Get a Grip - The Marketing Power of Managing Customer Relationships
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The document discusses the critical importance of customer retention in businesses, illustrating through examples from major brands like Nike, Disney, and Kodak how they fail to nurture existing customer relationships despite investing heavily in customer acquisition. It emphasizes that companies often lack follow-up communication, fail to collect valuable customer data, and do not employ strategies to keep customers engaged, ultimately risking their loyalty. Solutions are proposed, including better customer insights and proactive marketing approaches to reinforce relationships and retain profitable customers.
Get a Grip - The Marketing Power of Managing Customer Relationships
- 1. G R AY M A T T E R RALSTON360 VIEW 2: GET A GRIP FALL 2004
- 2. VIEW II: GET A GRIP E X E C U T I V E S U M M A RY Most businesses spend considerable time and effort getting customers. But how many work at keeping those customers? View 1 V I E W II II examines the ways in which even big brands like Nike and Disney fail to get a grip on customers, and offers real-world solutions to help businesses keep their most profitable customers hooked. G R AY M A T T E R RALSTON360
- 3. Y O U G O T TA K N O W W H E N T O H O L D ‘ E M . Remember the Seinfeld episode where Jerry tries to pick up the rental car he reserved only to find that the rental company had “run out of cars”? The secret, Jerry said to the rental agent, isn’t so much in taking reservations; it’s in holding them. The same could be said for customers. Many businesses spend a serious amount of time, money and energy getting new customers. The problem is that most forget to “hold” onto new customers once they’re in the proverbial fold, instead letting them slip away and into the arms of a waiting competitor. Marketers seem willing to spend money to acquire customers, but not to retain them. In fact, a recent Gartner study of the financial services category shows that marketers spend, on average, $280 to recruit a new customer compared with just $57 to keep one. My guess is that this is the rule rather than the exception. This issue of View is my story of baffled befuddlement, as well as a call to get our collective acts together to create Delighted Customers that stay put. It features my personal experiences with six big brands that should’ve known better but didn’t, and is followed by simple, 2 V I E W II cost-effective solutions to stimulate me to purchase more and then retain me as a customer. It’s a classic story of The One That Got Away that serves as a cautionary tale to all of us to nurture customer relationships, or risk losing them completely. ICE MACHINE? CHECK. DOWN COMFORTER? CHECK. I N T E R E S T I N R E P E AT B U S I N E S S ? N O T S O M U C H . Situation A few weeks ago I stayed at the Hotel Lucia in Portland, Oregon, a trendy little boutique of a hotel where the art is modern and the guests wear black. I was there to do a little “secret shopping” for some friends whose client owns the hotel. The verdict? The service was great. The lobby was au courant. The room was nice, albeit a bit cozy. What really amazed me, however, was how quickly I slipped in—and then out—of the hotel’s grip. G R AY M A T T E R RALSTON360
- 4. Here’s how my visit went: I booked on-line. The hotel sent me a conformation via email. I checked in. They smiled. I smiled back. I checked out. At no time did the hotel, either via my two face-to-face contacts or via email, attempt to determine if I was a frequent visitor to Portland. I did not receive a follow-up email thanking me for my visit or asking for any data related to my wants and needs. The hotel failed to identify me as a “good prospect,” or worse, an existing customer worth nurturing. Between personal, family and employee business trips to Portland, Ralston360 represents approximately $20,000 in annual revenues for a Portland hotel. While not the GNP of a small nation, it isn’t exactly pocket change, either. It would’ve been worth a little extra effort on the hotel’s part to ensure that I remained the Delighted Customer they had already created. 3 V I E W II Solutions The hotel had three opportunities to learn more about me—two as I stood at the front desk in a face-to-face meeting with reception. The reception area wasn’t busy and I was willing to have a brief conversation. No hotel communication beyond “thanks for stopping by” was offered. The hotel should provide valuable incentives for the staff to learn more about their customers. They should politely question me to find out if I am a frequent visitor to Portland. If I’m deemed a potential repeat customer, they could then enter this information into a database to help guide further communications and offers. A successful hotel I know offers very powerful incentives (including trips and percentages of incremental sales) to their front desk employees to act as lead-generators. Another opportunity was lost by not staying in touch via email. I booked via email and they confirmed. That was it. Why not put me in a database, say thanks for visiting via a follow-up email and ask me questions to start learning more about me? Permission marketing works, period. Segment me, predict my future value, then nurture me. That’s the only way to build Delighted Customers—clientele that has already entered your universe and G R AY M A T T E R will drive your business at lower cost than new acquisitions. RALSTON360
- 5. TA K E A P I C T U R E . I T ’ L L L A S T L O N G E R T H A N T H I S R E L AT I O N S H I P. Situation Eastman Kodak is in trouble. The world is shifting from film to digital, and Kodak is scrambling to maintain market share in the photography industry. According to the Photo Marketing Association International, “It (2003) was a pivotal year for the industry as digital cameras outsold traditional cameras for the first time ever. By the end of this year, digital camera penetration is predicted to surpass 42 percent of households.” Kodak knows this trend well and is trying to reinvent itself as a digital company. Meanwhile, however, there are still millions of people who continue to use film and who send their film into Kodak or a Kodak- licensed film lab for processing. People like me, for instance. I returned from vacation and filled out one of those ubiquitous yellow Kodak processing envelopes at the drug store. (We are a blended family: half digital/half film.) Kodak, via their agent, asked for my name, address and telephone number. They had me. They had most of the big data points. They even knew that I asked for the images on a disc for use in my computer, a sure sign we are moving away from film. Did Kodak capture my personal data 4 V I E W II to stay in touch? Did this new digital company ask me for my digital email address on the form? Did they provide any incentives for me to provide it? Nope. What a missed opportunity to build a direct relationship, a relationship that will totally slip out of their grip as we become a 100% film-free home. Solutions Add an email address space to the film deposit form. Then stay in touch and offer incentives to buy more film. A company that is reinventing itself because its category is in decline should at least say thank you and try to keep the relationship ball in play. Track my usage. Predict my future behavior. Begin to re-position Kodak. If Americans are moving away from film, become our digital instructor. Create a stand-alone Web site learning center. Send out newsletters with advice on digital choices ranging from camera usage to editing tools. Provide a connection to Kodak’s Ofoto website. Use this “expert positioning” to re-brand the company to existing film customers and the wide world of confused digital camera owners. I need this help. I’m as confused about digital options as the next guy. I’m sure I’m not alone. G R AY M A T T E R Hey Kodak. Smile and give me a hug! RALSTON360
- 6. Y O U H A D M E AT H E L L O . Situation BMW launched BMW Films in 2001. This Internet-based film series, which was viewed over 41 million times in its first two years, is lauded as one of the best examples of Internet marketing. BMW created the ultimate in content-driven entertainment by developing its very own series of short, Hollywood-quality dramas staring their cars. This program was built on the recognition that 85% of today’s BMW buyers use the Web for research and that they are watching less television—and therefore fewer BMW commercials. BMW turned the usual advertising model around and spent 80% of their budget on production and only 20% on Internet media. Smart, no? Well, no. Although the program had me at hello, it forgot to invite me in. Sure, the film series generated over $20 million in free publicity and, as their advertising agency said, created the impression that “BMW is young. BMW is cool. BMWs go like hell. BMWs are safe. Lexus and Mercedes are for wussies.” 5 V I E W II They just didn’t ask for the order. They had me in their world, but never asked me if I wanted to find out more about BMW, or if I was currently in the market for a car. They never sent a follow-up email or letter. They didn’t ask my local dealer to make contact (with my permission). All this despite this unique 1:1 opportunity to garner my contact information. BMW’s agency states that that their strategy was to not sell to me. I understand that this film series was created to sell attributes, to build good will and polish the brand. I really do. That said, call me crazy, but I thought the point of all of this work was to actually sell me a car. So what’s a cooler-than-thou brand like BMW supposed to do? Solutions First of all, get over being too cool. Don’t get smug because you have a multi-media success on your hands; it doesn’t necessarily sell products or services. Instead, make a little effort to really use the time I have just spent with your brand to be more proactive. G R AY M A T T E R RALSTON360
- 7. Stay in touch and build a dialog. Ask me if I would like to receive an email notification for the next film. Give me an incentive to provide a bit of personal information. Maybe even ask if I am in the market for a car. How about a “VIP test drive” of a model highlighted in one of the movies? After all, I have just spent nine minutes being entertained by BMW and have a nice warm feeling for the brand. Bring me further inside the world of BMW. Who knows? I might just be in the mood to buy a car. MICKEY MOUSE MARKETING. Situation In October 2001, one month after September 11, I visited Disney World with my wife and two kids. (We were living in New Jersey at the time and there was no way we were going to be deterred from traveling by Al Qaeda). We researched the trip, purchased our airfare, reserved our rooms at a Disney Resort hotel and bought our tickets and passes to the park on-line at www.disney.go.com. In addition to booking online, we used a Disney World card (our room key) to make all of our in-park purchases. By the end of this trip, Disney knew us almost better than we knew 6 V I E W II ourselves. They knew how to contact us by email and mail, where we lived, our economic status, the ages of our kids and our interests. They even knew that we liked South African wine because we used our Disney card to buy our meals. This is the kind of granular data that most direct marketers would kill for. Great story, but unfortunately there’s no fairytale ending. Disney didn’t stay in touch despite collecting a huge amount of personal and family data. They never re-marketed Disney World (despite experiencing the post 9/11 travel downturn), never sent us advance information on their films or DVDs and never sent a promotion to get us to visit one of the Disney Stores in Manhattan. They never even asked if we enjoyed our trip. Simply mind-blowing. Solutions First of all, say “thank you.” These two little words have an amazing impact on the psyche—and ultimately loyalty—of customers. I’m sure Walt understood the power of “Thank You” and would have used these simple words to maintain our relationship. Stay in touch. I mean, what’s up with not staying in touch and G R AY M A T T E R RALSTON360
- 8. building loyalty with someone who just dropped six grand on a Disney vacation? Disney had my email address, my home address and was privy to my every move. They should’ve stayed on top of us to keep a good thing going. Trips to Disney World are built on the idea of shared family fun. We might have gone again before the kids move on to college. Just a nudge could make the difference. Deliver time-released offers based on our behavior (from toy- buying to entertainment), demographics (we are adults and kids with different interests) and calculated lifetime value to anticipate and drive future sales of Disney Resort visits, Disney movies, Disney toys and viewership of the Disney Channel. Disney is known as one of the great, integrated marketing machines. Integrate me. Stimulate referrals. Give me an incentive to tell my friends and family about our experience. Give us a template and we’ll send it on. Team up with Kodak and help me send out my snap shots. All viral marketing does not have to be in the sprit of Burger King’s “Subservient Chicken.” Sometimes all you have to do is to ask customers to tell their friends about you and your services Want more? We traveled in October, at the start of the holiday season. We lived outside of New York City. Disney should have sent 7 V I E W II us a coupon to go shopping at the Disney Store in New York. This was a gimme. Or at least should have been. J U S T M I S S E D I T. Situation My son was 12 when he went to Nike iD to custom build a pair of Nike Shox. In case you don’t have a teenager at home, this is the Nike Web site (www.nikeid.com) where you can use an interactive tool to create your own Nike shoe. He chose the model, the colors and the words. He was one of the first people I knew that bought into the promise of mass customization that the Internet is delivering and Nike pioneered. He also spent over $120 of his own money to make this purchase and, with my help, provided enough personal information to complete the order. He was thrilled with the experience and was one of the coolest kids in town when he toured in his custom Shox. The problem was, Nike dropped him like 3rd period geometry. Nike never followed up or kept him in the loop—any loop—about upcoming offerings he would have been interested in. Two years later, he wears G R AY M A T T E R RALSTON360
- 9. skateboarding shoes from Vans. This hardcore Gen Y advertising- shunning dude will be hard, if not impossible, to get back. Solutions Just think of how easy it would have been for Nike to keep in touch? How great it would have been to receive a personal letter from the designer of Nike Shox or even Phil Knight? Maybe there could have been a Nike iD club, where membership does have its privileges. Twelve-year-old boys don’t get much mail. I think that a bit of personal attention might have kept him in the loop and, more importantly, held him as a Nike customer. I N T E R E S T I N G LY, T H I S V I R U S I S N ’ T C AT C H I N G . Situation I subscribe to McAfee Security’s VirusScan. It is easy to use, has kept my computer virus-free and is a good deal at an annual subscription of $39.99. (If you have ever had your hard drive blown away, you’ll agree that $39.99 is a small price to pay for virus protection.) 8 V I E W II McAfee knows who I am and even sends me update notifications via Security Alerts. However, they don’t make a valiant effort to up- sell me. Yes, they occasionally tell me that they also have firewall protection, but it’s a weak sales pitch. In fact, McAfee, a company that I now love, has lots of other products and services that I might want. Cool-sounding software like Antispyware, Spamkiller and something called Quickclean to keep my computer running at peak performance. All of these products would be worth a good, hard look if McAfee ever tried to grab me. McAfee has a great business model. It has a direct on-going digital relationship with me. It could make a pretty compelling sales pitch borne of safety-from-fear. But they don’t. And I’m not in their grip. Solutions Play up the fear factor. I already receive McAfee virus alerts sent directly to my home computers. Why not tie in alerts that also drive incremental sales? Tell me about the potential problems associated with spam. Tell me about spywear. Make me nervous and give me a great deal on new products. At least test it. G R AY M A T T E R RALSTON360
- 10. Look at subscription lengths. Why not a multi-year deal instead of an annual subscription? Lock me in long-term and reduce both attrition rates and future marketing expenses. O F C O U R S E , T H E R E A R E T W O S I D E S T O E V E RY S T O RY. The companies that I’ve profiled are sure to have a response to every one of my criticisms and suggestions. In fact, they might have some very good reasons for not building their Delighted Customer relationships. For example: Hotel Lucia might say that it is difficult to get reception staff to act as marketers. Kodak could point to the fact that they do not actually own the processors and are dependant on third parties to collect those yellow envelopes and data. BMW has already said that the BMW Film program has been a “branding” success. Disney – well, I have no clue why they let me go so easily. 9 V I E W II Nike isn’t a direct marketing company and it is focused on next season’s shoes. McAfee is already in touch. So, yes, they probably have some perfectly “legitimate” reasons for losing their grip on me. The question is, are these reasons good enough? Is it worth losing the customers they’ve paid so dearly to cultivate just because of a few challenges, a paradigm shift, or an unwillingness to get outside of their existing marketing box? I don’t think so. If these brands want to build real ROI for their marketing efforts, they need to work smarter, not harder. They need to take a few extra steps, think like direct marketers and do a little more active marketing in order to cultivate Delighted Customers through a system of ongoing stimulation and retention. Period. G R AY M A T T E R RALSTON360
- 11. W H AT T O D O ? S I M P L E : G E T A G R I P. Change the way you think. Go beyond just getting customers to holding them. Determine the next step. Then the step after that. Really spend the time to think through the “acquire, stimulate and retain” cycle. Nurture the customer and the relationship through experiences that build goodwill, brand loyalty and an interest in repeating a pleasurable experience. Bottom line: work toward creating what we call the Delighted Customer, that holy grail of patron who buys more, buys more often, buys at higher margin and tells their friends about your products and services. Use some of the strategies suggested above to begin garnering—and keeping—Delighted Customers. Now that you are in my grip call me. In addition to actually helping clients think through and deliver retention strategies we have the direct marketing chops, including the most sophisticated email management and delivery system in the business, to help you get the job done. I’d be delighted to help. And, I will say “Thank You” for your business! I promise. 10 V I E W II W H AT I S V I E W ? View is a series of white papers featuring marketing insights from Ralston360 CEO Peter Levitan. View provides business and marketing professionals with new perspectives on what makes marketing communications work. Not yesterday. Not tomorrow. Not in theory. But in the real world, right now. To get a fresh outlook on the business of creating, nurturing and maintaining Delighted Customers, check out Peter’s next View. You’ll find a visionary approach to marketing communications. And a 360º view of how to make it work. Past Views can be seen at ralston360.com. G R AY M A T T E R RALSTON360
- 12. WE DELIVER W H O W E H AV E D E L I V E R E D F O R Ralston360 is dedicated to helping clients Just a few of our clients in Oregon, Washington, exceed marketing objectives. We are dedicated and Idaho: to getting our clients and their messages A C C E N T O P T I C A L T E C H N O LO G I E S—the global leader in noticed. We use lots of gray matter to make optoelectronic process controls this happen. B A N K O F T H E C A S C A D E S —nationally recognized Northwest bank We do not have a one-size-fits-all solution, and recognize that the most effective program is C L E A R C H O I C E H E A LT H P L A N S —Medicare-Plus based on the right brand strategy, advertising, insurance program direct response, PR or grass roots marketing. FA R M E R S & M E R C H A N T S S TAT E B A N K —Idaho’s largest community bank Our mantra is simple: We help our clients acquire, I D A H O P O W E R —publicly traded regional electric utility stimulate and retain Delighted Customers. M I C R O N T E C H N O L O G Y —North America’s largest computer memory supplier S A F E C O —one of America’s most respected insurers S U N R I V E R R E S O R T —the Northwest’s leading golf and destination resort And some clients from our staff’s deep, dark past: ADIDAS INTERNATIONAL AMEX AT & T WHY WE DELIVER COCA-COLA Ralston360 is a full-service marketing company GENERAL MILLS with 19 years experience in national and local markets. Our management has worked in major JOHNSON & JOHNSON agencies in San Francisco, Seattle, New York, NORTHWEST AIRLINES Minneapolis and London. We offer strategic PBS research and guidance leading to effective S A R A LE E marketing solutions for print, broadcast, SUZUKI corporate ID, collateral, direct marketing, trade marketing and the Internet. We make it easy to reach Ralston360: www.ralston360.com 877 577 5790 toll free info@ralston360.com G R AY M A T T E R RALSTON360
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