4 posts tagged “futurism”
In this excellent article Professor Kenneth Alan Grossberg puts forward his views on marketing in the great recession of 2009.
Dr. Grossberg earned his Ph.D at Princeton, started his academic career at Harvard and Boston College, but in 1980 turned to the private sector where enjoyed successful career. In July 2001 he became the first non-Japanese professor to be granted tenure at the International Management (MBA) program of Waseda University in Tokyo, and in 2002 he founded the Waseda Marketing Forum.
Introduction
All preconceived notions about what the future will be like economically were radically shaken during 2008. The almost giddy wave of consumption that swept both developed and emerging economies during the past decade has come to a grinding halt so dramatically as to herald a rare paradigm shift in the psychology of consumers worldwide. We are not just witnessing changes of degree, but of kind. What are the elements that contributed to this consumer panic and altered expectations, and what do they augur for marketing in the coming era? Consumerism has not died, but it has been reborn, and what follows is a brief analysis of the forms it is likely to take over the next few years.
The Domino Theory
A cascade of financial and business catastrophes during the last quarter of 2008 made obvious to all what the data only showed in the final days of the year: that the world was in recession. That was nothing new, but the question remained how severe and widespread this economic trough would turn out to be. The first series of dominos to fall in quick succession and in overwhelming numbers was in the world of international banking and investing. That resulted in financial gridlock which spurred the governments of the advanced economies to move in a variety of ways and at different speeds towards policies aimed at relieving the paralysis. Bankers, reacting true to their stereotype, refused to lend to those who needed to borrow, which in this instance included most other banks as well as their usual corporate and individual clients.
It became very clear very quickly (if anyone needed to be reminded) that credit is the universal solvent of consumption and production, and industries from mining to automotive brought production to a screeching halt at the turn of the year as they either found it impossible to get funding for working capital or experienced a drop in orders from those who could not. Since this slowdown was all based on anticipated derived demand, it was not long before the global consumer began to panic after downsizing moves - and hiring and spending freezes - spread virally throughout the world’s largest economies. What resulted was the largest number of firings in recent memory. Because lending seized up everywhere almost simultaneously, borrowing became harder for institutions which had only a week before been considered among the safest of gilt-edged credits.
In this way, the gridlocked financial world, accompanied by stock market crashes of historic proportions, threatened in a matter of weeks to balloon into a dangerously enfeebled global economy. The subsequent panic selling put in motion price destruction that will inevitably impact almost every good and service on the market for years to come. What few seemed wise or brave enough to consider is that the freeze on spending and hiring which became overnight orthodoxy among firms large and small on every continent can lead inevitably to just one result – the dramatic loss of revenue and income for all consumers and producers without exception. Panics and bubbles, of course, do not result from rational, cool headed leadership and decision-making, and this was simply one more example of commercial folly running its course. Companies were quick to learn, to their chagrin, that none of their actions is without consequence, and employing a beggar-thy-neighbor policy is not limited in its impact to the economy where it is introduced. The spectre of universal protectionism in the guise of autarchic hoarding of precious resources now emerged as the greatest threat to global economic health.
Decoupling is a Myth
The Great Recession of 2009
Hopefully, we will not see one in four members of the workforce unemployed as happened in the United States during the 1930s, but we may well see 25% of American, Japanese and Eurozone workers under-employed for extended periods of time. The paucity of full-time jobs will translate directly and painfully into smaller paychecks, which will mean that discretionary income by the great bulk of potential consumers in the developed world will evaporate. The exuberant consumption of the past decade in the United States and (to a lesser extent) Europe, and of the past five years in Japan, depended primarily on the existence of ample discretionary income and that essential fellow-traveler – glowing consumer confidence. But in October 2008 American consumer confidence posted its lowest reading since the Conference Board began doing the survey in 1967.[1] At the same time, Japan’s consumer sentiment index, influenced by the global financial turmoil and the worsening employment situation, also fell to its lowest level since the government began the survey in 1982.[2] There is room to judge consumers in both countries overly pessimistic, but whether their fear and extreme reaction is justified or not, we are witnessing a sea change in the attitudes of individual customers that we have not seen since the middle of the last century. The American Marketing Association gave it a name: austerity marketing, which is defined as marketing to consumers who don’t want to spend. This involves creating incentives beyond the discounts and coupons which already flood the marketplace, and making very clear to the consumer why offerings are worth the money and how they are relevant to the purchaser’s needs or desires.[3]
A corollary of austerity marketing is a tamping down of the conspicuous consumption that was so ubiquitous just a year ago. A specialist at The Luxury Institute, Milton Pedraza, commented on the trend towards a more subtle extravagance by saying that “It’s not that you do not want…the benefit of luxury among your peers, but you want to be more understated in public.”[4] In Tokugawa Japan, wealthy merchants were in constant fear of the shogunate seizing their wealth if they flaunted it too openly, so they would wear plain-looking kimono lined with the finest silks that could not be seen. Perhaps modern affluent consumers are adopting a similar sort of brand-invisible extravagance. The psychic rush of having something costly may be enough, as it was to the Japanese merchant, without the need for anyone else to know about it. A new kind of appeal might be constructed in luxury offerings to cater to this new attitude on the part of affluent consumers. As things get worse before they get better, a new etiquette of consumption may become popular, characterized by understatement and consideration for those who have less than you. As the owner of a wedding planning business said of the new more modest wedding parties being requested,”They don’t want to look ostentatious. They say, ‘Make it simple.’ You don’t want to be there promoting your wealth to people who don’t have it.” This is in sharp contrast to the flaunting and conspicuous consumption that only a year ago was common for wedding parties. Now it is considered perfectly acceptable to wed technology to parsimony by hooking up an iPod to a speaker system instead of paying for a live band. ”[5]
For the present, high-end merchants are running scared and are not waiting to make deep discounts in the asking prices for discretionary luxury goods.[6] As Stephen Sadove, chief executive at Saks put it, “I don’t think any of us anticipated that high-end customers were going to fall off as dramatically as they have.”[7] In any case, these new consumer attitudes will require creative marketing approaches, whether they are called austerity marketing or value marketing or given some other label. It has been suggested that one strategy which could work is to bifurcate the appeal to affordable luxury by either competing on price for traditionally high-priced products, such as what Coach does against Louis Vuitton, or by raising the quality of low-priced products to justify a higher price (e.g., a Starbucks coffee).[8]
The approach which calls for emphasizing the steak rather than the sizzle this time is certainly a valid gambit for some classes of consumer goods, but what if the consumer does not want steak or cannot afford it, or will settle (metaphorically) for egg salad instead? If that is the case, and preliminary evidence would indicate that we are in the midst of a paradigm shift and not just a dip in consumption, then this will not be just a question of changing the appeal to purchase.[9] It will become a much bigger challenge for businesses. Companies keep talking about knowing their customers, but they will have to know them better than ever in order to sell to them successfully in the emerging penny-pinching and guilt-ridden environment.
Indulgent Parsimony - The Wave of the Future?
In the consumer markets of the United States, Japan and Europe, one approach which holds promise of being successful is that of indulgent parsimony, or parsimonious indulgence. This entails searching for satisfaction and fulfilling those motivations which fill the upper strata of Maslow’s needs pyramid by consuming less costly goods and services that nonetheless still manage to make the heart sing. People whose stock portfolios and pension funds have lost a third of their value in the course of two months are in emotional shock. They are at that point when they have less than they counted on for sheltering their future, and ironically are in even greater need of comfort and relief from stress. This could present shrewd marketers with an opportunity rather than be just a stumbling block, but they will have to do more than merely change their appeals in order to stimulate purchase.
To clinch the sale, what will they have to give the customer? What is it that customers need more of? Reassurance that all will be well? A sense of comfort and well-being despite the shock of sudden impoverishment? More personalized service and hand-holding to compensate for a sense of insecurity about the future? Commiseration on being handed a raw deal by the fates of Wall Street? All of the above? Obviously, a range of appeals to the consumer can be telegraphed as part of a marketer’s offering message. Denny’s restaurant chain decided to tap into the considerable anger of ordinary citizens at the government’s rescue of the large banks by launching a campaign with the tag line “Who’s Bailing You Out?”. And Procter & Gamble, in a response to the new cautious consumption, started to use a value message in their adverts for diapers, detergent and shaving cream and re-emphasized in-store promotions more prominently than before. As P&G CEO AG Laffley put it, “(In) a more recessionary type of environment, more decisions are made in the store, so we have to be competitive in the store.”[10] In other words, consumer guilt, uncertainty, and fear all conspire to postpone the purchase decision until that “moment of truth” when the purchaser is staring at the merchandise on the store shelf.
The right approach to capturing these shell-shocked consumers of course depends on what product or service is being offered. You cannot offer coupons for designer apparel and accessories, but you can do the equivalent by instituting shockingly large discounts on luxury goods or offering generous financing options for loyal customers, both of which were used this Christmas season by Saks Fifth Avenue, Barney’s and other high-end American clothiers. This “slash-and-burn pricing” has merchants worried about a paradigm shift, and one boutique owner was quoted as saying that “everybody is paralyzed wondering what people want, what they’re willing to spend, what’s going to dazzle us into not being able to live without certain items…It’s all going to be very Darwinian.”[11]
For even standard merchandise, marketers will now have to devise programs that emotionally empower their target customers to indulge parsimoniously – and without guilt or buyer’s remorse. This may take a recession-friendly version of the “I’m worth it” type of personal appeal that L’Oreal used so profitably years ago, but this time the approach must be sanitized of its previous narcissistic flavor. Narcissism, as everyone will realize very soon if they do not already do so, is an artifact of the exuberant go-go years that abruptly ended in 2008, because even wealthy consumers now feel embarrassed (if not guilty) by conspicuous consumption. Is there such a thing as consumer narcissistic guilt? The wedding planner’s observation quoted above seems to indicate that it now exists, at least in some contexts. We may yet see this become an influence on product promotion strategy. A popular newspaper columnist recently called the shopping mall ‘a den of iniquity’ because “immoral shopping” takes place there, which she defined as “people buy(ing) things they don’t need with money they don’t have and may never have.” She confessed (note: expiating her consumption guilt) that “I was a mall rat at one time….I loved going to the mall and hunting for sales. But then I had an epiphany. (my emphasis)..No matter how much of a sale you find at the mall, you are not saving money. You are spending less, but you are not saving…..So, I’ll confess (again, relieving her consumer guilt) I’m not terribly troubled by all the retail failures or store closings. I’m a wee bit happy that the ‘mallworld’ is collapsing.”[12]
The objective for the next few years should be to encourage guilt-free (and altruistic) gratification by one’s customers. A potentially successful gambit could be “I’m worth it…because I’ve examined all the alternatives and this one gives me the best value for something I really do need”. In troubled times, all of us crave things that make the heart sing, but it does not have to be a luxury automobile or a Hermes Birkin bag. A Neuhaus or Godiva (or even a Hershey’s) chocolate bar, a Krispy Kreme doughnut, a Starbucks double latté, a day trip carrying a picnic lunch to the mountains or to the seashore using public transportation instead of the car - all of these can answer the need for affordable indulgence.
Darrell Rigby, a partner at Bain & Co. management consultants expressed the phenomenon simply: “Economic downturns have a way of turning consumer purchasing hierarchies upside down. Self-actualization and esteem-building don’t seem nearly as important as taking care of basic needs.”[13] In actual fact, people may need even more support for their self-image and esteem-building because they are not yet that close to subsistence that they would adopt the attitudes Maslow describes at the bottom of his consumption pyramid. Rather, they are frightened more than penniless. We have entered an age of anxiety about material culture that will have the deepest impact on the largest demographic segment of affluent consumers – the baby boomer generation. They have suffered the greatest paper losses so far in personal financial and real assets and must confront an unexpectedly austere old age. All businesses must ask themselves what will get these shaken consumers to buy under such straitened circumstances.
What will work? Overt snob appeal has lost its power over the majority and will not soon return in the same form we have experienced it during the past decade. Excellent quality will still be able to capture customer loyalty sometimes, though even here there will be an erosion of dependable and loyal brand groupies. Great value is – as the marketing profession is trumpeting – a more likely way to capture the hearts and pocketbooks of millions. And at the end of the day marketers will have to include guilt-free parsimony as part of their appeal. Christmas 2008 witnessed Macy’s peddling hope, telling its customers to “believe.” It is an emotional and almost anti-materialistic approach to promoting shopping.
Among the losers we can count most residential real estate and its fellow-traveler the consumer durables industry, for at least the next two years. The exception is the situation where a vendor can offer attractive low interest (or even no interest) and no down payment financing. A carriage trade emporium like Saks Fifth Avenue launched a promotion called the “gift of time” where loyal SFA charge card-holding customers who spent more than $2,000.on a single shopping trip to the store were given twelve months of interest-free credit. The SFA credit card holders are a core customer group for Saks, and 44% of Saks’ last fiscal year sales were made on the proprietary card, so it makes sense for Saks to try to retain this cohort.[14] Retailers are justifiably nervous about falling sales, and not just in the United States, but Japan and Europe as well. High-end apparel and furnishings appear to have had their day for the time being., which tells us that a paradigm shift is in the works. And you can forget about deluxe vacations and cruises. This time most middle class travelers will be sitting on the dock rather than on the deck. Overpriced restaurants will also fail. There is a good reason that McDonald’s has had a strong showing across the globe because what they offer is affordable to families and singles alike.
Given the abundance of losers, who will still be a winner in this changed environment? Health care related marketers – especially generic drug companies – will continue to rack up sales. People still get sick and need medication, and governments and insurers want to control the cost of those medicines by mandating that physicians prescribe generics whenever possible.[15] Privately held means of public transport like commuter bus and train lines will also enjoy a boom now that people want to save on the cost of fuel (even though the price of gas has dropped from its extreme highs). The fear (or reality) of unemployment leading to a sudden drop in income will encourage them to economize on private driving by relying on public transportation where they can. Unfortunately, few places in the US are well served by public transit networks, which could be an opportunity for some entrepreneurial organizations to start bus lines in areas that have not previously had them.
Value restaurants and fast food establishments will capture greater market share, though here there will be attrition accompanying the increasing competition of feuding brands. And in the same way that consumers choose inexpensive fast food like McDonald’s over more expensive alternatives, discount retailers like Wal-Mart will benefit from the flight to cheap merchandise at the expense of the department stores. The new buzz word is value. Target moved away from its positioning as affordable chic during the 2008 year end shopping season by highlighting gifts that cost less than $25, and even matched Wal-Mart with some toy offerings priced at less than $10. Their new TV ad slogan was “A new day. A new way to save,” Target CEO Gregg Steinhafel put it bluntly: “We are emphasizing value in all communications with our guests,” Wal-Mart countered with TV commercials that promised “economic solutions right around the corner” in a clever take-off on an oft-repeated bromide from the days of the 1930s Great Depression.[16]
Another area that will continue to thrive despite the Great Recession of 2009 is one segment of the total education market - private schools that cater to the wealthy. [17] This segment will have better fortune than private schools whose many clients come from the upper middle class.[18] The fact that many school and university endowments have been hard hit by the stock market crash will only make it more critical to attract the wealthy to their banner as customers (students) and patrons (donors).
Last but far from least is the “sweet spot” of indulgent parsimony - that cluster of industries which cater to our various cravings for sweets, alcohol, tobacco, and entertainment. Chocolate, snack foods, beer and wine, cigarettes, movies and the internet will continue to exert a pull on consumers. Actually, that pull will increase as people search for affordable ways to indulge in an attempt to lessen the stress of worrying about a job about to end or already lost, a mortgage about to be declared in default, or a lack of the wherewithal to continue life as it was during the years of ebullient material consumption. Even here, though, there will be a separating out of products and brands that cannot compete, as has occurred in the videogame industry. Long relatively insulated from economic turmoil because of the inexpensive entertainment they represent, the current climate has made retailers more selective about stocking only the top game titles, which has caused downsizing even among the strongest players like Electronic Arts.[19]
And this makes it clear that, although indulgent parsimony can be a savvy strategy for some companies to use to attract business, it will not end the Great Recession of 2009. Since so much industrial consumption, including both manufacturing and service industries, depends on derived demand from ordinary consumers, if the typical customer defers purchases there will be no one to manufacture for – except the government. This is, of course, a real and growing possibility, since priming the economic pump in the USA, Japan and Europe will of necessity make government the consumer of last resort. The bail out of the American automakers GM and Chrysler will make the federal government the owner of last resort, and that would bring us full circle. The sub-prime mortgage disaster originated in part because of a policy motivated by social engineering goal: to make homeowning more widespread by granting mortgages to people who could not afford them. This mandated lending to borrowers who were high risk, and the financial engineers then created ways to disguise that risk so it would be more palatable to large private investors who bought the paper that securitized those risky mortgages. And we all know what that led to. So let us hope that the government as investor, lender and consumer of last resort will have better luck than private parties have had recently. Indulgent parsimony is not a stratagem likely to work with the government, however. But it should help many companies survive the current downturn until the winds of change again begin to blow through the global economy and bring in their wake another paradigm shift in consumer behavior.
This article was written by Tokyo based Professor Kenneth Grossberg, who also holds all copyrights. If you want to learn more about Professor Grossberg, visit his profile at Waseda Marketing Forum
[1] Phil Izzo, “U.S. recovery is forecast,” The Wall Street Journal, Nov. 14-16, 2008, p.10.
[2] “Japanese consumer survey shows slide in confidence,” The Wall Street Journal, Nov. 13, 2008, p.10
[3] Elizabeth A. Sullivan, “Austerity Marketing,” Marketing News, Oct. 15, 2008, pp.13-14
[4] Brooke Masters, “Exuberance yields to a new austerity,” Financial Times, Nov. 18, 2008.
[5] Nina Reyes, “Recession? Time to slash the flower budget,” The New York Times, Dec.21, 2008.
[6] Guy Trebay, “Luxury prices are falling; the sky, too,” New York Times, Dec. 3, 2008.
Rachel Dodes & Christina Passariello, “In rare move, luxury-goods makers trim prices in U.S.”, Wall Street Journal Asia, Nov. 18, 2008, p.20
[7] “High-end brands find credit crisis is hard to wear,” Financial Times, Nov. 28, 2008, p.16
[8] These two possible approaches to gaining competitive advantage in the marketing of affordable luxury goods are discussed in detail by Ming-Hui Huang and Roland T. Rust, “Two paths to luxury,” Marketing Management, Nov.-Dec., 2008, pp.31-35.
[9] Stephanie Rosenbloom, “Retail sales are weakest in 35 years,” New York Times, Dec. 4, 2008.
[10] Andrew Edgecliffe-Johnson & Tim Bradshaw, “Lessons for marketers who face a hard sell,” Financial Times, Nov. 20, 2008, p.10.
[11] Trebay, Op. cit., New York Times, Dec. 3, 2008.
[12] Michelle Singletary, “Our relationship with the mall,” washingtonpost.com, Dec. 11, 2008.
[13] Ylan Q. Mui, “Tapping into shoppers’ psyches: battered retailers turn to sentimental sales pitches,” Washington Post.com, Nov. 18, 2008.
[14] Jonathan Birchall, “Free credit offer for Saks cardholders,” Financial Times, Nov. 17, 2008.
[15] The pharmaceutical market in general will do less well than the generic sub-category, however, Jeanne Whalen, “Roche’s chief warns of a likely shakeout; New-drug pipeline may suffer as slump heightens frugality,” Wall Street Journal, Dec. 9, 2008, p.18.
[16] Ylan Mui, op. cit., WashingtonPost.com
[17] David Turner, “On the playing fields of Bangkok.” Financial Times,Nov. 25, 2008 discusses overseas campuses of “branded” British public schools catering to the wealthy of the Middle and Far East, while Winnie Hu & Alison Leigh Cowan, “Private schools say they’re thriving in downturn,” New York Times, Nov. 29, 2008 profiles the impact of the financial crisis on New York City’s elite private schools.
[18] Rebecca Knight, “Private US schools feel the heat as downturn bites; Philanthropy is set to fall, endowments are losing value and parents struggle to pay fees,” Financial Times, Dec. 9, 2008, p.3
[19] Yukari Iwatani Kane, “Electronic Arts to cut 1,000 jobs, close at least nine of its facilities,” The Wall Street Journal, Dec. 22, 2008, p.7
The Slovenian Direct Marketing Association are inviting marketers to attend the conference day entitled “C2C Marketing: Momentary niche or overall future” in Ljubljana, Slovenia on the 18th. of February 2009.
The conference is part of the highly interesting Promarket combining three days of trade-show with three days of presentations. On Wednesday 17th. of February participants can enjoy presentations fitting the overall theme “Mentality shifts in Sales” and on Friday 19th. the theme is “Who is creating public relations - sales, marketing, PR or customers?”. A highly interesting concept, which - I am sure - will attract a lot of people to this beautiful city.
Marketing speakers include
- Chris Catchpole, a highly respected direct marketing creative, United Kingdom
- Sandi Češko, Studio Moderna Group, Slovenia
- Hrabren Suknajić, Google, United Kingdom
- Michael Leander Nielsen, Denmark
Consistently deliver a truly awesome customer experience each and every day..
Let’s face it, more and more people are worried about the current economic conditions and how they will be impacted. Comments such as, “Our inquiries have really dropped off,” “People are sure taking a long time to make buying decisions,” “Our customers are demanding more from us or leaving,” “Pricing pressures are becoming the norm,” “Far more “shoppers” than buyers,” “It costs a lot more to find new customers these days,” “Customers are defecting at all time high rates,” along with many other similar and related comments.
This article is sponsored by Return on Behavior Magazine published by TeleFaction.
Now, more than ever, is your time to Be Disruptive, Build Loyalty and Change the Game so you not only survive, but thrive in the future! This is not the time to hunker down and hope the storm blows over quickly - it is here for the foreseeable future. What are you going to do to Take Advantage of it and come out stronger when the growth cycle kicks in again? What are you going to change from what you are doing today to give you different results?
Most look for ways to cut the fat out of the organization and improve processes to squeeze every dime out of operations - certainly something to consider. However, while this cost-cutting effort is going on, what are you doing to focus on the group that actually pays you money - the customer? How are you capturing more revenue so you can increase profitability and dominate your competition?
We recently conducted our own informal research to find out what companies are doing to attack this situation and move themselves to the head of the pack - or why they weren’t. We began by asking a number of business owners and executives in a variety of organizations to give us their thoughts on these same questions. We hoped to learn some new ideas in addition to validating or modifying our own hypothesis about what we were seeing. The comments and discussions were very interesting and confirmed one thing - we were “dead on target” with our hypothesis. However, one question kept coming up in almost every conversation we had, “How can we beat our competitors and win more share of wallet from our customers?” Stay tuned..
There is no question we are experiencing some economic challenges today - most indicators are telling this story. And even though no one wants to talk about the “R” word, it may very well be here or looming in the near future. Many businesses are seeing decreases in sales and getting more pressure to cut their prices to compete for the same customers. One executive we talked with asked, “How can you build loyalty during these times when customers are looking for more services than they did before and at a lower price?” Great question. The answer I gave him wasn’t the one I think he expected to hear. I said to him, “Be Disruptive and Build Loyalty when everyone else is hunkering down. There are great opportunities in these times if you act “proactively” instead of “reactively.” If you haven’t built a following of loyal customers before now, begin immediately and be blatant about it. This will move you ahead of your competitors today and help ensure you have them when times get better. Customers (and employees) still want and organization to deliver a consistent, repeatable experience and to keep their promises - that still reigns above price.” He agreed.
The other word we kept hearing in our discussions was the “C” word - “commodity.” As businesses are being squeezed on price, their customer base is defecting to their competitors. If they hadn’t already built an experience that created loyalty, along with the products and services to differentiate themselves, they ended up drifting toward the commodity space. This is where customers see little, if any, differentiation between businesses and begin to move toward the lowest price point - resulting in no distinction or value for the experience. Once customers believe you are a commodity, the only way to compete is to lower your prices - creating a downward cycle turning your product or service into a commodity. This is absolutely not where you want to head unless you have a model that always wins on price.
For example, one of our clients, a software development firm, was seeing exactly the same picture - pressure on price and no clear differentiation. Upon further investigation, we found the reasons were lack of consistency in the experience and focusing on the “wrong” promises. The customer told us many times, “If they could just keep two or three of their promises all the time we would give them more exclusivity and more opportunities.” You can read more about them on our website under Case Studies.
Our research shows that companies have the best chance of surviving, and even flourishing during tougher economic times, when they have more Loyal Customers than their competition. While this may seem intuitive, it is amazing how few have really actively focused on this effort. The best companies have invested the time and resources to build Trusted, Loyal Relationships with their customers. As the economy slows, customers gravitate to these companies because they know they will receive a consistent and repeatable experience. These companies don’t sit back and relax, they continue to build from the powerful vantage point they already have over their competitors. They are in the enviable position of being on top and controlling the experience while their competitors spend extra dollars and resources to try and win these customers away. A case in point is Southwest Airlines. They were still very successful, even during the attacks of 9-11 when air travel dropped off sharply, and remained profitable (unlike the other airlines). Why? Because they had done what was necessary to build a loyal customer base and capitalized on supporting them during this difficult time.
With what we have seen and heard, we wanted to share a 5 Step process we believe can help businesses thrive in the current economy and well into the future. These Steps are a compilation of both the responses we received from our research and our own experience. There is no “magic pill,” but what we can give you is a specific recipe of proven Steps you can take to build Loyalty quickly and rise to the top of the list with your customers. These Steps aren’t difficult to grasp but will take some effort to execute so you can Consistently deliver a Truly Awesome Customer Experience each and every day and create your own list of loyal customers.
Here are the 5 Steps..
1. Start by truly understanding your client base. Get some analytics about your customer so you can truly understand the revenue and profitability of your customers. Analyze where the revenue is coming from, by segment and by category. See which customers, products and services drive the majority of sales. Find out who is most profitable for you today, even if it is only at the gross margin level. Truly “understand” where your revenue and profits are coming from in your customer base. This will help feed the other Steps going forward.
2. Now ask some tough questions. Are we in alignment between what we are doing operationally and how this supports our most profitable customers? Are we focused on different customer segments because of economics or some other reason? Are these the markets we should be in both short term and longer term? What do the competitors look like in each of these segments? Should we focus on a different segment due to lack of competition and opportunity? Ask tough questions of your management team, based on analytics, to truly understand where opportunities exist. This Step is all about understanding your customer and the competitive landscape. Time spent here will help you focus for Step 3.
3. Now find out what is going on externally with your customers - the experience you deliver. Go out and get some good information directly from your customer so you know what experience would differentiate you from your competitors. This can’t be wimpy information either. It has to be fresh, unfiltered and from their own voice to give you what you need. You can waste a lot of time and money on meaningless survey’s and research. Resist doing what you have always done in the past and go get the “good stuff” directly from your customer. You are looking for what they believe are the “loyalty factors” and “promises” that will differentiate you. Use an outside firm since there isn’t time to waste and the customer usually gives deeper information to someone not associated with your organization. This can happen quicker than you might think. Another example, when we worked with a law firm (case study is also on our website) they realized they were not focusing on anything that differentiated them. They needed this input to turn the ship around.
4. Now focus on implementation and retention. Since you now know which customers have the greatest profitability and what it would take to move them to becoming “Loyalists,” you are ready to build and implement the “truly awesome” customer experience. Identify changes you can, and need, to make in the processes of your organization to ensure the consistent and repetitive delivery of the experience - systematic and throughout the organization. In our book, “Creating and Delivering Totally Awesome Customer Experiences,” we stated, “Eliminate the Random Acts of Excellence and Chaos and you can deliver a consistent and repeatable experience.” This means providing everyone in your organization the information and tools to understand exactly how to deliver this experience the same way every day. Customers thrive on consistency.
5. Start delivering the new experience, communicate it and then measure the results. Communicate to your customer what you are doing. They will appreciate you focusing on them and Changing the Game in the experience. Build your messaging around the changes you are making and what you are delivering. Build your “Brand Promise” around the “loyalty factors” and “promises” your customer wants. Integrate this into everything you do and say and do it over and over and over again. This demonstrates consistency and avoids the impression of “flavor of the month.” This is who you are and what you stand for and believe in. Repeating the message and keeping your promises builds Trust, which leads to Loyalty and Retention.
Now you have a proven 5 Step recipe for taking your organization into a leading position. Even if you are, or have been, trending downward because of the economic times it is not too late to start. Focus on understanding and building the Promises and Loyalty Drivers into the customer experience immediately and you can turn things around faster than you might think.
Even if you only begin to build some loyalty to survive today, when the economy turns upward you will reap more benefits than ever before with a base of loyal customers to build upon. Remember, Loyalty is an “earned” state and not a given. If you want to build loyalty now and in the future, don’t just window dress it. Rally around it and make lasting changes - your customer will notice. Start today. Be Disruptive, Bold and take control and you will find yourself ahead of your competitors and beating them today and tomorrow.
Marketingboss TV recently featured a 1 hour long presentation given by Dr. Patric Dixon about future consumer trends.
The presentation provides valuable insight to anyone who takes an interest in futurism,
future marketing strategies, consumerism, lifestyle and consumer trends.
If you want to understand consumers and business buyers alike, you might
like to know that Dr. Patric Dixon is a world authority on the subject.
Well worth watching. Click here to watch
