Marketing has already been changed a great deal over time. While business marketing activities followed a Mass Marketing principle until the 1960s, it was replaced by a target group based approach in the form of Direct Marketing in no later than the 1970s. Beginning in the early 1990s, concepts of Database Marketing, which features a strong focus on databases and analysis systems, alongside modern information techniques, (together summarized under the term Customer Relationship Management – CRM), have been discussed and implemented to facilitate a comprehensive, highly standardized, yet simultaneously individualized approach to customer management (“Mass Customizing”).
Consequently, CRM (in a business sense) means improving customer loyalty and profitability in terms of both acquiring new customers and optimizing existing customer relationships. While traditionally structured marketing tends to concentrate on generating sales in the short-term, market shares and unidirectional customer information, the relationship-based approach focuses on establishing long-term business relationships, building knowledge of individual customers and interacting with customers across all different customer touch points. The focus on individual transactions discernible in part is replaced by an emphasis on business relationships.
The reason for the – not really surprising – increase in focus on the customer comes from the realization that dissatisfied customers are usually gone for good, and more importantly, they can have considerable negative repercussions on their respective market. Retaining satisfied customers, on the other hand, requires far less expenditure and resources than customer acquisition and opens up the potential for additional sales (cross-selling). Numerous studies show that customer satisfaction is less a result of one specific interaction with a company, and more the outcome of the entire business relationship … the customer experience at all phases and interaction points with the company – organizations simply must provide their customers with satisfactory experience. Competing on that dimension means orchestrating all the different interaction points that people pick up in the buying process, being provided with the highest quality of customer data and processing capabilities. This means: besides satisfying product features and product quality, the corporation has to manage the emotions including the smells, sounds, sights, tastes and textures of the good or service, as well as the environment in which it is offered. This comprises “mechanics” (things) as well as “humanics” (people interactions). Always interesting to see … and the major reason why the results of CRM initiatives and Total Customer Experience initiatives pretty often fall behind expectations … are the emotional elements, which are just as important to the customer experience and work synergistically with functional elements such as product quality. This means: To fully leverage experience as part of a customer-value proposition, organizations must manage the emotional component of experiences with the same rigor they bring to the management of product and service functionality.
And there is a plentitude of examples for the benefits of a Total Customer Experience like Virgin Atlantic Airways. Within an increasing competition and under increasing cost pressure, it is no surprise that potential improvements generally target better service, lower prices, and increased punctuality and reliability. But what makes Virgin better than the competition? The reason lies in a Total Customer Experience management across all customer touch points. First of all, the challenge that Virgin handles so brilliantly is to understand the customer’s situation, to get in the customer’s shoes, so to speak. The company combines leading product innovations with excellent service and so creates a unique flight experience for its customers. Using an optimal mixture of investment in research and development, ground-breaking design, and the ability to anticipate customer expectations, Virgin Atlantic has become the market leader for upper class air travel. Virgin placed a clear emphasis on finding out the typical “pain points” that plague almost every passenger before, during, or after a flight in order to create relevant customer value by providing appropriate solutions. Consequently, a new lounge at Heathrow (London) offered stressed frequent flyers massages or beauty therapies. Flyers might also improve their golf stroke on their own driving range and then enjoy the latest sashimi creation in the recently open sushi bar. And the service innovations don’t stop on the ground: even at an altitude of a few thousand meters, passengers had the chance for a hair cut or get a manicure. In order to get the most comprehensive picture of their customers, Virgin Atlantic places strong emphasis on the commitment of its employees and ethnographic processes in qualitative market research … the emotional component of experiences .. again across all customer touch points. Company employees, known internally as the “Virgin Tribe”, are given a high degree of personal responsibility and independence to generate ideas that the company can implement in new and innovative services. With its customer-driven strategy, Virgin Atlantic Airways achieved outstanding success. Virgin Atlantic was able to increase sales across a couple of years, e.g. profit from 21 Mio UK Pounds in 2004 to 61 Mio UK Pounds in 2008. Achieving such success and sustained growth requires more than just the right, creative business idea. Rather, the main challenge is to orient the entire company and the core competencies toward customer needs across all areas. Marketing, sales, service and research/development must subject themselves equally to this “demand first” orientation.
The same as the Ritz Carlton Hotel Group – they have become popular not just by selling hotel rooms, but rather by providing an excellent customer service: the bellman or the receptionist know exactly what the individual customer requirements and preferences are and can greet the customer always personally with his name and ask him if he or she would like to get the same amenities as last time. The prerequisite: an integrated IT platform for capturing and processing all customer information and serving as the central repository for all customer interfacing service areas. To achieve Total Customer Experience and – as a consequence as with Virgin Airways or Ritz-Carlton Hotels also customer loyalty and advocacy – a business must take an integrated, strategic approach to CRM, one that focuses on improving the customer’s total experience with the organization across the entire enterprise, all touch points (physical and electronic), and all experiential elements (from presales activity, to product/service experience to post-sales support). The approach to use CRM technology as an isolated “point solution” and implemented in and by individual company departments fails to unlock CRM’s potential to have a substantive impact on the Total Customer Experience and really drive loyalty. In this vein, the CRM mantra needs to change from “move quickly and reap early rewards” to “move quickly and work towards achieving a strategic objective.” The prevailing short – term focus emphasizes doing things in a compartmentalized manner (e.g., the call center operations of the consumer products group) with little coordination with other elements in the Total Customer Experience. Since customers define loyalty by the sum of their experiences with the organization, across all touch points and across all experiential elements such as presales, order and delivery process, product / service experience and post-sales support, CRM initiatives with the goal to improve loyalty must view the Total Customer Experience from a holistic perspective. Interacting with customers over the Web or a call centre in a customized manner, while doing nothing to improve their product or service experience, will have a limited or even – while not providing a consistent customer experience – negative impact also on customer loyalty.
This blog series “Marketing 2.0” addresses topics that have come into the forefront of importance for marketing and must be tackled immediately… stay tuned for the next blog!
Further interesting readings:
Strauss, R.E.: Marketing Planning by Design. Systematic Planning for Successful Marketing Strategy, London: Wiley & Sons, 2008.
Calhoun, J.: Driving loyalty by managing the total customer experience, in: Ivey Business Journal, 2001, pp. 2-7.
Berry, L. L.; Carbone, L. P.; Haeckel, S. H.: Managing the Total Customer Experience, in: MIT Sloan Management Review, Spring 2002, Volume 43, Number 3, pp. 1-6.