Tag Archives: Business

Not Really a Global Economy

Posted on 16 August 10 | 4 Comments
My Pocket Contents
Image by William Hook via Flickr

The news continues to be full of stories around the Global Economy and how companies increasingly operate independent of national boundaries – so that one could be forgiven for believing that we really do live in a global economy.

However, as my current experience of relocating to a “First World” country – England – shows, where one would expect that things do operate in this way, the reality is very different and the Global Economy seems a long way off.

Certainly, some things work well – one can move money between bank accounts across multiple geographies easily (provided, of course, your accounts are all with one bank, otherwise it’s far more complicated). Mobile telephones also operate well across boundaries, although you pay handsomely for making and receiving calls when away from the country where your phone is registered – profiteering, perhaps?

However, the rather large holes in this Global Economy story (myth?)  have really been exposed when trying to establish myself with the basics here.

  • Renting a home – this is far from simple. You have to get credit reference agencies involved and they require enormous amounts of information. Simply giving them details of your bank/s and relationship managers isn’t enough: you have to do all the leg work yourself.
  • Insurance – amazingly, motor insurance companies apparently don’t give credit for a no-claims driving record in countries like Dubai (an extremely challenging environment as anyone who has driven there will attest), although they are happy to do so for comparatively tame driving countries like New Zealand, so no more no-claims bonus on motor insurance…
  • Telephones – it took me a week to establish that I COULD get Blackberry Services on a Pay As You Go basis (I was told by some mobile operators and some phone shops that this was impossible for the first week, but kept researching until I found it could be done).

In fact, for most general things (even using your new bank account’s debit card) the over-riding requirement is for a local Post Code (you’re asked for this the whole time), so if you’re still trying to set things up and don’t yet have a fixed abode, you end up having to borrow a post code and address from a willing friend or relative for even simple transactions.

Why is it, that with a 30+ year history of banking, credit, insurance, telephone, etc., etc., usage in countries like South Africa and Dubai (countries that have “First World” standards of traceability on such things) I have to start over? One would think this information would be available to the relevant companies and authorities in other countries, but it seems to be only the case for adverse information and anyone else is “guilty until they prove themselves innocent.”

So much for the Global Economy – or is it just a case of laziness and profiteering?

———-

P.S. This relocation process is, of course, the reason for my lack of blogs recently – I hope to be back to regular blogging in September.

Regular readers will notice the banner picture change to reflect my new home…

Related articles by Zemanta
Enhanced by Zemanta

→ 4 Comments

Posted in Business - General, Customer Service, Economy

Tagged , , , , , ,

Service – the Quick Way to Kill a Brand

Posted on 20 June 10 | 15 Comments

I took my car for a service this morning – an experience that once again underscored just how easy it is to chase customers away and kill your brand.

Some background – I currently live in Dubai in the UAE, where the climate and conditions are not particularly vehicle-friendly, so that 4 wheel-drive vehicles such as mine need to be serviced every 5000 kilometres (3000 miles). Because the car is still under warranty this necessitates taking it to the dealership from where I bought it.

This particular vehicle, a Mitsubishi Pajero (also known as a Shogun in some markets) is extremely popular in the UAE – providing a well laid-out, spacious interior, good quality and reliability which is what one needs, especially when the temperature outside is somewhere over 45C. We greatly enjoy the vehicle. What I don’t enjoy is the regular service experience – and come the end of the lease period, I’d switch brands for this reason alone.

And this in a market where new car sales were some 82.5% down last year against 2008 according to ArabianBusiness.com. So you think the dealerships would be delivering exceptional service to maximise what few sales there are. Yet the Mitsubishi agents here seem to be oblivious to this simple approach, as today showed.

Yet, a pre-booked service that should take 30 minutes and be done while you wait, means being without a car for 11 hours – I take that car in at 7:30am and can only pick it up again around 6:30pm in spite of asking for it earlier (bigger services take 2-3 days with these people)!

What amazes me is that they seem to live in perpetual chaos. You book vehicles in advance, turn up at the specified time/day and they still seem to be unable to do the job quickly and painlessly because they’ve always got an unexpectedly full workshop. This sort of approach is, incidentally, quite commonplace here – service lets so many brands down (I have another still-unresolved issue with Bose).

What companies really have to recognise is that the after-sales service experience is one of the quickest ways to kill a brand. Customers are not – or should not – be a one-transaction experience. Lifetime value is what  companies need to focus on, as that’s where the real profits lie – repeat customers that become brand advocates. When are they going to understand this simple concept?

Enhanced by Zemanta

→ 15 Comments

Posted in Business - General, Customer Service, Lifetime Value

Tagged , , , , , , ,

A Failure of Leadership

Posted on 5 June 10 | 11 Comments
A beach after an oil spill.
Image via Wikipedia

The BP oil disaster in the Gulf of Mexico has highlighted many problems – problems with the technology for drilling at depths where the water pressure is around a ton per square inch; problems with BP not being transparent from the outset as to the extent of the spill; problems with oil companies putting short-term profits ahead of ensuring that these issues cannot happen; problems with the US Regulators who seemingly have been extremely lax in applying the regulations and have been granting waivers freely to the oil industry; problems with our ability to clean up oil spills even 21 years after Exxon Valdez (what’s happened to Kevin Costner’s centrifuge-based cleaner?)…

But for me, one of the most surprising things to emerge from this has been the failure of leadership. BP’s leadership issues are, to an extent, understandable – although not excusable – in that they have been focused on protecting shareholder value by trying to downplay the size, scope and likely cost of the problem. This doesn’t excuse the behaviour, as I’ve said, but one can understand it, so it’s not too surprising.

No, the leadership failure I’m referring to has been that of President Obama.

I realise that this statement might cause something of a firestorm from some readers of this blog, but bear with me on this for there are lessons to be learnt and actions to be taken – so it’s not (yet) too late.

We need to recognise that when running for office, then-Senator Barack Obama focused on the need for change – a need that the US population clearly believed in, given the fact that it propelled a largely-unknown junior Senator to the office of President. Central to this theme was his strong belief that things could best be accomplished by working together on the issues with all concerned parties – no matter on which side of the fence they stood.

This, of course, has not been a great success in the Congress and Senate as the divisions have, in many cases, simply been too deep to facilitate working together. The oil spill, though, is a different matter – for there is no question that everyone has a common goal: to stop the leak and clean up the mess as quickly as possible and with as little damage to the environment as is possible.

However, apart from being slow off the mark in terms of visiting the Gulf Coast, President Obama has spent most of his time publicly berating BP rather than being seen to work with them to address the issue in the most comprehensive way. Perhaps he was trying to cover up the shortcomings in his own administration – those regulatory bodies that were not doing their job properly – given the looming mid-term elections, or perhaps his anger simply clouded his judgement. Either way, instead of seeking to work shoulder-to-shoulder with BP and for them to jointly marshal the considerable forces that could be at their disposal if they, and other oil companies, worked together, the situation has become one of adversity. And an adversarial relationship never produces the best overall result.

It’s time for President Obama to put personal feelings and party politics aside on this problem; to work with all stakeholders – oil companies, state and local government (of all political persuasions), and anyone else that can play a positive role. He needs to remember his campaign promise to change the way things are done in Washington, and to work for the best result regardless of personal feelings, of politics and of attribution of blame. There’s plenty of time for all that after the mess is cleaned up.

Related articles by Zemanta
Reblog this post [with Zemanta]

→ 11 Comments

Posted in Business - General, Earth Sciences, Leadership, Oil

Tagged , , , , , , , , , ,

The End of Cash?

Posted on 27 May 10 | 5 Comments
Image representing iPhone as depicted in Crunc...
Image via CrunchBase

It’s interesting to see the number of recently introduced products coming to market which are designed to, in effect, remove the need for cash.

One that has garnered particular attention recently is, of course, Square. This comprises a small application that resides on your iPhone (or iPad, iPod Touch) or Android phone, together with a little reader that plugs straight into the audio input jack of the phone and turns it into a personal credit card payment machine that will allow the user to accept credit card payments from anyone for a small fee (typically 2.75% + 15c). With no costs for set-up, application or card reader this is sure to change the game for those tens of millions of small businesses, traders and professionals that have, until now, fallen outside the electronic payment net because they are too small for the card companies to serve cost-effectively.

But Square is not alone – Obopay allows anyone with a  mobile phone to set up an Obopay account and, for just 25-50c (plus 1.5% if you’re using a credit card to fund your account) send money – in other words, make a payment – to anyone else with a mobile phone, whether or not that person already has an Obopay account. Again, there are no setup costs.

And then there’s Intuit with its GoPayment service that also enables credit card payments from a mobile phone – this time with a Bluetooth reader – at a cost of 1.7% + 30c per transaction, although this service does have a monthly service cost of $12.95 attached to it (I wonder for how long, though, given the competition above).

Doubtless there are many others, too, either in stealth mode at present or on the drawing board.

What’s more, these systems allow you to build purchase histories by customers, offer loyalty programs and great levels of service more simply than the straightforward cash systems did – so even the smallest businesses can step up their marketing at little or no cost.

At present, all these products only work for you if you’re a US-resident/business, but it’s only a (hopefully short) matter of time before they go global and the way of transferring value changes forever from cash to electrons. No more looking for change, worrying about how the currency in a new country you’re visiting works, being concerned whether anybody’s watching as you withdraw a large amount of cash from an auto-teller…. And, of course, if you’re a small business, no more concerns about having the right change for those large notes that auto-tellers like to give, about the value sitting in your till, or being worried when taking your cash to deposit it.

It’s going to be interesting to see how society changes over the next generation as we move from cash altogether. Will the nationalistic bonds to a currency (and the resulting issues of payments from/to different countries and with travel) be removed, and could we find a common global currency?

And, of course, we’re seeing the continued drive for the mobile phone to be less a telephone and more a personal digital assistant in every way – clock, alarm, calendar, address book, diary, music player, radio, newspaper, camera, voice recorder and now, wallet. As an aside, it’s interesting to see how many of the Generation Ys don’t wear watches – their phones tell them the time. Has the watch industry got an answer to this, its potentially biggest threat?

We’re at a very interesting point in the 5000 year evolution of money as we know it. Will it disappear completely as a physical object in the next 20 years?

Related articles by Zemanta
Reblog this post [with Zemanta]

→ 5 Comments

Posted in Banking, Business - General, Customer Service, Economy, Marketing, technology, Uncategorized

Tagged , , , , , , , ,

Living Your Brand – do companies really care about their Brand?

Posted on 2 May 10 | 3 Comments
Goldman Sachs Tower in Jersey City
Image via Wikipedia

2010 certainly seems to be going down as the year when the proverbial corporate skeletons are coming out of the cupboard:

  • Toyota – which had built its brand on reliable, safe vehicles – recalls many millions of cars all around the world in an apparently ongoing saga, with new recalls being announced almost monthly;
  • Goldman Sachs – viewed by many as the pre-eminent merchant bank – being sued for fraud by the SEC and now under investigation by the UK regulators, too;
  • Many airlines – especially those using words like “Favourite” and “5 Star” in their advertising – simply refusing to abide by their legal obligations, in terms of Regulation 261/2004, to provide accommodation and refreshments for their stranded passengers during the volcanic eruption in Iceland.

And this is just a sample of the more recent headline-grabbing issues.

Are they really “Too big to fail” – or just too big to care?

I suspect they believe the latter, not recognising the truth in the old adage that “Pride comes before a fall.” Remember, almost none of the largest and then most successful companies in, say, 1900, are still in any position of strength today – in fact most have disappeared altogether.

These corporates need to get back to basics, to remember that it is their customers that pay their salaries and to start treating their customers as the company’s most precious resource, rather than as a necessary irritant. Simply repeating a marketing mantra branding themselves as the pre-eminent company in their field doesn’t make it true…

The fact is that branding is a lot more than just a logo with a catchy by-line – a company’s brand is everything to do with that company, and the logo is just something to recognise it by as we’re visual creatures. Branding is about customer service, branding is about the way customers interact with the company in all ways, branding’s about staff training, branding includes corporate governance and social responsibility, branding is about all the materials that company produces – from marketing through packaging to the products themselves – in fact, branding is about everything to do with a company.

And this is where so many companies are falling down: they’ve lost sight of everything but the short-term pursuit of the bottom line. And I use “short-term” advisedly – as without attention to all aspects of their corporate brand, those companies will lose customers and start to fail.

Just look at the consumer backlash against many banks that they perceive to have been complicit in the economic downturn. Imagine how consumers who have been poorly treated will feel about giving more of their hard-earned money to those airlines that left them high and dry. Will former Toyota buyers be as happy to buy another Toyota?

Companies need to start refocusing on their entire brand, they need to recognise the power of instant communication for their customers and embrace it to make a positive difference, and they need to once again really put their customers first instead of just saying they do.

What do you think – do companies no longer care about their brand in pursuit of profits? Have you joined the growing ranks of disgruntled consumers and, if so, which are the brands you love to hate?

Related articles by Zemanta

Reblog this post [with Zemanta]

→ 3 Comments

Posted in Advertising, Airlines, Banking, Business - General, Customer Service, Lifetime Value, Marketing, Recession, Social Media, technology, Uncategorized

Tagged , , , , , , , , , , , , , , ,

Can Europe Survive? Life after Katla…

Posted on 24 April 10 | 6 Comments
Katla
Image via Wikipedia

The recent chaos surrounding the eruption of the Eyjafjallajökull volcano in Iceland – with effects being felt globally in terms of significant financial losses, disruption to travellers, disruption to food supplies, and so on – needs to provoke some serious discussion as to what actions are needed to prevent even greater, and much longer-term, chaos in the event of a more significant eruption.

After all,  history has clearly shown that when Eyjafjallajökull erupts, it’s very much larger neighbour Katla is generally not far behind, and Katla is overdue for an eruption anyway.

While the size of eruptions can never be accurately forecast, the historical evidence shows that Katla’s eruption is likely to be at least ten times the size of the Eyjafjallajökull eruption – and quite possibly more. This could mean not only significant floods of fresh glacial-melt water into the sea (a volume equal to the combined flow of the Amazon, Mississippi, Nile and Yangtze rivers is estimated to have occurred following its 1755 eruption), but a column of ash rising 20km, or more, into the jet stream and being spread over a much greater part of the Northern Hemisphere.

History has already shown some of the worst effects from major volcanic eruptions in Iceland – that of Laki in 1783 resulted in famine across Western Europe, and as far south as Egypt, one of the longest and coldest winters on record in North America, and the death of tens of thousands of people from gas poisoning and famine. It was even linked to the start of the French Revolution, where the lack of food played a significant role.

Admittedly, these are somewhat extreme examples, but they show what is possible should Katla’s eruption be a big one – and almost all experts agree that with Katla, it’s not a question of “if” but of “when” it will erupt.

So, what are some of the possible effects of a big Katla eruption?

  • Air travel – the recent 6-day chaos would potentially be dwarfed by one that could last months. This would not only impact passengers, but freight, too. Tourism would certainly be impacted negatively, but so would food imports and general freight movement.
  • Agriculture – the impact of a prolonged cold spell would drastically affect crop production in Europe and, potentially, elsewhere in the Northern Hemisphere. For Europe, this would just add to the difficulties faced by the lack of air transport to bring in fresh produce from elsewhere.
  • Power – of course, a lengthy period of exceptionally cold weather would push up power consumption dramatically. Could Europe cope with a prolonged extra demand for power for heating?
  • Wealth – potentially a significant shift in the wealth of Europe as the combination of food shortages, collapsing tourism, freight reduction and prolonged cold takes its toll. Where would this wealth go, and who would benefit?

Disturbingly, though, little attention seems to being paid to this, in spite of the lessons we’ve learnt from Eyjafjallajökull. And if it’s not Katla, how long before another significant eruption – perhaps in Iceland, or perhaps elsewhere (Yellowstone?)…

European, and other, governments need to get together as a matter of urgency on this: the planning for overcoming the potential problems is not something that can be done overnight in a reactive manner. Rather, they need to start work today on ways to reduce the reliance on current modes of air transport (could the airship make a comeback?), to find additional reliable power sources, determine ways to source sufficient food, and so on.

Related articles by Zemanta
Reblog this post [with Zemanta]

→ 6 Comments

Posted in Airlines, Business - General, Earth Sciences, Economy, Europe, Uncategorized

Tagged , , , , , , , , , , , , ,

Twitter – The “Next Big Thing” for Business

Posted on 12 April 10 | 6 Comments
Image representing Twitter as depicted in Crun...
Image via CrunchBase

With Twitter set to pass the magic 100 Million user mark later this month, or early May, and the company having been valued at around a Billion Dollars last year, it’s moved from the realms of novelty. So, should business sit up and take note; is it the “Next Big Thing” as a business tool?

Speaking with business leaders and marketers, one gets mixed responses – the enthusiastic advocates on the one hand, and those that hope it will fade away as it can potentially damage their company, they believe, on the other.

There’s no question that any public forum can be used by people to disparage, or worse, a company, but is that a reason to abstain from that forum, or should one take the opportunity to embrace it and counter any adverse remarks? After all, unhappy customers that are turned around tend to become the most loyal advocates…

Others look at Twitter and ask whether 140 characters is really enough for any sort of meaningful dialogue with customers and dismiss it on this basis. But in our information-overloaded world, is brevity not a blessing?

Properly used, there is no question in my mind that Twitter really can become a significant business tool:

  • Customer service – probably the first Twitter application area to be embraced, companies like Southwest Airlines, Staples and Zappos have found it invaluable to track unhappy customers, respond quickly and show a great service ethos.
  • Sales leads – of course, great customer service leads to sales, but many more companies, like Dell, Sony and Starbucks are using Twitter to promote products; in fact an article last month reported Sony measuring over £1 Million in sales directly attributable to its Vaio Twitter account.
  • Promotions – an extension of the sales leads application is using Twitter for promoting special offers to followers. As the integration of GPS technology with phones increases, these could even be location and time specific, making them highly targeted.
  • Product feedback – companies are often accused of making products that customers don’t need, or of not including “obvious” features. Twitter can give a window for listening to the needs and views of a very wide customer base.
  • Order tracking – an area I’ve yet to see, but one I think is an obvious one: imagine being able to Direct Tweet to a courier company and get an automated response as to where your special delivery is in the system…

In fact, the possibilities are endless – limited only by imagination. With Twitter, companies have access to an incredible mass direct marketing tool without the dangers of being considered spammers – people would simply unfollow those they consider annoying – and one which can provide real-time, real-person feedback on an incredibly wide range of issues.

Twitter, I firmly believe, is poised to be the “Next Big Thing” for business, and companies that ignore it do so at their peril.

Related articles by Zemanta
Reblog this post [with Zemanta]

→ 6 Comments

Posted in Advertising, Business - General, Customer Service, Marketing, Social Networking, technology

Tagged , , , , , , ,

Does “The Cloud” Make Sense for Business?

Posted on 31 March 10 | 6 Comments
HANOVER, GERMANY - MARCH 01: Illuminated plas...
Image by Getty Images via Daylife

The interest in Cloud Computing has grown exponentially in the past few months with a quick Google search on “The Cloud” and on “Cloud Computing” yielding over 25 million articles between the two phrases.

Suddenly, it seems, this is the panacea for all that ails in the technology space – or is it?

There is certainly a good deal of ongoing investment in giant data farms – although the cost of power required to run, and cool, these massive installations is now causing serious concern. I’ve seen estimates of up to 100MW for a giant server farm under development, with 50MW farms apparently not being unusual. Consequently we’re seeing imaginative schemes to overcome this in advanced stages of investigation – ranging from hydroelectric schemes in particularly cold countries with good water, like Iceland and Finland, to Scottish tidal power, to some companies even investigating building sea-platforms that use wave energy for power and sea water for cooling.

However, there is equally a slow but steady increase in governments wanting to monitor data traffic – apparently for security reasons, although I suspect there may be oversight by the fiscal authorities, too. Even Australia is talking about Internet filtering…

All of this is adding greatly to the conversation, of course, with equally strong lobbies on both sides of the debate – much around whether Cloud Computing is taking us back to the old “mainframe and dumb terminal” computing days or whether it’s taking us forward to an more secure, cost-effective era, albeit with the possibility of less flexibility with systems and information.

In my view, though, the issue of whether to adopt a Cloud architecture or not comes down to individual companies and applications – and for the purposes of this discussion, I mean a public Cloud architecture, rather than one owned by the end-user company.

To my mind, the companies that should strongly look at this approach are the SMEs (Small and Medium Enterprises). The reasons here are straightforward economics – few will have the staff or the capital resources to have a fully secure IT infrastructure, complete with Disaster Recovery. This means multiple servers in multiple locations, interconnected by very high speed links and a significant IT team managing it all, with a strong security system. By adopting Cloud architecture for most applications – including that most critical one of all for most businesses, email – the issues of security, availability, backup and full disaster recovery are outsourced to the experts and the SME gets on with running its business. That’s not to say you dispense with PCs – they will still have a strong place in many areas, from detailed individual analysis of data to creative writing, design, etc.

For large corporates, though, the issue is different. They have large IT teams. They have multiple locations, many servers and, generally, already have high-speed connections between them all. Therefore, ensuring adequate levels of security and availability while having a proper backup regimen and a full set of disaster recovery plans for each location, should be routine and already in place. For these organisations, Cloud Computing makes little sense – except, perhaps, for some specialist applications that are not available in another form.

And, of course, if all the world’s large corporates had all their corporate systems in a few locations, what a tempting terrorist target that would make – SPECTRE, of James Bond fame, would seem tame by comparison with the havoc that could be wrought in such a scenario.

So, to answer the question about whether “The Cloud” makes sense for business, my view is that for most SMEs, certainly. For large corporates, probably not. What do you think?

Related articles by Zemanta
Reblog this post [with Zemanta]

→ 6 Comments

Posted in Business - General, Economy, technology

Tagged , , , , , , ,

Is Offshoring threatened by a return to Onshoring?

Posted on 17 March 10 | 7 Comments
CHICAGO - JUNE 16: A demonstrator protests ag...
Image by Getty Images via Daylife

One of the potential side-effects of the global economic slowdown that could have far-reaching financial and political consequences is the question of whether offshore jobs should be brought back onshore.

After all, since the Offshoring model really started to take off in the 90s, a number of economies have become dependent on the revenues generated by their ability to provide such facilities for the historically more costly Western countries. For example, India’s business and technology services companies are estimated to have had revenues of some $58 Billion in 2008, up from just $4 Billion ten years earlier, with that sector’s export earnings (largely Offshoring) reaching an estimated $46 Billion in 2008 – offsetting some three quarters of the country’s oil imports.

The rationale for Offshoring was simple:

  • Consumers were ever-more price conscious, and companies were equally ever more cost conscious.
  • Developing economies had much lower labour rates and so could provide manufacturing and many services at significant lower cost, to the benefit of the consumer and the company.

The effects on local labour were not a serious consideration as it was widely believed that they would find alternate employment – perhaps even at a higher skills level which would earn them more money.

Of course, Offshoring was not without its challenges – issues over the quality/consistency of goods and services supplied, of cultural/language differences (especially in the services sector), of corporate governance (data and information leaks, etc.) and of differing expectations of both parties raised their heads. But these could be overcome while economies remained strong and consumers kept buying.

However, the persistence of the economic slowdown, coupled with the likelihood that unemployment in the Western democracies will remain high for the foreseeable future and the growing public debt are forcing a re-evaluation of the Offshoring model:

  • What impact will weaker Western currencies have on the production cost?
  • Will a move to new models of outsourcing – using a managed-services model with guarantees of performance/quality, as opposed to the classic “staff augmentation” model – enable total delivered cost to be lower Onshore?
  • For manufacturing, to what extent will lower transport costs of finished goods offset the higher manufacture cost of Onshore products?
  • What is the premium that can be attached to national pride (e.g. goods/services from that Onshore country)?

And then there are political considerations for the Onshore country: politicians that are seen to encourage job growth are more likely to be re-elected. What’s more, perhaps this could be done in a way that benefits that country’s fiscus, while being seen to be friendly to business and to the workforce as a whole. To what extent would tax breaks for companies bringing jobs back Onshore be offset by the additional income taxes it would gain from the newly employed, the decrease in unemployment benefits and the additional sales tax/VAT it would gain from the spending of these people?

Although a return to Onshoring may not be suitable for everything – large scale manufacturing of small, relatively low-cost items, for example – it seems to me that the benefits to a country, and to that country’s employers, of adopting a greater Onshoring model could be significant. And, if this trend took hold, the impact on Emerging markets that had come to rely on providing Offshoring could be even more significant. What do you think?

Related articles by Zemanta

Update:
Great blog article by Derek Singleton: “5 Strategies for Growing as a Domestic Manufacturer“

→ 7 Comments

Posted in Business - General, Economy, Recession

Tagged , , , , , , , , , ,

Customer Loyalty – is there a Right Kind?

Posted on 10 March 10 | 8 Comments
Your Customer's Emotional Experience
Image by 33 Interactions via Flickr

We talk a good deal about customer loyalty nowadays, but do we really understand it and know how to gain it?

The “1 to 1” gurus, Peppers & Rogers, define three sorts of Customer Loyalty:

  • Emotional Loyalty – this is about how customers feel about your brand;
  • Behavioural Loyalty – the way customers respond, and whether they actively seek to do business with you;
  • Profitable Loyalty – those customers that help you to make money.

Emotional Loyalty was the first level of understanding of the concept of customer loyalty, with early marketing designed to appeal to the emotions and build a bond with customers in this way. However, it became apparent that while customers might feel emotionally close to your brand, that didn’t necessarily mean they would buy from you, or do so on a regular basis.

This led to the concept of Behavioural Loyalty where marketers sought to find ways of bringing the customer to them to do business, and do so regularly. Of course, in many cases Emotional Loyalty was ignored as the focus was on getting the customer to purchase from you.

More recently, with the advent of tools to analyse customer purchases and overall costs more accurately, companies are discovering that on average only around 20% of customers are profitable for a business, with 60% being around break-even and a further 20% losing the company money, so they then focused on trying to find ways to increase the percentage of profitable customers and either remove the unprofitable ones or make them profitable.

However, isn’t the key really to do the first two well and use this to leverage the third? It really is not about focusing on just one aspect of loyalty, but rather about understanding how all three interact and driving your business accordingly.

On the emotional level, you need to be clear about what your brand stands for and ensure that you deliver what you say you will do – never over-promise and under-deliver as that is the quickest way to kill your brand’s emotional loyalty.

To keep your customers coming back – and we all know that repeat customers are best – your marketing must understand their buying behaviour and ensure that you continue to interact with them to capture the maximum share of their wallets. The Lifetime Value concept is key here.

But, of course, you must ensure you do so profitably – and this is not just about margin, but about the total costs of doing business with each customer. A high margin customer can still result in a loss for you if, for example, they are consistently returning items for credit, needing expensive support resources, paying late, and so on, while a low-margin customer who pays cash and never needs support can be nicely profitable. Be clear about where the costs are for each customer.

A great example of a company that does all three well is Amazon: just look at the brand recognition, the fact that you know they it’s a reliable supplier of books, DVDs, etc., at good prices, with a no-quibble replacement policy, and then see how it constantly offers you new items based on your buying behaviour. Amazon’s systems are not only providing its marketing engine with ongoing offers tailored to your likes, but make purchasing easy, so its internal costs are low as there is minimal need for support.

But, after all, if you really think about it, isn’t this what business is all about anyway: getting customers who feel good about doing business with you as you provide a consistently great customer experience, coming back over and over again to make purchases that are profitable for you?

So, to answer the question as to whether there is a Right Kind of Customer Loyalty, the answer is clearly, “No.” To be successful you need to ensure you are focusing your business on all three – Emotional, Behavioural and Profitable. And, in the famous words of a song first made popular in the mid 60s, “Do What You Do, Do Well.”

Related articles by Zemanta
Reblog this post [with Zemanta]

→ 8 Comments

Posted in Advertising, Business - General, Customer Service, Lifetime Value, Marketing

Tagged , , , , , , , , , ,