The traditional marketing company, no matter how friendly, ultimately sees customers as adversaries, and vice versa. The company and the customer play a zero-sum game: If the customer gets a discount, the company loses profit margin. Their interests have traditionally been at odds; the customer wants to buy as much product as possible for the lowest price, while the company wants to sell the least product possible for the highest price. If an enterprise and a customer have no relationship prior to a purchase, and they have no relationship following it, then their entire interaction is centered on a single, solitary transaction and the profitability of that transaction. Thus, in a transaction-based, product-centric business model, buyer and seller are adversaries, no matter how much the seller may try not to act the part. In this business model, practically the only assurance a customer has that they can trust the product and service being sold to them is the general reputation of the brand itself.7
By contrast, the customer-based enterprise aligns customer collaboration with profitability. Compare the behaviors that result from both sides if each transaction occurs in the context of a longer-term relationship. For starters, a one-to-one enterprise would likely be willing to fix a problem raised by a single transaction at a loss if the relationship with the customer were profitable long term (see Exhibit 1.4).
EXHIBIT 1.4 Comparison of Market-Share and Share-of-Customer Strategies
| Market-Share Strategy | Share-of-Customer Strategy |
|---|---|
| Treat different products differently. | Treat different customers differently. |
| Maximize the value each product creates. | Maximize the value each customer creates. |
| Focus on each product's attributes and benefits. | Focus on each customer's experience. |
| Differentiate products from competitors. | Differentiate customers from each other. |
| Sell to customers. | Collaborate with customers. |
| Treat customers as on-off switches. | Treat customers as volume dials. |
| Task product managers to find a continual stream of new customers for each product. | Task customer managers to meet more needs for each customer. |
| Use mass media to offer all products to an audience of potential customers. | Use interactive media to learn each customer's need and offer the right product to meet that need. |
The central purpose of managing customer relationships and experiences is for the enterprise to focus on increasing the overall value of its customer base—and customer retention is critical to its success. Increasing the value of the customer base, whether through cross-selling (getting customers to buy other products and services), upselling (getting customers to buy more expensive offerings), or customer referrals, will lead to a more profitable enterprise. The enterprise can also reduce the cost of serving its best customers by making it more convenient for them to buy from the enterprise (e.g., by using Amazon's one-click ordering process, or online banking rather than a bank teller).
And although technology accelerates customer relationships, it is not the same as building customer value. While one-to-one customer relationships are enabled by technology, executives at firms with strong customer relationships and burgeoning customer equity (CE) believe that the enabling technology should be viewed as the means to an end, not the end itself. Managing customer experiences and relationships is an ongoing business process, not merely a technology.
The central purpose of managing customer relationships and experiences is for the enterprise to focus on increasing the overall value of its customer base—and customer retention is critical to its success.
While enterprises are experimenting with a wide array of technology and software solutions from different vendors to satisfy their customer-driven needs, they are learning that they cannot depend on technology alone to do the job. Before it can be implemented successfully, managing customer relationships individually requires committed leadership from the upper management of the enterprise and wholehearted participation throughout the organization as well. Although customer strategies are driven by new technological capabilities, the technology alone does not make a company customer-centric. The payoff can be great, but the need to build the strategy to get, keep, and grow customers is even more important than the technology required to implement that strategy.
The foundation for an enterprise focused on building its value by building the value of the customer base is unique: Establish relationships with customers on an individual basis, then use the information gathered to treat different customers differently and increase the value of each one to the firm.
The foundation for an enterprise focused on building its value by building the value of the customer base is unique: Establish trustable relationships with customers on an individual basis, then use the information gathered to treat different customers differently and increase the value of each one to the firm.
The firms that are best at building customer value are not the ones that ask, “How can we use new technologies to get our customers to buy more?” Instead they are the companies that ask, “How can we use new technologies to deliver more value to our customers?”
WHAT IS A RELATIONSHIP? IS THAT DIFFERENT FROM CUSTOMER EXPERIENCE?
What does it mean for an enterprise and a customer to have a relationship with each other? Do customers have relationships with enterprises that do not know them? Can the enterprise be said to have a relationship with a customer it does not know? Is a relationship possible if the company knows the customer and tailors offers and communications, remembers things for the customer, and deliberately builds customer experience—even if the customer is not aware of a relationship? Is it possible for a customer to have a relationship with a brand? Perhaps what is thought to be a customer's “relationship with a brand” is more accurately described as the customer's attitude or predisposition toward the brand. This attitude is a combination of impressions from actual experiences with that brand, as well as what one has heard about the brand from ads (company-originated communication), from news, and from others (comments from friends and ratings by strangers). Experts have studied the nature of relationships in business for many years, and there are many different perspectives on the fundamental purpose of relationships in business strategies.
This book is about managing customer relationships and experiences more effectively in the 21st century, which is governed by a more individualized approach. The critical business objective can no longer be limited to acquiring the most customers and gaining the greatest market share for a product or service. Now that it's possible to deal individually with separate customers, the business objective must include establishing meaningful and profitable relationships with, at the least, the most valuable customers, and making the overall customer base more valuable. Technological advances during the last quarter of the twentieth century have mandated this shift in philosophy.
Managing the customer relationship is all about what the company does, and customer experience is what the customer feels like as a result.
In short, the enterprise strives to get a customer, keep that customer for a lifetime, and grow the value of the customer to the enterprise. Relationships