THINKING DESIGNER

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Valuing Your Customers

My classic book, Valuing Your Customers, was a highly respected text during the foundation of the digital era. This selection highlights ideas related to using information to improve  service, customer experience and  loyalty in the era of individuality.

The book explained how:

– quality must evolve from product quality, to process quality to relationship quality to meet the needs of today’s consumers and employees, and to achieve optimum potential (returning over the route in implementation);

– lifetime value becomes the key to both long- and short-term profitability;

– strategic application of knowledge and of communications changes products, transforming them into personalized and commodity-proof service brands;

– shifting from ‘brand management’ to ‘account stewardship’ preserves and nurtures the brand;

– ‘moments of truth’ crystalize service experience, organization development and relationship management in the ‘archetypal moments’ that make customers come back – and tell their friends;

– guarantee management thinking builds an end to end business devoted to acquiring and sustaining valued relationships;

Book Review: Valuing Your Customers by Angus Jenkinson, McGraw Hill.

Extract from IDM Exchange, Issue No 4.  Winter 1995

Tony Reynolds, head of marketing solutions at AT&T, praises a new book on loyalty marketing which, he says, not only deals effectively with concepts, strategy and philosophy, but also includes powerful and well-researched case studies.  It is also as easy to read as a good novel.

 

Valuing your customers’ was so easy to read.  It has the flow of a good novel that drives to the next page with desire and results in satisfaction.  The book not only communicates views on the concepts and strategies of loyalty but also the philosophy associated with the subject... Firstly, it focuses on the recognition of customer values, exploring how organisations win or lose customer loyalty, emphasising that you earn loyalty through mutual respect and understanding gained through dialogue.  It is often forgotten that dialogue includes listening.

Next it deals with the practical issues of  change required to fulfil the potential offered by loyalty, explaining how to establish the foundations for an organisation whose future and loyalty will be driven by quality.  It examines how culture and systems should be utilised to effectively manage and deliver a quality that will lead to lifetime loyalty.

 

 In the past, organisations have created databases of dubious quality and focused on splitting their customers into small groups (segmentation).  The book suggests that organisations should focus on putting like customers together not splitting the masses.  A key message is that ‘one-to-one’ is history - its too impersonal - I-to-I is here.

 

 ‘Valuing your customers’ confirms Jenkinson as a thought leader in the subject of customer relations.  The book will educate and influence all that read it, and will result in cultural change within many organisations.  I suggest you read it and circulate it to as many friends and colleagues as you can.  To summarise the message - think quality.  Offer a quality that no one can refuse or reject.  Most of all, if you want to be successful and achieve true loyalty, listen to, care about and understand your customers as individuals.

 

EXCERPTS: NOTE: Throughout, the word ‘consumer’ or ‘customer’ means a private individual, an individual within a company or a company, quite interchangeably, according to context or need. Where a distinction needs to be highlighted, it usually is [people are people wherever they are and they all have ideas, emotions, desires].

  • A service culture & relationship

    The community building concept is central to quality [digital] marketing. Building loyal relationships with personal customers means building community.

    Becoming community value directed increasingly means developing a mutuality of value: loyalty to customers creates loyalty from customers. Treasuring our reputation within the customer community is the first step towards creating the value stream that sustains the company into the future...

    Service mastery is then the blue riband goal. It is achieved when organizational and relationship effectiveness come together in product, process, information, goals and mutual loyalty: the needs of community and responsive company become increasingly self-supporting.

    This model of organization development benefits from giving direction to quality development goals; and by ensuring that they match our individual needs as managers, leaders, employees and customers, it increases the possibility of achievement, or at least positive movement. It replaces the goal of quality as product specification with quality as customer partnership. Perhaps the first toolmakers said, ‘You hunt, you’re good at it; I’ll make your flints’, but the reality is that no product finds its way to the customer without an uncommon amount of cooperative activity. This is what really drives economic development.

    On co-creation: Let us first say something about ‘competitive advantage’. Until the eighteenth century, ‘competitive’ only had the sense of ‘competence’. In fact, it meant ‘working together to achieve excellence’. This is the basis of true competitive advantage.

    For decades, organizations acted single-mindedly to develop the skills and strategies in brand building and communication which persuaded customers to buy the products the company wanted to sell. The skills were valuable, but their deployment was one way, single track, outbound, monolithic communication to the masses. This process shaped planning, product development, manufacturing, sales and marketing. It belonged to an era when mass manufacturing, mass distribution and mass marketing conditioned the industrial paradigm and was structure focused on optimizing the length of production runs, not customer relationships. Size equalled economy of scale and power. Companies relished power as the capacity to dominate the marketplace. The jobs of sales, marketing and advertising were simply to shift the tin the factories turned out.

    The mass-marketing method is essentially adversarial: it aims to dominate markets, customers, tastes and styles. Campaigns, strategies and targets shape the contest, and the contest is often with the customer.

    Pushing a stone uphill is hard work. So is paddling a canoe against the river. If the aim of marketing is to make products sell themselves, doing that needs a profound form of conversation: profound listening, followed by profound internal action to digest the message, then profound communication.

    The great unifying theme of the 20th century is the triumph of the individual...

    Marshall McLuhan made the following prediction: ‘One of the future aspects of advertising is the custom-made, the tailor-made. Instead of peddling mass-produced commodities, advertising is going to become a personal service to each individual.’ This implies that the customer should be seen as a partner or associate, not a target enemy whose resistance must be overcome.

    One of the single most effective ways to destroy quality is to stick a wet finger in the air and set short-term, arbitrary, numeric targets ‘to get people working’. The gap between this and the renewing, ordering imagination based on intimate and profound knowledge of customers and craft is as wide as Ginnungagap, the void between worlds in Norse mythology. This is a numericism that wants to impose itself on the world. If you ignore the realities of the marketplace or the system and try to impose your own order onto it, is it so surprising that you should find yourself obsessed with survival, never getting off the bottom rung of development?

    Grocers who want to create and sustain lasting relationships with their customers use a number of time-honoured techniques, whose principles cross boundaries. The good community grocer greets his or her customer with a smile and by name: ‘Hello Mrs Horobitz, and how are we today?’ There may even be a family question: ‘And how’s your son after his operation?’ Produce is good and is laid out openly for display, and in the process of picking the customer’s order the grocer would publicly reject anything considered unsuitable and ostentatiously but naturally throw it in the reject bin, in a gesture that says ‘I care’. There would be an extra carrot added to the pile after the scale dipped and the right weight had been reached, an open display of natural added value. There might be an occasional treat such as an apricot for a child or a bunch of flowers at Christmas. The grocer would talk cheerfully but not pushily about products: ‘I’ve got a nice lot of new potatoes just in. Would you like to try them?’ The above example demonstrates a number of key principles:

    – Acknowledging the person, both as an individual and as a valued customer.

    – Having a dialogue that enables warmth and knowledge to be developed.

    – Being able to anticipate a reliable relationship, with few problems, which are promptly and courteously dealt with.

    – Regular added value as a natural extension of the basic transaction.

    – Special attention during relationship development.

    – Graceful surprises

    Branding, through the world of imagery and personality, creates a ‘being’ with which the customer can identify...

    Alfie Kohn tells me an old American joke. An old man was getting insulted by a group of 10-year-olds each day. They would tell him how stupid and ugly and old he was. Rather than shout at them he called them together and told them that any of them who shouted at him the next day would get a dollar. Excited and amazed they all came round hurled abuse, and collected their dollar. ‘Do the same tomorrow’, he said, ‘and I’ll give you a quarter for your trouble’. The children thought this was still pretty good, and turned out again to insult him and earn the reward. Then he apologized and told them that on the following day he could only afford to give them a penny. ‘Forget it,’ they said – and that was the end of his problem. NatWest offered one point per £10 spent, then one per £20, and next?

    The new marketing seeks to establish an association through dialogue and through a set of values that are mutual and community creating: the higher levels of organization quality. Such values are essentially moral. They are based on a principle of sharing which becomes gain-gain. ...So, the ideas, the imagination and techniques of business will need to be more coloured by a moral, value laden outlook if they are going to be successful in winning and keeping customers in a loyal relationship. This, of course, does not mean a moralistic attitude. That would simply be talking down to customers. Companies which carve a great reputation for themselves, for their quality and dependability, are always associated implicitly at least with moral worth: with integrity, honest value, and a guarantee of worth.

    Marketing ...becomes service and the boundaries of product and marketing become blurred...

    While good-quality selling is essentially a service, paradoxically, service can be considered as a sales activity. Service is the creation of relationship value through acts of care that satisfy customer needs. Service creates the company’s future: ensuring that customers wish to return to the same source for future purchases. Service creates tomorrow’s sales; it is selling through a long-term window. The promise of future service, if credible, also produces today’s sales.

    Service transforms the commodity in personalized interaction with the customer. It generates relationship values through a series of interactions at the service front line. These are the threshold moments of truth when clients and customers test our development. To what extent will the quality of our processes, resources, people, information, etc., come together? To what extent can we put the customer’s genuine needs and preferences first, not as slaves, but as partners? Then, good service transforms commodities.

    What eventually determines our loyalty, or the lack of it, is the ‘archetypal moment,’ or moments that we would call to mind about a company, the inner mental picture of the company, or its products and services, and how we feel about this.

    The future will be marked by an intensification and deepening of business relationships. The model in Figure 8.6 is of this dynamic threshold [moment of truth, touch point] with customers: a two-way dialogue and relationship that needs to adjust to individual customers and customer groups, and their changing needs over time, as well as the organization’s changing needs and capabilities.

    The interaction includes all communications, including product and service delivery, customer complaints and requests, telephone contacts, both inbound and outbound, promotional and service mailings, educational and promotional events, e.g. seminars and previews, and face-to-face meetings or encounters... one has to call into question the real value of any part of the business that has no relationship with customers.

    First Direct are in the top quartile of British banks in a Boston matrix measuring ‘customer satisfaction’ and ‘willingness to refer’, and are one of only two banks in this quartile. In addition to being the first British bank serious about remote banking, they achieved technical leadership with implementation of an event management or event trigger system. This enabled them to predefine a series of possible customer events and to programme a desired response, an idea first promoted by the author in 1988. Marketing management define ‘rules’ and customers are subsequently selected by the database system for communication, promotion or service, based on their event or behaviour history.

    This concept, an event trigger, links three ideas:

    1. The recency/frequency/value behaviour thinking that has driven mail order for decades: Who?

    2. The moment of truth concept: When?

    3. Contact management techniques developed for salesforce management systems and telemarketing scripting, with emphasis on process management: What?

    An event trigger can be defined as ‘the configuration of a system to recognize particular customers and their relationship at a moment of truth and thereby stimulate an appropriate action according to a predetermined and evolving policy’.

    The most important moments of truth [touch points] are the archetypal moments, ...It is the picture and feeling of the event experienced by a customer that best sums up his or her loyalty or disinterest in a company or its products [brand essence].

    Studies of satisfaction show that, ‘Satisfaction is not the pleasurableness of the [consumption] experience … it is the evaluation rendered that the experience was at least as good as it was supposed to be.’15 Satisfaction is an evaluated condition which arises during a two stage process. It is summarized in the study by Westbrook (1987)14 as: consumption outcome → affect → satisfaction. This study also showed that feelings, which may be less conscious (and which are described by one researcher as primitive and naive16) are more powerful drivers of word of mouth recommendations and future buying decisions than satisfaction, perhaps because of those very conditions. In fact, recent scientific studies are only now recognizing17 what is obvious to many: the important role of feeling and emotion in judgement and decision forming.

    Of course, some decisions are made with considerable rational input. This is particularly true in business-to-business marketing where the decision process tends to be more formalized and involves multiple individuals and organizational specifications. Even here though, feelings of confidence, warmth, fear, etc., often influence decisions. Even in the most intellectual process, there is a final judgement: does it feel right? Einstein would judge a theorem on feelings, for example by its beauty. The ‘feel good’ factor is now a recognized force in political processes and the economy.

    Service is the creation of relationship value through acts of care that satisfy customer needs. Service creates the company’s future: ensuring that customers wish to return to the same source for future purchases. Service creates tomorrow’s sales; it is selling through a long-term window. The promise of future service, if credible, also produces today’s sales.

  • An information-led customer-focused discipline

    These are disciplines to transform organization and customer value by creating, sustaining and developing relationships of value. The evolution of quality from product performance to relationship performance is the critical step because this meets the new aspirations of customers and employees...

    If the transformation is successfully implemented, the result will sweep the old, impersonal, antagonistic mass marketing out as a learning phase. If not, companies will count the cost in declining margins.

    Tomorrow’s marketers will need to build competences which move marketing from an impersonal, transaction focus powered by image to a personal, relationship focus built on substantial service in aid of the brand, not just one to one, but I to I (I∞I), using and mobilizing all the responsive company’s resources in the promise, the guarantee of quality, delivered at the moment of truth to a recognized individual.

    [Marketing in the digital era] is the means of transforming the impersonal, unvalued noise of the modern marketplace into welcomed moments of truth [touch points], which become the basis for the cultivation of a reciprocal relationship between the individual members of the customer community and the responsive company.

    The information system is the enabler of best practice. Until a company has developed effective knowledge about the interaction of customers and company at the front line, and how communications, operations and activities affect customer attitudes and behaviour, it has little opportunity to optimize those encounters. Until it knows who its individual customers are and how they are behaving, it will find it difficult to break out of an impersonal and undifferentiated treatment of them.

  • Intelligence and the smart service

    One of the most important developments over the next years will be the increasing ‘intelligence’ and information content in products. Information is not only a component of the product package in its own right, as in a railway timetable or library database, but will increasingly transform the process, relationship and hardware components of the product. More and more products, for example financial products, consist almost exclusively of information (or expertise) added value.

    It is therefore crucially important that the computer database system is able to record the total service package, or at least all meaningful elements of it. For example, in making a decision about the effectiveness of a particular insurance product, it may be necessary to link the product not only to the marketing promotion, but also to the particular script that is used. Furthermore, if customers telephoning for an insurance quotation are kept waiting for a long time, this could affect take-up and loyalty. An insurance product that has had a claim is a different insurance product from one that has not, both to the customer and the company.

    It should therefore be possible to configure the database to recognize the different elements or entities that are likely to be relevant to total service product mix. A technique such as regression analysis can then be used to link customer satisfaction and retention to key ingredients of the product. It is less important to adopt a particular model of the product than to recognize the needs to be able to link service components in an information system and measure productive effects. This is covered in more detail in Chapters 11 and 12.

    A powerful service guarantee works. It produces companies that stand out from the crowd, and, if taken seriously, forces commitment to quality. The result is a double impact:

    – Better quality service.

    – Contented customers willing to pay for assured quality.

    ‘Guarantee management’ is the end-to-end establishment of a market-moving commitment, a guarantee of delivery supported by systems, knowledge and processes. It is an idea that was developed earlier as a support for the development of treasured reputation. There were four components:

    1. Establish what you want to promise (from knowledge of customers).

    2. Establish how to deliver it.

    3. Make the offer.

    4. Invite response, making it easy if anything goes wrong.

    It is quite obvious that a guarantee hits straight at the problem of reliability while providing great marketing leverage. And a guarantee is essentially a direct marketing device. It is targeted, it communicates and it invites response. Link it to a database and you have great analytical and targeting power, e.g. for follow up.

    One of the most important developments over the next years will be the increasing ‘intelligence’ and information content in products. Information is not only a component of the product package in its own right, as in a railway timetable or library database, but will increasingly transform the process, relationship and hardware components of the product. More and more products, for example financial products, consist almost exclusively of information (or expertise) added value.

    It is therefore crucially important that the computer database system is able to record the total service package, or at least all meaningful elements of it. For example, in making a decision about the effectiveness of a particular insurance product, it may be necessary to link the product not only to the marketing promotion, but also to the particular script that is used. Furthermore, if customers telephoning for an insurance quotation are kept waiting for a long time, this could affect take-up and loyalty. An insurance product that has had a claim is a different insurance product from one that has not, both to the customer and the company.

    It should therefore be possible to configure the database to recognize the different elements or entities that are likely to be relevant to total service product mix. A technique such as regression analysis can then be used to link customer satisfaction and retention to key ingredients of the product. It is less important to adopt a particular model of the product than to recognize the needs to be able to link service components in an information system and measure productive effects. This is covered in more detail in Chapters 11 and 12.

    A powerful service guarantee works. It produces companies that stand out from the crowd, and, if taken seriously, forces commitment to quality. The result is a double impact:

    – Better quality service.

    – Contented customers willing to pay for assured quality.

    ‘Guarantee management’ is the end-to-end establishment of a market-moving commitment, a guarantee of delivery supported by systems, knowledge and processes. It is an idea that was developed earlier as a support for the development of treasured reputation. There were four components:

    1. Establish what you want to promise (from knowledge of customers).

    2. Establish how to deliver it.

    3. Make the offer.

    4. Invite response, making it easy if anything goes wrong.

    It is quite obvious that a guarantee hits straight at the problem of reliability while providing great marketing leverage. And a guarantee is essentially a direct marketing device. It is targeted, it communicates and it invites response. Link it to a database and you have great analytical and targeting power, e.g. for follow up.

     

     

© ANGUS JENKINSON, 2016. ALL RIGHTS RESERVED.