Category Archives: Marketing

Customer Loyalty – is there a Right Kind?

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.”

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How Can the Print Media Survive?

As we approach the end of 2009, this question becomes all the more relevant. With a full year of advertising revenues down, subscriptions and renewals declining and staff being laid off to cut costs, there have to be questions as to how the publishing industry can survive.

One thing is certain – the business model of old will have to change. Thanks to technology, people today are relying on instant news – yesterday’s news (as found in the printed newspaper) or last week’s news (as found in weekly magazines) is no longer a saleable commodity, and if the public don’t want to read it, advertisers won’t pay to advertise in it.

Of course, Rupert Murdoch’s recent comments about charging for access to his news online and preventing Google from finding his stories have further fuelled speculation as to the future of the printed word.

However, far from fearing the new technologies, publishers should be embracing them – after all, do the new technologies not extend the potential reach of any publication or broadcast platform to the entire globe?

What’s needed, and what people are looking for, in this info-saturated world is not just more information, but more useful, focused and targeted information. Instead of newspapers all trying to produce the same news for the same geographic audience, focus. That’s how Wall Street Journal and Financial Times, for example, have been able to charge for much of their content – they focus on the news that businessmen need now. If a publisher can provide knowledge, as opposed to just information, people will pay for it.

Just as general broadcast TV has given way to cable/satellite subscription services, providing more focused channel selections, so should publishers look to provide focused services that people will pay for. What’s more, such focused audiences provide a richer platform for advertisers.

I’m not for one moment suggesting that printing is dead – at least not for the foreseeable future. Like just about everyone else I speak with, there’s something about being able to read the printed word on paper that is far too appealing to me. A combination of convenience, feel, smell, I suppose. What I am suggesting is that publishers need to use technology to complement their print editions.

Knowledge has a shelf-life, and can be printed for future reference purposes (witness my stacks of magazines – National Geographic, Fast Company, Fortune, Plane & Pilot, Travel & Leisure, etc.). News, or information, is immediate and best consumed quickly – and this is where the electron should play its part (whether Internet or Broadcast). But, again, there’s no reason electronic media should not drive its audience to print, and vice-versa. I see them as, ideally, complementary rather than simply competing.

News media, rather than cutting journalists, should seek out the best they can find and encourage them to provide knowledge as well as information. Magazines should give tantalizing glimpses of what they offer to an online audience, while encouraging them to subscribe to the printed word (after all, for example, aren’t the images in a National Geographic magazine so much better than those online?). Broadcast media should encourage audiences to seek out more information than they can cover in the broadcast, driving audiences online and to print for this knowledge. And, of course, printed media should not be shy of encouraging readers to enrich their knowledge through broadcast segments, internet updates and the like.

We talk about mankind’s knowledge increasing at an exponential rate, but I suspect that much of this is just the same bits of information being repeated over and over again. We have the tools for a much richer information and knowledge environment and we should use them.

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Social Networking in Business – Good or Bad?

One of the most vigorously debated issues today is the place of Social Networking in the workplace:
• Should companies be using Social Networking in their marketing mix?
• Should staff be allowed access to Social Networking while at work?

Much of the debate stems from a lack of understanding of what Social Networking is all about and how it should be used, or not used. Many people, in fact, still equate Social Networking with inane information about where somebody is currently sitting doing some introspective navel-gazing, whereas it can – and should – be a highly effective medium for raising the profile of the business, encouraging interaction with all stakeholders and generally enhancing its position in the market.

A great example here is Twitter. While there has been much attention given to an August study from Pear Analytics suggesting that only 8.7% of all Tweets pass along value, the fact is that this misses the point of what a tool like Twitter can really be used for in a business marketing environment. It could, for example, be a wonderful way for customers to get quick status updates on service issues (Direct Tweet the Job Number to your Service Dept) or to see where a shipment is (Direct Tweet a Waybill Number to your Shipping Dept). What about having special-interest customers following a particular product group in your company for news on that product and, possibly, special offers? In fact, the uses for this sort of interaction are limited only by imagination…

Facebook, too, is not simply a tool to show who was drinking too much at the last party. Rather, in the right hands it becomes a great way to promote your business to a wide audience and to gain a set of “Fans” who, by their very presence, are opt-in customers for your marketing efforts. This can be a direct, company page where you share information on your company (or simply a specific product group within your company) and encourage feedback from your “Fans” or can be a more subliminal way of getting your company noticed through making available information of more general use such as the (very topical for this article) Social Media for Small Business set of guides published by Dell.

Of course, if you’re going to open yourself up for public feedback with systems like Twitter and Facebook, it’s essential that you have somebody monitoring your name/page and responding to the inevitable negative comments that will crop up from time to time – thereby turning negatives into easily-seen positives.

Then there are tools like LinkedIn – a great way to find people for your business and to manage your own business profile for those looking at potentially working with you (yes, prospective employees do research your company to see what is out there!).

By tying all of this together with your own Social Networking platform of customers, etc., you can promote your business, conduct online training or product releases, run polls to test issues, manage events and generally make your customers feel part of “your family.” What’s more, you no longer have to contend with outdated mailing lists as your “fans”/customers keep their information updated for you…

So – in answer to the question as to whether companies should be using Social Networking in their marketing mix, an emphatic YES. The secret is to define your objectives and utilise the appropriate tools, remembering, too, that these will evolve and change over time.

And as for the second part of the question – whether employees should have access to Social Networking sites – if this is a part of your marketing mix, your employees need to be a part of it, too. Where there is evidence of individual abuse, as will happen (just as it does with the telephone, coffee breaks, etc., etc.), action against those individuals can be taken – it’s just a question of the right level of monitoring and control, particularly as the lines between work time and leisure time blur in this connected world.

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