How Should Your Company Respond?
In the face of increasing customer power, your company can choose among three possible strategies. These strategies range from amplifying the traditional push/pull model of marketing, to strengthening relationships with customers, to embracing true customer advocacy. I’ll introduce these strategies in this section and then discuss their relative merits in depth in Chapter 6, "Where Are You Positioned on the Trust Dimensions?"
Push/Pull Harder: You may be tempted to respond to your customers’ new power with good old-fashioned marketing push and pull. Increased pull by media advertising, aggressive push by price promotions (perhaps with higher initial prices or hidden fees to maintain profits), and potentially misleading one-sided communications might get the job done. After all, those time-tested tactics have been the core of marketing for the last 50 years. But modern-day consumers are wiser and more elusive than their more gullible predecessors. Even as consumers have embraced a greater influx of information, the media channels by which a company might push information to consumers have become less effective. Media fragmentation, consumer skepticism, and the time pressures of a modern lifestyle mean that pushing information and products on unsuspecting customers is an uphill battle.
In the halcyon days of mass media, everyone read his or her local newspaper and watched one of the three national broadcast TV channels. In the past, a company could reach a large mass of consumers through any of these mass-media outlets. But now, daily newspaper readers are in the minority, national broadcasts have lost market share to a dizzying array of cable channels, and the Internet has diverted peoples’ attention to a fragmented web of online sites. The national broadcast networks have seen their market share of prime-time audiences decline 50% since 1970. When today’s figures are compared to the 1960s, the decline is even worse. The hundreds of channels available on cable or via satellite fragment the TV’s power, making it harder for marketers to push their messages to the millions of viewers that they need. Surprisingly, advertising costs have not fallen—in fact, they are way up! Network prime time TV cost per thousand exposures rose 18% from 2000 to 2003.15
Even if a prospective customer is exposed to your TV ad, only one-third actually watch the ad—the vast majority mute it, switch channels, or leave the room.16 In a 2004 study, Yankelovich found that 79% of viewers flip channels during commercials compared to 51% in 1986, and 53% turn down the volume versus 25% in 1986.17 Ads lose out in the competition with the refrigerator, the bathroom, family members, other TV channels, electronic games, and the Internet. Average use of the Internet is almost the same as TV viewing time, at 15 hours per week, and 36% of people say they are watching less TV.18 Some people under 21 never watch TV and prefer to use the Internet and mobile devices. Even on the Internet, with its deftly targeted pop-up and banner ads, click-through rates have fallen dramatically since the early Internet days of 1998 to 2005. Internet service providers and software vendors now tout their capability to block pop-ups and spam. Junk mail gets tossed, and telephone calls are screened by Caller-ID, answering machines, and no-call registries. The effectiveness per dollar of push/pull marketing has dropped dramatically!
Admittedly, a company may continue to thrive using a push strategy in this brave new world of fragmented media and attention-deficient addled customers. Clever, funny, or engaging ads can draw customers in. Shrewd selection of highly specific media with refined targeting can help a company reach its intended niche audience. But aggressive push can be a false victory—winning the sale but losing the customer if excessive hype or questionable (but not illegal) pricing tactics leave the buyer embittered and resentful if they find out the facts. And in today’s world, they will find out the facts!
Strengthen Relationships: In trying to appeal to a more powerful customer base, your company might pursue a strategy of relationship marketing. In recent years, many leading companies have refocused on their customers by emphasizing customer satisfaction metrics, creating consistency in customer interfaces, building better products through Total Quality Management, and emphasizing more personalized service. Customer Relationship Management (CRM) software often backs these efforts by giving a company the data and functionality it needs for one-to-one marketing and creating a consistent one-face-to-the-customer interface. CRM helps a company to understand each customer and then deliver a consistent message or service to that customer. By putting the "custom" back in customers, these companies can target their customers better and can deliver persuasive information and promotions more efficiently.
Customers may enjoy this new emphasis on one-to-one connections, but only if your company is very careful about how it uses the data. The dream of CRM is for a close positive relationship with customers, but the reality is often more invasive marketing. Too many CRM programs are based on building a huge data warehouse, mining the data, and then hitting the identified segments with aggressive email, phone, or Internet promotions, with or without customer permission. For some companies, CRM is merely a more efficient means of push/pull marketing, targeting customers in the sense of drawing accurate cross-hairs on their chests. Impertinence and aggressive cross-selling can make your customers treat your company as if it were a cheeky acquaintance—making the customer cross the street to avoid contact with you. No wonder 55% of CRMs have not succeeded.19 If your CRM is a push system, it is not going to work well in this world of customer power. You need to fulfill the dream of CRM by building a long-run trust, but even this may not be enough. Advocacy is an effective new strategy and you should consider it.
Customer Advocacy: Your company might choose to embrace advocacy by becoming a faithful representative of your customers’ interests. Under this approach, you provide customers and prospects with open, honest, and complete information. You give them advice so that they can find the best products, even if those products are not your company’s products. Far from being foolish, the honesty of advocacy reflects the reality that customers will learn the truth anyway. If your company is distorting the truth, your customers will detect those falsehoods and will act accordingly.
Of course, if you embrace honesty, you will need to have very good, if not the best, products. With transparency, this is the only way you can earn the customer’s purchase. You will invest more in product design and quality and less in pushy promotion and advertising.
Advocacy is not a way for your company to speak at customers. Rather, it is a mutual dialogue that assumes that if you advocate for your customers, those customers will reciprocate with their trust, purchases, and an enduring loyalty (see Figure 1-1). It is a partnership between you and your customers for everyone’s mutual benefit. You advocate for their interest, and they advocate for you by buying your products and helping you design better products. Most importantly, they tell other customers about your firm and products. Advocacy has duality—the partnership created by advocacy is mutual and reciprocal. If customers tell others about the positive partnership, then customer acquisition costs will decline, and customer preference for your product will grow. Companies that advocate for customers will enjoy more opportunities to sell a wider range of products to more people. This can lead to growth in sales as customers and their friends choose your company’s products. It also leads to greater profit margins as customers come to realize that you offer an extra value that is reflected in an honest, reasonable price. General Motors, Intel, Leading Credit Unions, and John Deere are a few of the companies that are testing and implementing advocacy programs, and we will discuss these cases in depth later in this book.
Figure 1-1 Company Advocates for Consumer and Consumer Advocates for the Firm