products in other internet communities to spread the good word. Lastly, maintain vigilant customer service to keep the other customers satisfied.
- Deploy internet interactive marketing tools to engage the customer and build a relationship. Take a look at companies such as Eloqua, Hubspot, and Aprimo who can offer a view of the customer from beginning to end.
- Use loyalty or club cards to track customer store visits, purchases, local tastes, how they paid, and respond with one-on-one marketing offers. This requires interactive marketing tools and drip marketing tactics.
- Monitor customer buying behavior. For example, when an American Express customer buys an airline ticket for the first time, AMEX will send an offer for a Platinum level card.
- Leverage partner relationships with key buying behavior. When customers make significant life time purchases (home purchase), send offers via your partners. (i.e. furniture and carpet vendors). Or, when an insurance company sees a customer’s spouse pass away they’ll offer customized products.
- Companies will grow if they can manage their leaking buckets. Consider making Customer Service a C-level position to capture the resources to maintain and grow the customer base. It’s far easier and cheaper to sell to the choir than poaching new accounts. Capture customer data and learn to offer customized products and services.
- Migrate customers from entry level products to more profitable ones. In the B2C world, business leaders learn quickly that building customer value is more profitable than brand loyalty. It’s about building customer lifetime value versus brands that come and go.
- All companies should be maximizing the value of their CRM Systems (Customers Relationship Management such as Salesforce, Siebel, Oracle, IBM, Microsoft, Amdocs, and SAP). Usually it’s the IT or sales department that controls the CRM. In B2C enterprises marketing should be given control to manage the entire customer lifecycle. Marketing, sales, and customer service should have one view to cultivate and build profitable customer lifetime value.
- Nokia has 60% market share of the cell phone market. New bells and whistles are not the key. It’s understanding customer’s perception of value and usage. In short, it’s a myth to say “Build it and they will come.” Rather, engage both product development and developer communities to invite all ideas to collaborate new product offerings
- Measure. Manage. Measure. Capture and measure customer behavior and feedback. Learn to be ahead of the curve versus always reacting.
- Measure and manage long term customer value. Don’t sacrifice short term sales versus the value of a long term customer value.
- Avoid the pitfalls of competing for market share as you’ll start mimicking your customers and lose your identity and market differentiation. Rather be different and maintain your competitive difference which offers the value your customers enjoy. There’s a reason why Apple is profitable and PC laptops are commodities.
- The Sigmoid curve preaches creative destruction. All products and organisms have their lifecycle of seeding, nurturing, growing, maturing, and declining. Learn the art of creative destruction and be your own best competitor.
- Finally you’ll need new views on measuring success. It’s customer profitability replacing product profitability. It’s Customer Lifetime Value replacing current sales. It’s Customer Equity replacing brand equity. Lastly, it’s Customer Equity Share replacing market share.