Being direct... AdVantage Feb 2004
Some companies still don't seem to get it ...
... the ONLY measure of customer value is: Share of Wallet!
In the post-industrial age, where many products and services have become
commoditised, who actually decides what constitutes value?
There is a fundamental truth about Brand Loyalty that many of those who believe that they only need to promise it, tend loose sight of: A customer can only be described as loyal (therefore valuable) to a particular brand, when that customer continuously spends a disproportionate share of his/her total spend in the category, on that brand - not as soon as they fill in a form to join some loyalty programme! I have always had a very simple understanding of this whole process, and want to talk about the airline industry as an example of that understanding: One elects to spend one's air travel budget with a chosen airline (as opposed to spreading it amongst many) and in turn, the airline provides additional value to 'me', the customer - beyond just getting 'me' from point a to point b - but also by (meeting an emotional need) and treating 'me' as special! Managers totally focused on the product, too often neglect delivering on the emotional level. Also, the airlines may not think so - but this is a two-way 'contract' that should have the objective of benefiting both seller and buyer!
The trouble with the 'contract' is that (in practice) it just doesn't work! Loyal (also read Valuable) customers are not treated very differently from anyone else who might only make a single purchase, and who may only do so perhaps once in a blue moon. The SINGLE way that anyone can guarantee getting a modicum of recognition or 'better' service from ANY airline - is to pay way over the odds (i.e. become a better 'class' of customer) each time that one climbs aboard a particular flight.
You see, despite what they all say about the long-term importance of their customers, the thing that really seems to drive the airline business is 'this flight's load factor'; 'cost per seat mile'; and all manner of other cost-cutting and profit-margin management. Now before anyone feels it necessary to inform me that business sustainability is about making profit - I know, I know.
But, in a world of increasing commoditisation (product formulation and quality basics are now the entry level for even being in a category) the only way to differentiate - is to deliver a level of service, recognition (and maybe even emotional attention to detail) that makes a customer literally rave about the brand! I don't believe that the traditional marketing approaches can successfully 'hoodwink' customers into buying inferior stuff on a sustainable basis, any more.
I have previously spoken of the obvious intellectual differences between helping buyers to buy rather than only helping sellers to sell. Alan Mitchell is the author of a book called 'Right Side Up Marketing', and for the first time in many years of reading literally thousands of words about the business of marketing and the marketing of business, I have found someone who makes a very strong case indeed that the old industrial-age-model of 'tell to sell the output of our mass production' is way past its 'sell-by' date. The 'dyed-in-the-wool' focus of business on getting rid of output or capacity is one of the main reasons why so many companies can't (or won't) think about their brands, from their customer's perspective.
Mitchell informs us in a clear written style that:
- The generic functions of marketing - matching supply to demand, and connecting buyer to seller, are no longer the preserve of the seller only. In the connected age, these can be undertaken by literally anyone.
- The 'consumer' is an artefact - and relic - of the industrial age. The 'consumer' is most often a real person and indeed has a lot more to trade than just money. He is also an investor in, and seller of, others assets such as information, time, attention and commitment.
- The 'market' is not the final arbiter and clearing house of value, as we tend to think it is. Real human exchange is much richer than merely the exchange of money for goods or services. People can exchange many other forms of value: information and ideas, time and attention, goals and values, passions and emotions. But, he goes on, in the industrial age model, the consumer's contribution to value-creation has been dispersed; unaccounted for; taken for granted; overlooked and even condescended.
As long as marketing companies only see 'the customer relationship' as a means to serve their own ends, the opportunity to create win-wins will go un-fulfilled. Customers can (and do) bring an enormous amount to a commercial relationship besides money, Sadly too, many companies are maybe just too busy 'selling stuff' to pay much attention to this less than obvious 'touchy-feely' aspect of marketing!
Mitchell says that an essential element to discovering added value is not merely to be found in promotions, pricing and sales discounts, but also in 'mutual process re-engineering' whereby BOTH parties to the relationship change some of the things they do, (and maybe how they interface) - in order to jointly tackle and reduce the total cost (including emotional cost) of the business process in question… to their mutual benefit.
Now, many would call that REAL added value!!