Cultivating Customer Relationships

Companies are using information about customers to enact precision marketing designed to build strong long­term relationships.⁷⁴ Information is easy to differentiate, customize, personalize, and dispatch over networks at incredible speed. But that capability cuts both ways. For instance, customers now comparison-shop quickly and easily through sites such as Bizrate.com, Shopping.com, and PriceGrabber.com, and Epinions.com and Yelp.com let them share information about their product and service experiences with others. Company empowerment has been matched by customer empowerment, and companies have to adjust to shifts in the nature and strength of their customer relationships.

1. CUSTOMER RELATIONSHIP MANAGEMENT

Customer relationship management (CRM) is the process of carefully managing detailed information about individual customers and all customer “touch points” to maximize loyalty.⁷⁵ CRM is important because a major driver of company profitability is the aggregate value of the company’s customer base. A related concept, cus­tomer value management (CVM), describes the company’s optimization of the value of its customer base. CVM focuses on the analysis of individual data on prospects and customers to develop marketing strategies to acquire and retain customers and drive customer behavior.⁷⁶

A customer touch point is any occasion when a customer encounters the brand and product—from actual ex­perience to personal or mass communications to casual observation. For a hotel, the touch points include reserva­tions, check-in and checkout, frequent-stay programs, room service, business services, exercise facilities, laundry service, restaurants, and bars. The Four Seasons relies on personal touches, such as a staff that always addresses guests by name, high-powered employees who understand the needs of sophisticated business travelers, and at least one best-in-region facility, such as a premier restaurant or spa.⁷⁷

CRM enables companies to provide excellent real-time customer service through the effective use of indi­vidual account information. Based on what they know about each valued customer, they can customize market offerings, services, programs, messages, and media. Companies’ increased ability to track and market to indi­vidual customers is not without its controversies, as “Marketing Insight: The Behavioral Targeting Controversy” highlights.

PERSONALIZING MARKETING Widespread Internet usage allows marketers to abandon the mass-market practices that built brand powerhouses in the 1950s, 1960s, and 1970s for new approaches that are a throwback to marketing practices from a century ago, when merchants literally knew their customers by name. Personalizing marketing is about making sure the brand and its marketing are as personally relevant as possible to as many customers as possible—a challenge, given that no two customers are identical.

Companies are using e-mail, Web sites, call centers, databases, and database software to foster continuous contact between company and customer. Although technology can help with customer relationship management, firms have to be careful not to roll out too many automated-response phone systems or social-networking tools as ways to satisfy customer service requests. Many customers still prefer to talk to a live representative to receive more personal service—an ongoing priority in marketing.⁷⁸

Companies are recognizing the role of the personal component in CRM and its influence once customers make actual contact with the company. Employees can create strong bonds with customers by individualiz­ing and personalizing relationships. Consider the lengths to which British Airways is going to satisfy valued customers.⁷⁹

BRITISH AIRWAYS British Airways took personalization to a higher level in the summer of 2012 with its new “Know Me” program. One goal was to centralize information about frequent fliers from every one of BA’s service chan­nels—Web site, call center, e-mail, on board planes, and inside airports—into a single database. For any one passenger booked on a flight, BA would know his or her current seating location, previous flights and meal choices, prior complaint history, and so on. BA also distributed 2,000 iPads among crew members and ground staff to allow them to access the database as well as receive personal recognition messages about passengers on any one flight. The goal was to have 4,500 daily messages, or approximately seven message updates per flight. To facilitate VIP passenger identification, British Airways also used stored photos of fliers downloaded from Google Image searches. One company representative described the program as aiming to “recreate the feeling of recognition you get in a favorite restaurant when you’re welcomed there, but in our case it will be delivered by thousands of staff to millions of customers.” Although some observers raised privacy concerns—even calling it “creepy”—British Airways noted that the passenger information was already available or viewed as helpful by its most valuable fliers.

As part of a broad trend towards personalization, Coca-Cola has introduced Freestyle dispensing machines that allow users to customize their soft drink choices.

While British Airways is personalizing its service experiences, BMW is figuring out ways to personalize its products. While 15 percent of U.S. drivers custom-ordered their cars in 2010, BMW’s goal was to make that number 40 percent of its buyers by 2015. The company offers 500 side-mirror combinations, 1,300 front bumper combinations, and 9,000 center-console combinations and provides new buyers a video link to watch their car being “born” while waiting for delivery. Its detailed manufacturing and procurement system takes the slack out the production process, reduces inventory carrying costs, and avoids rebates on slow-moving sellers. Customers tend to load up with options—generating more profitability for BMW and its dealers—but are also more loyal.⁸⁰

Even Coca-Cola is getting in on the action. The Coca-Cola Freestyle dispensing machine can dispense 125 sparkling and still brands that consumers can mix via a touchscreen, creating a beverage to suit their particular taste.⁸¹

To adapt to customers’ increased desire for personalization, marketers have embraced concepts such as permission marketing. Permission marketing, the practice of marketing to consumers only after gaining their expressed permis­sion, is based on the premise that marketers can no longer use “interruption marketing” via mass media campaigns. According to Seth Godin, a pioneer in the new technique, marketers develop stronger consumer relationships by respecting consumers’ wishes and sending messages only when they express a willingness to become more engaged with the brand.⁸² Godin believes permission marketing works because it is “anticipated, personal, and relevant.”

Permission marketing, like other personalization approaches, presumes consumers know what they want, though they often have undefined, ambiguous, or conflicting preferences. “Participatory marketing” may be a more appropriate concept than permission marketing because marketers and consumers need to work together to find out how the firm can best satisfy consumers.

CUSTOMER EMPOWERMENT Marketers are helping consumers become evangelists for brands by providing them resources and opportunities to demonstrate their passion. Doritos held a contest to let consumers name its next flavor. Converse asked amateur filmmakers to submit 30-second short films that demonstrated how the iconic sneaker brand inspired them. The best of the 1,800 submissions were showcased in the Converse Gallery

Web site, and the best of the best became TV commercials. Sales of shoes via the Web site doubled in the month after the gallery’s launch.⁸³

As much as new technologies help customers assist or become involved in a brand’s marketing, they also help them avoid marketing at the same time. For example, ad blocking is the most popular software extension for lead­ing browsers, and the overall rate of ad blocking by users averages about 10 percent.⁸⁴

Although much has been made of the newly empowered consumer—in charge, setting the direction of the brand, and playing a much bigger role in how it is marketed—it’s still true that only some consumers want to get involved with some of the brands they use and, even then, only some of the time. Consumers have lives, jobs, families, hobbies, goals, and commitments, and many things matter more to them than the brands they purchase and consume. Understanding how to best market a brand given such diversity in customer interests is crucially important.⁸⁵

When will consumers choose to engage with a brand? Many factors can come into play, but follow-up analy­sis of the IBM 2010 CEO Study revealed the following about customer pragmatism: “. . . most do not engage with companies via social media simply to feel connected. . . . To successfully exploit the potential of social media, com­panies need to design experiences that deliver tangible value in return for customers’ time, attention, endorsement and data.” According to these IBM analysts, that “tangible value” includes discounts, coupons, and information to facilitate purchase. They also note that many businesses overlook social media’s most potent capabilities for captur­ing customer insights, monitoring the brand, conducting research, and soliciting new-product ideas.⁸⁶

CUSTOMER REViEWS AND RECOMMENDATIONS Although the strongest influence on consumer choice remains “recommended by relative/friend,” an increasingly important decision factor is “recommendations from consumers.” With increasing mistrust of some companies and their advertising, online customer ratings and reviews are playing a growing role in the customer buying process.⁸⁷

A Forrester research study, for example, found that close to 50 percent of consumers won’t book a hotel that does not have online reviews. Not surprisingly, more hotels are launching their own program to post reviews (Starwood places independent, authenticated reviews on individual hotel sites) or are using travel review sites (Wyndham streams its five most recent reviews from TripAdvisor on its site, leading to a 30 percent increase in bookings).⁸⁸ TripAdvisor has quickly grown to be a valuable online resource for travelers.⁸⁹

TRIPADVISOR After being frustrated by the lack of detailed, reliable, and up-to-date information available to help him decide where to go on a Mexican holiday, Stephen Kaufer founded TripAdvisor in 2001. The pioneer in online consumer travel reviews, the company grew quickly and is now the world’s largest travel Web site, with more than 170 mil­lion user reviews and opinions as of 2014. It allows users to collect and share information and make bookings for a wide variety of hotels, vacation rentals, airlines, restaurants, and other travel-related locations or businesses through its hotel and air booking partners. Users can post reviews, photos, and opinions and participate in discussions on a variety of different topics. To improve the quality and accuracy of its content, TripAdvisor uses both manual review and advanced computer algorithms, including a verification and fraud detection system that considers the IP and e-mail address of reviewers (as well as other review attributes) and monitors suspicious patterns of postings as well as inappropriate language. About 30 hotels have been blacklisted from the site for suspicious reviews. TripAdvisor has more than 280 million unique visitors monthly, and hundreds of millions of people each month view its content on 500 other sites, including Best Western International, Expedia, and Thomas Cook. In recent years, TripAdvisor has innovated to improve the personalization and social nature of its services; in fact, it was one of Facebook’s initial launch partners for its “Instant Personalization” project, which allows users to personalize their TripAdvisor experience by allowing them to see TripAdvisor content posted by their Facebook friends, subject to their privacy elections. Local Picks is a Facebook app that allows users to localize TripAdvisor restaurant reviews and auto-share user reviews on Facebook Timeline. The Friends of Friends function allows TripAdvisor users to sort reviews by a user’s Facebook friend status. Its acquisitions of social and mobile connectivity travel sites Wanderfly and EveryTrail have further strengthened TripAdvisor’s capabilities in that area.

When online pet food retailer PETCO started using consumer product ratings and reviews in e-mails and banner ads, it found its click-through rate increased considerably as a result.⁹⁰ Brick-and-mortar retailers such as Best Buy, Staples, and Cabela’s are also recognizing the power of consumer reviews and have begun to display them in their stores.⁹¹

Despite consumer acceptance of such reviews, however, their quality and integrity can be in question.⁹² In one famous example, over a period of seven years, the cofounder and CEO of Whole Foods Market posted more than 1,100 entries on Yahoo! Finance’s online bulletin board under a pseudonym, praising his company and criticizing competitors.

Some companies offer computer-recognition technology to monitor for fraud. Bazaarvoice helps companies such as Walmart and Best Buy manage and monitor online reviews using a process called device fingerprinting. The company caught one firm posting hundreds of positive reviews of one of its products and negative reviews of its competitor’s.

Online reviews and blogging sites such as Gawker have struggled to police comments.⁹⁴ To avoid attracting anonymous or biased reviews, Angie’s List allows only paid and registered subscribers to access its Web site, which compiles about 40,000 reviews of service companies and health care professionals from its 1.5 million North American subscribers each month. Users rate providers on price, quality, responsiveness, punctuality, and profes­sionalism using a report card-style A-to-F scale.⁹⁵

Other sites offer summaries of professional third-party reviews. Metacritic aggregates music, game, TV, and movie reviews from leading critics—often from more than 100 publications—averaged into a single 1-to-100 score. Review sites are important in the video game industry because of the influence they wield and the prod­uct’s high selling price—often $50 to $60. Some game companies tie bonuses for their developers to game scores on the more popular sites. If a major new release doesn’t make the 85-plus cutoff, the publisher’s stock price may even drop.⁹⁶

Bloggers who review products or services are influential because they may have thousands of followers; blogs are often among the top links returned in online searches for certain brands or categories. A company’s PR department may track popular blogs via online services such as Google Alerts and Technorati. Firms also court the favor of key bloggers via free samples and advance information. Most bloggers disclose this special treatment.

For smaller brands with limited media budgets, online word of mouth is critical. To generate prelaunch buzz for one of its new hot cereals, organic food maker Amy’s Kitchen shipped out samples before its release to several of the 50 or so vegan, gluten-free, or vegetarian food bloggers the company tracks. When favorable reviews appeared on these blogs, the company was besieged by e-mails asking where to buy the cereal.⁹⁷

As it turns out, sometimes even negative reviews can be surprisingly helpful. For one thing, although they can hurt a well-known brand, they can create awareness about an unknown or overlooked one. They can also provide valued information.

A Forrester study of 10,000 consumers of Amazon.com’s electronics and home and garden products found that 50 percent found negative reviews helpful. Most purchased the products regardless of negative comments because they felt these merely reflected personal tastes and opinions different from their own. When consumers can better learn the advantages and disadvantages of products through negative reviews, fewer product returns may result, saving retailers and producers money.⁹⁸

Online retailers often add their own recommendations to consumer selections or purchases: “If you like that black handbag, you’ll love this red top.” One source estimated that recommendation systems contribute 10 percent to 30 percent of an online retailer’s sales. Specialized software tools help facilitate customer “discovery” or un­planned purchases.

At the same time, online companies need to make sure their attempts to create relationships with customers don’t backfire, as when customers are bombarded by computer-generated recommendations that consistently miss the mark. Buy a few baby gifts on Amazon.com, and your personalized recommendations suddenly don’t look so personal! E-tailers need to recognize the limitations of online personalization while searching for technology and processes that really work.

CUSTOMER COMPLAINTS Some companies think they’re getting a sense of customer satisfaction by tallying complaints, but studies show that while customers are dissatisfied with their purchases about 25 percent of the time, only about 5 percent complain. The other 95 percent either feel complaining is not worth the effort or don’t know how or to whom to complain. They just stop buying.⁹⁹

Of the customers who register a complaint, 54 percent to 70 percent will do business with the organization again if their complaint is resolved. The figure goes up to a staggering 95 percent if the customer feels the com­plaint was resolved quickly. Customers whose complaints are satisfactorily resolved tell an average of five people about the good treatment they received.¹⁰⁰ The average dissatisfied customer, however, gripes to 11 people. If each of these tells still other people, the number exposed to bad word of mouth may grow exponentially.

No matter how perfectly designed and implemented a marketing program is, mistakes will happen. The best thing a company can do is make it easy for customers to complain. Suggestion forms, toll-free numbers, Web sites, and e-mail addresses allow for quick, two-way communication. The 3M Company claims that more than two- thirds of its product-improvement ideas come from listening to customer complaints.

Given that many customers may choose not to complain, companies should proactively monitor social media and other places where customer complaints and feedback may be aired. Jet Blue’s 27-member customer service team is charged with monitoring the airline’s Twitter account and Facebook page, among other responsibilities. When a customer’s complaint about a fee for bringing a folded bike on board began to circulate online, Jet Blue quickly responded and decided it was not a service it should charge for.¹⁰¹

Given the potential downside of having an unhappy customer, it’s critical that marketers deal with negative experiences properly.¹⁰² Although challenging, the following practices can help to recover customer goodwill:¹⁰³

1. Set up a seven-day, 24-hour toll-free hotline (by phone, fax, or e-mail) to receive and act on complaints— make it easy for the customer.
2. Contact the complaining customer as quickly as possible. The slower the company is to respond, the more dis­satisfaction may grow and lead to negative word of mouth.
3. Accept responsibility for the customer’s disappointment; don’t blame the customer.
4. Use customer service people who are friendly and empathic.
5. Resolve the complaint swiftly and to the customer’s satisfaction. Some complaining customers are not looking for compensation so much as a sign that the company cares.

Not all complaints, however, reflect actual deficiencies or problems with a company’s product or service.¹⁰⁴ Big companies especially are targets for opportunistic customers who attempt to capitalize on even minor transgres­sions or generous compensation policies. Some firms fight back and even take an aggressive stance if they feel a criticism or complaint is unjustified.

When Taco Bell began to attract negative buzz online after rumors and a consumer lawsuit alleged that its taco mixture consisted of more filler than meat, it leaped into action with full-page newspaper ads headlined, “Thank you for suing us.” There and in Facebook postings and a YouTube video, the company pointed out that its taco mixture was 88 percent beef, with ingredients such as water, oats, spices, and cocoa powder added only for flavor, texture, and moisture. To help spread the word, Taco Bell marketers bought the key words “taco,” “bell,” and “lawsuit” so that its official responses appeared as the first link on Yahoo!, Google, and Bing searches.¹⁰⁵

Many senior executives worry about their firms using social media and the potential negative effects of cranky customers communicating online. Marketers, however, contend that the positives outweigh the negatives and steps can be taken to minimize the likelihood of such damage.

One strategy for companies active in corporate social responsibility is to actively shape their public image dur­ing quiet times and then leverage that goodwill in paid or other media during difficult times. Nike was once a target of Internet-savvy critics who skillfully used search engine optimization to populate unflattering portraits of the company. Now, searches for Nike yield links to sites that describe its many environmental and community initiatives (such as shoe recycling).

2. MARKETING insight The Behavioral Targeting Controversy

The emergence of behavioral targeting is allowing companies to track the online behavior of target customers and find the best match between ads and prospects. Tracking an individual’s Internet usage behavior relies on cookies—randomly assigned numbers, codes, and data that are stored on the user’s computer hard drive and reveal which sites have been visited, the amount of time spent there, which products or pages were viewed, and which search terms were entered.

The Wall Street Journal reviewed 1,000 top Web sites and found that 75 percent included code from social networks such as Facebook’s “like” and Twitter’s “tweet” buttons. The existence of the code could match people’s identities with their Web-browsing activities, tracking a user’s arrival on a page even if the Facebook or Twitter button was never clicked. Another Wall Street Journal study showed that roughly a quarter of the times a user logged into one of 70 popular Web sites, the user’s real name and e-mail address or other personal details, such as username, were passed on to third-party companies.

A new customer signing up with Microsoft for a free Hotmail e­mail account, for example, is required to give the company his or her name, age, gender, and zip code. Microsoft can then combine those facts with information such as observed online behavior and character­istics of the area in which the customer lives to help advertisers better understand whether, when, and how to contact that customer. Although Microsoft maintains it carefully preserves consumer privacy—it claims it won’t purchase an individual’s income history—it can still provide advertising clients with behavioral targeting information.

For example, Microsoft can help a DiningIn franchisee zero in on working moms ages 30 to 40 in a given neighborhood with ads designed to reach them before 10 am when they’re most likely to be

planning their evening meal. Or if a person clicks on three Web sites related to auto insurance and then visits an unrelated site for sports or entertainment, auto insurance ads may show up on that site. Microsoft claims behavioral targeting can increase the likelihood a visitor clicks an ad by as much as 76 percent.

Proponents of behavioral targeting maintain that it also brings consumers more relevant ads. Because the ads are more effective as a result, more ad revenue is available to support free online con­tent. Supporters also maintain that many consumers would be less concerned if they knew exactly how tracking worked. They argue that practices conform with the online ad industry’s self-regulation norms, ensuring anonymity by not giving firms access to “personal identifiable information” (PII).

Identity information is removed, protected, or separated from browsing history in different ways. For example, a Web site can use a formula to turn its users’ e-mail addresses into jumbled strings of num­bers and letters, as can an advertiser. Both can send their jumbled lists to a third company that looks for matches so the Web site can show an ad targeted to a specific person without any real e-mail addresses changing hands.

Nevertheless, as Chapter 3 pointed out, consumers have sig­nificant misgivings about advertisers tracking them online. A single Web page can contain computer code from dozens of different ad compa­nies or tracking firms. Government regulators wonder whether industry self-regulation will be sufficient or whether legislation is needed.

Sources: Elisabeth Sullivan, “Behave,” Marketing News, September 15, 2008, pp. 12-15; Stephanie Clifford, “Two-Thirds of Americans Object to Online Tracking,” New York Times, September 30, 2009; Jessica Mintz, “Microsoft Adds Behavioral Targeting,” Associated Press, December 28, 2006; Laurie Birkett, “The Cookie That Won’t Crumble,” Forbes, January 18, 2010, p. 32; Alden M. Hayashi, “How Not to Market on the Web,” MIT Sloan Management Review (Winter 2010), pp. 14-15; Deborah L. Golemon and Laurie A. Babin, “How Marketers Are Dealing With the Controversy Surrounding Behavioral Targeting,” International Journal of Business, Marketing and Decision Sciences 4 (Spring 2011), pp. 127-141; Jennifer Valentino- Devries and Jeremy Singer-Vine, “They Know What You’re Shopping For,” Wall Street Journal, December 7, 2012.

Source: Kotler Philip T., Keller Kevin Lane (2015), Marketing Management, Pearson; 15th Edition.