Walter Adamson

Owning the customer relationship doesn't mean owning the customer

Do companies honestly think that they can "own the customer" these days? I'm astounded to say that some behave as if they do, in such ways as lack of transparency, creating false expectations, and creating artificial exit barriers. Mistaking owning the customer relationship with owning the customer may be part of the problem.

In the last two days I have had cause to ponder how significant organisations can be so backward and outmoded in their behaviour towards customers - it seems to me to be such a serious disease that it may even signal some early signs of corporate decay.

I say that because in the era of the transformation to social business, those businesses which cling to such outmoded behaviours will become increasingly more exposed, and vulnerable to their competition.

Case 1

At a small meeting with a team from a leading global IT business, a household name and a monster company, pricing models were being discussed for a new software product. The visiting US expert was here to explain that there are three customer segments - 1-100 seats, 100 - 1000 seats, and 1000+. For each segment there are three pricing models. These took some explanation, with lots of notes taken.

The bottom line is that the very small customer actually gets the same deal as the very large customer because there is a marketing strategy to try to capture more of that market. And in fact one of the pricing models for the very small customer just actually states the price - that's the formula - couldn't be more simple.

Whereas the formulas for the large customers are very complex, they have bonuses for current licenses and discounts for volume and then a killer "inverse bugger factor" at the end which magically brings their price down to the same price as the super small buyer needing only ONE seat.

One of the local sales staff asked - why this complexity, and why this magic wand thing at the end to come at with that number? The US expert blandly stated that all this was simply a ploy to make the big customers feel as if they are getting a good deal. It's just negotiation tactics.

Case 2

To move a domain from an Australian firm who describes themselves as a "global publicly-listed IT firm" I had to get an unlock key. Other registries list this for you in the domain details, and you just cut and paste. In this case it was only available by clicking a link and requesting it - and it then said "this has been queued and will be delivered to you in up to 72 hours".

Having to wait 72 hours was bad enough, given that it's readily available and should be visible within the account. Then I had a call, it was from their Support team. Why was I transferring? they wanted to know!

Needless to say I was annoyed to get the call, since whenever I wanted support it's very hard to get - which is exactly what I told them and the actual reason I was leaving, plus their prices were outrageous and up to 5 times what others were charging. Immediately I was offered a much cheaper deal. They know this story.

I declined the offer and went on to use the example that I could not even get my unlock online, that I had to make this request. "Oh I can give that to you right now if you like?" Yes, I like, that's the reason I clicked the request. So if you have this there online then why don't you publish it in my account console? I asked.

"It's a customer retention strategy - so we can call you" !!!! 

Where ARE their minds at?

It's beyond belief isn't it. The leaders of these organisations have strategies to deceive their customers, to mislead them, to falsify intentions, and to aim to retain them by brute force.

Not only do these behaviours indicate disorganised organisations which are extremely short-term oriented and with noone accountable for owning a customer relationship, but they think that they can "own" customers by keeping them hostage.

It's a clear symptom of conflicting goals withing the organisation - also a lack of clarity of purpose, lack of mutual commitment across the teams and business units and to the customer, and most of all a lack of respect for their customers. In other words the organisation is misaligned in terms of managing their relationship with the customer. Or maybe they ARE aligned - to short-sighted short-term goals?

I think that it's also even deeper - it's a sign of a corporate sickness. An entrenched malaise of the culture and the leadership.

What's the result with customers

The outcomes of this behaviour are "obvious", even if not so to the companies:

1. Customers are going to find out - this is the way things are in these days of social media;
2. Customers are going to feel cheated and disrespected - I did;
3. And they are going to tell their friends and colleagues - in an amplified social media way.

It's not always the case that they will cease buying from the supplier, because they may be hostage customers.

For example, take me and Qantas. I have 1 million frequent flyer miles, yet I dislike Qantas and their attitude in a multitude of ways. Why do I continue to fly with them?  Because the others are not much better (we have little choice anyway) and because I have the 1 million miles!

I'm a hostage customer of Qantas (not to mention my telco provider and my electricity retailer!).

Customer equity is destroyed

Whether I stay with Qantas or not, or whether people stay customers of my two case studies or not, it does not mean that staying with them retains their customer equity.

Thinking of customer equity in three parts explains how this is destroyed in these cases:

• Value equity - the perception of value is either betrayed, or it comes out to be nothing but neutral and an non-advantage in my examples. So there is negative or zero value equity, despite the fact I might remain a customer;
• Brand equity - the perception of their brand. It's bad, and made even worse when the deceptions are discovered, and even worse when a customer feels like a hostage;
• Retention equity - if a customer is staying a customer despite their feelings above, then they are definitely going to resent it. They'll be telling the 15 other friends how they resent it, as opposed to the satisifed customer telling 1 other person.

So on all counts the customer equity is destroyed, even if the customer's business is retained.

When businesses try to own customers, instead of focusing on how they can internally optimise and manage the total relationship, then they will always destroy customer equity.

Continual erosion of customer equity can only lead to one thing, provided competitive forces are in play - which is an eventual reflection of the total decline in customer equity in the valuation of the company.

It takes time to pass, but even companies with hostage customers can't destroy customer equity forever and remain unscathed. Hopefully these two companies can pull themselves up and with a bit of reflection get truly focused back on the customer.

Have you experienced "customer control" - how did you react?

Do you still buy from organisations who you disrepect - as a hostage customer?

Is owning the customer verus owning the customer relationship the root cause of these issues?

Walter @adamson

Social media brings 100X improvement in customer insights

In a report called Social Media Monitoring: Why It Pays to Listen to Online Conversation Aberdeen Group concludes that Best-in-Class organizations are 2.6-times more likely than Industry Average companies, and 93-times more likely than Laggards, to improve their ability to generate consumer insights that drive new product/service development.

That's a remarkable difference, and if you added up the money spent on investment in innovation you would probably find the Best-In-Class companies are spending significantly less and achieving much better results also because of their use of social media.

It's these kind of reports and figures which can provide essential input for a business case for social media, among those firms still to be convinced or wishing to increase their investment.

The report, covering 250 companies, adds to the unabating trend for business organisations to invest in social media, despite, for example, the GFC.

In fact, the research found that, despite the substantial cutbacks that most companies have been forced to make in light of the global economic recession, 50% of all companies are increasing their investment level in social media monitoring initiatives.

Aberdeen is a rock solid research group, so this research is quite significant. It comes on the back of Inc's recent study showing an accelerating use of social media among the Inc 500, and the Social Media Academy's recent survey showing that 75% of the Fortune 500 are engaged already in social media.

In fact the Social Media Academy uncovered the fact that many of the Fortune 500 are coy about their activities because they seem them as a competitive advantage.

It's a tsunami

This all adds up to one big wave pounding over the corporate world and how it interacts with its customers.

The Aberdeen study, found a series of other significant differences between Best-in-Class and Laggard companies in their survey:

• Best-in-Class are 3.3-times more likely than Industry Average companies, and 82-times more likely than Laggards, to improve their ability to identify and reduce risk to the brand;
• Best-in-Class organizations also outperformed Laggards when it comes to improving customer advocacy and decreasing customer service costs.

In addition to deploying the right set of enabling technologies, success in social media monitoring requires a combination of strategic actions and organizational capabilities. To that point:

• Best-in-Class companies are 42% more likely than Laggards to have a process for disseminating insights gleaned from consumer-generated content to key decision-makers and also twice as likely to have a process for applying the insights in the context of specific needs;
• Best-in-Class companies are 1.9-times more likely than Laggards to have dedicated operations resources devoted to social media monitoring, analysis and reporting. 

The report includes a number of recommendations which it says companies must do in order to achieve best performance, including:

• Integrating social media monitoring activities with customer feedback management activities at a granular level;
• Defining event triggers and implementing alerts to communicate insights that are urgent in nature.

In addition to hiring resources that have social media monitoring as part of their job description, recommended actions also include conducting online consumer sentiment analysis at a granular level, identifying and measuring the value of key influencers, and implementing time-sensitive performance metrics.

So, what's the bottom line?

Firstly, if you're "not yet convinced" or "your customers aren't ready for it" then you're already a terminal Laggard.

Secondly, if you're getting going then stay on track and have a good strategy and organisational implementation plan because if you're not committed to staying ahead then you are going to be passed by others who are.

Thirdly, if you're building a business case and you need some "facts" then go figure how much you are spending on some of these key customer and product activities today and extrapolate a conservative achievable saving if you could approach the current best practice.

Fourthly, if you are about to invest in new product development research, or brand monitoring, or customer service, then step back and think hard about the full opportunities for social media investment to bring better and more cost effective results.

Finally, because I work with a lot of Software as a Service companies helping them rebuild and shape their business and marketing models, I noted the following statistic from the report:

• 78% of Best-in-Class companies, compared to only 8% of Laggards, have improved their year-on-year customer retention rates.

That's gold, and very very expensive if the Laggards have to play traditional marketing/sales catch-up with the Best-in-Class.

Social media is game changing for business, and it is in play today, now!

http://xeesm.com/walter