Thursday, December 29, 2005

Expectations are what AT&T needs to manage

According to an article on hostreview.com, AT&T is about to launch "its most ambitious and aggressive brand campaign in its more than 120-year history." What is fascinating about this campaign is a why they are doing it. Check out the quote from the article below:

"The research showed a remarkable 85 percent correlation across all customer groups as to what brand attributes are most highly valued. 'Our customers told us that, above all, there are three things they expect from us,'” said Whitacre. '“They want innovation thats meaningful, that makes a real difference for them. They expect us to earn their trust by keeping our promises and standing behind our products. And they expect us to treat them fairly, with no surprises. '‘Your world. Delivered.'’ is our way of pledging to all of our customers — from a teenager in California to the CIO of a global company— that AT&T's passion to invent and SBC'’s drive to deliver have come together to deliver what matters most in their lives.'"”

Customers want the company to keep its promises, stand behind its products and treat them fairly without surprises. WOW! These are truly revolutionary insights! Was AT&T surprised by these findings? Were they shocked that customers want to be treated with respect and honesty? Horrors! What's a marketer to do?

Underlying this entire plan is the need to overcome the Paradox of Excellence. Yet, I fear the company lacks a clear understanding that without shaping those customer expectations and without setting realistic expectations in the customers' minds, AT&T will have done little to get customers to believe in their brand again.

Saturday, December 24, 2005

Brand shifting - a new loyalty distinction

We tend to think of brand switching as a binary activity. Either we buy from brand A or from brand B, but not from both. However, real customer behavior doesn't support that binary pre-conception. In fact, most customers often multisource. This is true for both consumer and business purchases. For example, I shop at both Albertson's, Safeway, Trader Joe's, Target and Costco for items I would traditionally find in a supermarket. The same is true for business travel. I use multiple airline carriers and rental car companies - depending on pricing, availability and location.

The true customer behavior is neither black nor white, rather it is gray. The real issue is the weighting of spending customers apply across the various vendors. We call this BRAND SHIFTING. Customer don't eliminate your brand - they merely shift the volume away from your brand to another. So, let me ask a question. What mechanisms do you have in place to identify BRAND SHIFTS? Can you declare with any confidence that your business is suffering from BRAND SHIFTS?

For example, for companies that sell into a multi-supplier environment, what % of the business are you getting? How has that changed over time? If you don't know the answers to these questions, you have no ability to know the true impact of customer attrition on your business.

Friday, December 23, 2005

Expectations around opt-in mail lists

A month ago, I signed my son up for baseball using an on-line registration tool. Regretfully and despite my attempts to avoid it, I somehow made it onto the registration company's opt-in list. Now, I don't have any "relationship" with this on-line registration company. My relationship is with my local little league. Yet, this organization seems to think they have a relationship with me and has put me into their spam list - a frustration all of us suffer every day.

The company, active.com, thinks transactionally, not relationally. They have been taught by relationship marketing experts that getting my name and spamming me will improve my relationship with them. It doesn't and won't. So if your organization does the same thing - stop it. I never had a relationship with the company and if you do the same thing - I won't have a relationship with yours. The only trust between me and the organization is they will accurately place my order with the league and not lose, misplace or exploit my credit card information. Putting me on the spam list (I distinctly remember disabling that request) has LOWERED my perception and trust in the company. Moreover, like the loser in high school who clings onto you and thinks you are their best friend because you walk past them at school, Active.com thinks it has a relationship with me because I was forced to use its service. We aren't friends and I certainly don't advocate for them.

Now to the opt-in. Like all good, legal opt-in programs, there is an opt-out program. You click on the unsubscribe and you are removed from the list - at least that is the expectation! With Active, I got a promotion offer email on Dec 9th and unsubscribed. I thought I had unsubscribed to Active.com. But nooooo. It was like wack-a-mole. The next day, I got the local events newsletter. So I subscribed to that. Then today, I got the monthly newsletter. I unsubscribed to that. Unfortunately, my unsubscription letter said they took me off the weekly newsletter list (not monthly) - I guess as a threat that they still may send me the monthly letter I just unsubscribed to.

Who knows what evil lurks in the hearts of Active.com, perhaps they have a semi-monthly newsletter or a holiday letter or a Chinese New Year's offer. Who knows? I will - when I get yet another spam I don't want from a vendor I don't have a relationship with. Active, like many misguided companies believe that if I am on their current subscriber list, they are building a relationship with me and building value - they aren't. Furthermore, the clever marketing manager who designed the scheme that we only unsubscribe to a specific piece of spam and not all spam and thinks they are beating the system is a fool. He or she is simply unaware of or indifferent to the impact this behavior has on their brand.

This transactional mindset has defeated any relationship-building benefits that could be derived from their "customer communications."

Tuesday, December 20, 2005

Sell what is in your bag

My first sales manager always said, "Sell what's in your bag." By this, he wanted us to sell what we had today and not what we might have in the future. Stay focused on the current products and current business. This was good advice 20 years ago and is still good advice today.

Now, customers always want more and expect to pay less for it. We wrongly believe our job as marketers is to give the customer what they want. If we give the customers what they want - they will only want more. In fact, the faster we supply the customer's wants, the less satisfied they will be and the faster they will expect further and more dramatic improvements. This treadmill is impossible to sustain.

We recommend a different course. As marketers, we need to reinforce our value to our customers so that they are happy with what they currently have. This is just a marketer's version of sell what's in your bag. If we can develop a way for customers to appreciate us now, they will more likely appreciate us when we improve the products and services we deliver.

Charles Kettering, the famous R&D head at GM said, "The key to economic prosperity is the organized creation of dissatisfaction." This is how GM created the annual car model. However, we marketers have missed a key word here - ORGANIZED. We want to keep our customers completely satisfied until we, and not our competitors, have the next product for them to buy. Only at that time do we want them to have any dissatisfaction. And then, we only want them to be dissatisfied on the attributes we satisfy with our new offerings.

Thursday, December 08, 2005

Vendor strategy affects customer satisfaction

An often overlooked contributor to poor customer satisfaction is a company's vendor/supply chain strategy. In talking with a mentor of mine, Jake Levy today, we talked about the importance of strong vendor relationships in delivering a consistent customer experience and positive surprise. In fact, Jake takes it even further. He posits supply chains can do more to damage a relationship with a customer than any sales person can.

Here's his argument. The typical company loses 10% of its customers per year. This is horrible, but that's where it is. However, if a company has a major supply chain disruption or quality issue, that one event can cause a lot more than 10% of customers to leave. True, very true.

There are two implications to this: CEO's, general managers and Supply Chain executives need to recognize and eliminate the possible impacts of changes in suppliers to the end customer's satisfaction and experience. Small changes that cause unexpected customer surprises can wipe away all economic benefits derived from the vendor switch. Organizations that don't take a holistic view of the interrelationships of actions across various functional siloes can unwittingly hurt their businesses.

The second implication is for sales executives. By recognizing you are vulnerable to unexpected problems with suppliers that affect customer satisfaction, you should be more diligent and proactive about improving communications with current customers NOW before these problems occur. Otherwise, you will lose customers when you shouldn't.

Wednesday, December 07, 2005

T-Mobile Gets it right

Truth in advertising. A lot of companies talk about it, but few marketers follow through with it. In a world of wireless hyperbole where customers are told their vendor is "raising the bar," T-Mobile takes a different approach. They recommend the customer check to see "if T-Mobile coverage is right for you with Personal Coverage Check".

What T-Mobile is doing is setting realistic expectations of performance. That way, they don't waste their time to acquire a customer who ultimately will become dissatisfied and leave. It leads to higher profits and more loyal customers. This was reinforced in the LA Times when writer James Granelli informed us that T-Mobile is "is now ranked generally as the best or second-best wireless carrier in the nation."

T-Mobile is a great example of a way to reduce the Paradox of Excellence by keeping customer expectations in check.

Monday, December 05, 2005

Value-Reinforcement Marketing

Dave and I have been thinking about this idea of value-reinforcement for a while and believe it will become an important marketing trend in the future.

Value Reinforcement Marketing is when a company affirms the benefits of existing offerings to current customers in a way that reinforces that customers' positive perceptions about the value the company delivers.

Marketers spend the majority of their marketing budgets on acquiring new customers and very little on communicating with existing customers. Moreover, when there is communications with existing customers, it is rarely value-reinforcing communications, it is often transactional or promotional in nature (such as price discounts for additional purchases).

Value-Reinforcement Marketing is different in several ways.

1. Dollars are spent marketing to existing customers. It is oriented towards someone who already receives the company's benefits, rather than someone who might receive these benefits.
2. It is designed to turn customers into advocates, not turn prospects into customers (although if often does indirectly).
3. It is designed to reinforce existing (although dormant) perceived value not create new perceived value in the customer's mind from scratch
4. More effective than acquisition marketing because recipients already have a predisposition to like the company because they are already customers
5. Oriented towards the retention of trust and value, not creation of trust and value. This, again, is less expensive
6. More relational and less transactional in nature

Benefits of Value-Reinforcement Marketing

Companies who reinforce their value receive many positive benefits including:
1. Top line revenue growth
2. Increased market share
3. Substantially improved margins through lower support costs and higher average selling prices
4. Increased stature in marketplace (brand perceptions, etc.)
5. Bigger barriers to customer switching

Companies who derive a bulk of their revenues from existing customers are strongly encouraged to better align their marketing communications dollars and begin Value-Reinforcement Marketing

Thursday, December 01, 2005

Punishing Customer Loyalty

David Sims writes on TMCnet that broadband companies are punishing loyal customers by giving discounts to new subscribers, instead of existing subscribers. This article highlights two hidden common elements that affect loyalty: Entitlement and Comparison.

When a company transacts with a customer, there is an exchange of value. One delivers a service and the other provides monetary compensation for that service (or good). This is the free market. These parties willfully exchanged their value for the other's value. As Martha would say, "It's a good thing!" Yet, ever-increasingly, customers believe that over time, they are entitled to improved performance (without an additional exchange of value). They want more and more for less and less.

The second element is comparison. As consumers, we are always comparing what we have with others. Watch kids at a school cafeteria when they open up their lunch boxes. Each one looks at what the other got to see how their lunch compares. Customers are no different. They want to know if they got a good deal. It is human nature to want to feel like we are treated fairly. This has become an issue for airlines. For the longest time, consumers thought everyone paid the same price for the same plane ride. Once airlines moved to yield management-driven pricing where prices are optimized and vary widely, customers become quite irate. It also applies to this example David gives about broadband customers. They are (or should be) happy with the price they are paying for the service they are getting. Yet, when they see a solicitation for new customers that offers a lower price then they paid (or can pay), they become angry and resentful. They recognize clearly they are less valued by their supplier. In return, they value the supplier less.

The lesson here is customers inherently feel entitled to decrease how much they value their supplier by expecting more for less and hypocritically become upset when suppliers decrease how much they value that customer when they offer better prices to new customers.

What's a smart company to do?

Aside from buying The Paradox of Excellence in bulk and hiring Fresh Perspectives (always good ideas), executives must recognize money
is a proxy for value. If you want customers to give you more money, they have to value you more highly. You must shape the comparisons customers make so they see the value you already provide and avoid marketing actions that cause negative comparions. Moreover, by highlighting your great performance in context over time, you can begin to eliminate the customer's sense of entitlement.