WHATEVER HAPPENED TO RELATIONSHIP MARKETING? 9 BIG MISTAKES

WHATEVER HAPPENED TO RELATIONSHIP MARKETING? 9 BIG MISTAKES

James R. Rosenfield

May 1999

Looking at my mailbox, thinking about the companies I do business with, making my consulting rounds, a thought occurs to me:

Whatever happened to relationship marketing?

Boomtown American 1999 is all about getting rich quick. Customer churn seems to be regarded as a quite acceptable cost of doing business. Customer service is at an all-time low - just think about your own life as a customer. Consumers are battered, bothered, and bewildered.

None of this was supposed to happen. People like me used to predict that by the end of the century relationship marketing, abetted by information technology, would rule the world. Instead, mass marketing seems to prevail, to the point that direct mail itself has turned into a mass marketing medium.

When you look at relationship marketing efforts, the bad and the ugly seem to be driving out the good, in a sort of crazed variation of Gresham's Law. Amazon.com begins to mess up a good thing by "selling" favorable reviews, a practice it quickly backed down on, but not without some brand equity damage. The airlines beat up their best customers - on a three-hour Delta flight last week that left at 8:00 PM. THERE WAS NO FOOD! A whole panoply of things keeps going wrong. Here are 9 of them:

MISTAKE #1: ASSUMING CUSTOMERS WANT A RELATIONSHIP

Relationships in private life are always two-way streets.
But customers want more of a one-way street, with the company doing the work of nurturing and maintaining things. They don't want a relationship with us unless we make it worth their while, and unless the basis of the relationship is on the customer's terms. This becomes especially important as loyalty and frequency programs multiply, competing for the same finite pocketbooks and attention spans.

We want relationships, because we know relationships make us money. But what does the customer want?

The customer wants solutions. Providing solutions, rather than merely products, creates the basis for a true customer relationship.

As it stands right now, there are too many products, too few solutions. The average suburban supermarket had 8,000 products in 1978, according to the Food Marketing Institute, and over 30,000 ten years later! No one needs 30,000 products, and in fact the sheer number of choices in itself becomes a problem.

The manufacturers are taking notice. A few years back, Procter & Gamble stunned the world by de-extending some of its product lines, a radical departure from the epidemic line extension and product proliferation of the last generation. P&G is beginning to understand that customers want solutions, and that simplification is part of the solution process.

Suggestion: Provide solutions, rather than products, and your customers will be willing to have a relationship with you.

MISTAKE #2: ASSUMING CUSTOMERS ARE WILLING TO WORK

About 20% of American consumers seem to be addicted to the game-like minutiae of loyalty and frequency programs. These are the same people who transfer credit card balances and switch long-distance carriers. They know how to work the system.

But the other 80% of consumers in 1999 are already working hard enough, and have no desire to put in extra work for you.

What does this mean? It means that the overly complex, difficult-to-figure-out awards schemes that now abound are beginning to turn people off. Customers are dropping out of the game, because the rules are too complicated (or have been changed in midstream--see Mistake # 7).

The consumer is sending this message loud and clear: "I've lived without your rewards up until now, and I'm not willing to put in the work to master your complications."

Another example: Have you taken a good look lately at your frequent flyer statements? Most of them were designed by the Marquis de Sade. Awards are often printed in light grey mousetype, guaranteed to be unreadable, especially by the middle-aged frequent flyers who comprise the airlines' single most profitable customer segment.

Suggestion: Relationship marketing programs need to be engineered so that simplicity is built into them, and so that simplicity remains. The customer wants solutions, and simplicity is a solution.
MISTAKE #3: ASSUMING CUSTOMERS WILL BE FAIR

You can get things right 900 times, but if you make a mistake on the 901st transaction, you'll get a quick lesson in the highly contingent nature of customer relationships. Customers will not be fair. They'll key in on the last event, which will subsume all the good things that came before. It's human nature: That terrible meal you had last night at a once favorite restaurant obviates the 20 excellent meals you had there previously.

Even worse, dissatisfied customers talk. Dissatisfied customers tell as many as 15 other people about their experience, naturally exaggerating the story with each re-telling.

However, customers' lack of fairness gives you a sterling opportunity for relationship building. The most loyal customer is a customer who complains in the first place (light users don't bother to complain, they merely go away), and who then gets the problem fixed expeditiously. This not only re-cements the bond, it makes it stronger than ever before.

Who's good at this these days? Not many companies, since customer abuse seems to be the 1999 standard. But you might audit MBNA, the credit card issuer, for whom customer service is the core competency.

Suggestion: You don't have to be perfect, but your customer service does. Otherwise, you will pay the price, maybe not in boomtime 1999, but at some point early in the next century. Relationship marketing is impossible without excellent customer service, and customer service must be regarded as one of the most essential marketing functions of the millennial period.

One More Suggestion: Watch out for Y2K! Customers need and want control and reassurance. That's what customer service is all about. Companies who have bailed out of the customer service game will pay a high price at the end of 1999, beginning of 2000.

MISTAKE #4: ASSUMING CUSTOMER SATISFACTION IS ENOUGH

Most customers polled in surveys claim to be satisfied. Worldwide, in fact, about 82% of all customers everywhere say they're satisfied. Yet everyone suffers from customer defections. What's going on here?

What's going on is that satisfaction is not enough. All satisfaction means is "You're doing OK." And in fact the 1999 American consumer actually has diminished expectations, because quality and service really have declined in so many categories. Businesses need to strive for customers who claim to be "very satisfied." When companies ratchet themselves up from "satisfied" to "very satisfied," customer attrition decreases significantly.

More important than offering frequent flyer miles or rebates is making sure that customers are "very satisfied." In fact, another hidden danger of relationship marketing is to substitute rewards for satisfaction. A dissatisfied participant of a frequency/
loyalty program will find some other program to join.

Suggestion: Don't be seduced by customer surveys showing "satisfaction." It's the "very satisfied" customer who creates your most significant long-term profits.

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