Get a Grip - The Marketing Power of Managing Customer Relationships

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V I E W 2 : GET A GRIPFALL 2004

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VIEW I I : GET A GRIP

EXECUTIVE SUMMARY

Most businesses spend considerable time and effort gettingcustomers. But how many work at keeping those customers? ViewII examines the ways in which even big brands like Nike and Disneyfail to get a grip on customers, and offers real-world solutions tohelp businesses keep their most profitable customers hooked.

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YOU GOTTA KNOW WHEN TO HOLD ‘EM.

Remember the Seinfeld episode where Jerry tries to pick up therental car he reserved only to find that the rental company had“run out of cars”? The secret, Jerry said to the rental agent, isn’tso 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 energygetting new customers. The problem is that most forget to “hold”onto new customers once they’re in the proverbial fold, insteadletting them slip away and into the arms of a waiting competitor.Marketers seem willing to spend money to acquire customers, butnot to retain them. In fact, a recent Gartner study of the financialservices category shows that marketers spend, on average, $280 torecruit a new customer compared with just $57 to keep one. Myguess is that this is the rule rather than the exception.

This issue of View is my story of baffled befuddlement, as well as acall to get our collective acts together to create Delighted Customersthat stay put. It features my personal experiences with six big brandsthat should’ve known better but didn’t, and is followed by simple,cost-effective solutions to stimulate me to purchase more and thenretain me as a customer. It’s a classic story of The One That GotAway that serves as a cautionary tale to all of us to nurture customerrelationships, or risk losing them completely.

ICE MACHINE? CHECK. DOWN COMFORTER? CHECK.

INTEREST IN REPEAT BUSINESS? NOT SO MUCH.

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 theguests wear black. I was there to do a little “secret shopping” forsome friends whose client owns the hotel.

The verdict? The service was great. The lobby was au courant. Theroom 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.

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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 orvia email, attempt to determine if I was a frequent visitor toPortland. I did not receive a follow-up email thanking me for myvisit or asking for any data related to my wants and needs. Thehotel failed to identify me as a “good prospect,” or worse, anexisting customer worth nurturing.

Between personal, family and employee business trips to Portland,Ralston360 represents approximately $20,000 in annualrevenues for a Portland hotel. While not the GNP of a small nation,it isn’t exactly pocket change, either. It would’ve been worth alittle extra effort on the hotel’s part to ensure that I remained theDelighted Customer they had already created.

Solutions

The hotel had three opportunities to learn more about me—two asI 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 briefconversation. No hotel communication beyond “thanks for stoppingby” was offered. The hotel should provide valuable incentives forthe staff to learn more about their customers. They should politelyquestion me to find out if I am a frequent visitor to Portland. If I’mdeemed a potential repeat customer, they could then enter thisinformation into a database to help guide further communicationsand offers. A successful hotel I know offers very powerful incentives(including trips and percentages of incremental sales) to their frontdesk employees to act as lead-generators.

Another opportunity was lost by not staying in touch via email. Ibooked via email and they confirmed. That was it. Why not put mein a database, say thanks for visiting via a follow-up email and askme questions to start learning more about me? Permissionmarketing works, period. Segment me, predict my future value,then nurture me. That’s the only way to build DelightedCustomers—clientele that has already entered your universe andwill drive your business at lower cost than new acquisitions.

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TAKE A PICTURE. IT ’LL LAST LONGER THAN THIS RELATIONSHIP.

Situation

Eastman Kodak is in trouble. The world is shifting from film todigital, and Kodak is scrambling to maintain market share in thephotography industry. According to the Photo MarketingAssociation International, “It (2003) was a pivotal year for theindustry as digital cameras outsold traditional cameras for the firsttime ever. By the end of this year, digital camera penetration ispredicted to surpass 42 percent of households.”

Kodak knows this trend well and is trying to reinvent itself as a digitalcompany. Meanwhile, however, there are still millions of people whocontinue 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 ubiquitousyellow Kodak processing envelopes at the drug store. (We are ablended 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 askedfor the images on a disc for use in my computer, a sure sign weare moving away from film. Did Kodak capture my personal datato stay in touch? Did this new digital company ask me for mydigital email address on the form? Did they provide any incentivesfor me to provide it? Nope. What a missed opportunity to build adirect relationship, a relationship that will totally slip out of theirgrip as we become a 100% film-free home.

Solutions

Add an email address space to the film deposit form. Then stay intouch and offer incentives to buy more film. A company that isreinventing itself because its category is in decline should at leastsay thank you and try to keep the relationship ball in play.

Track my usage. Predict my future behavior. Begin to re-positionKodak. If Americans are moving away from film, become ourdigital instructor. Create a stand-alone Web site learning center.Send out newsletters with advice on digital choices ranging fromcamera usage to editing tools. Provide a connection to Kodak’sOfoto website. Use this “expert positioning” to re-brand thecompany to existing film customers and the wide world ofconfused digital camera owners. I need this help. I’m as confusedabout digital options as the next guy. I’m sure I’m not alone.

Hey Kodak. Smile and give me a hug!

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YOU HAD ME AT HELLO.

Situation

BMW launched BMW Films in 2001. This Internet-based filmseries, which was viewed over 41 million times in its first twoyears, is lauded as one of the best examples of Internet marketing.BMW created the ultimate in content-driven entertainment bydeveloping its very own series of short, Hollywood-quality dramasstaring their cars. This program was built on the recognition that85% of today’s BMW buyers use the Web for research and thatthey are watching less television—and therefore fewer BMWcommercials. BMW turned the usual advertising model around andspent 80% of their budget on production and only 20% onInternet 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 publicityand, 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.”

They just didn’t ask for the order.

They had me in their world, but never asked me if I wanted to findout 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 mylocal dealer to make contact (with my permission). All this despitethis 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, callme crazy, but I thought the point of all of this work was toactually 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 youhave a multi-media success on your hands; it doesn’t necessarilysell products or services. Instead, make a little effort to really usethe time I have just spent with your brand to be more proactive.

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Stay in touch and build a dialog. Ask me if I would like to receivean email notification for the next film. Give me an incentive toprovide a bit of personal information. Maybe even ask if I am inthe market for a car. How about a “VIP test drive” of a modelhighlighted in one of the movies? After all, I have just spent nineminutes being entertained by BMW and have a nice warm feelingfor the brand. Bring me further inside the world of BMW. Whoknows? 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 DisneyWorld with my wife and two kids. (We were living in New Jersey atthe time and there was no way we were going to be deterred fromtraveling by Al Qaeda). We researched the trip, purchased ourairfare, reserved our rooms at a Disney Resort hotel and bought ourtickets and passes to the park on-line at www.disney.go.com. Inaddition to booking online, we used a Disney World card (our roomkey) to make all of our in-park purchases.

By the end of this trip, Disney knew us almost better than we knewourselves. They knew how to contact us by email and mail, wherewe lived, our economic status, the ages of our kids and ourinterests. They even knew that we liked South African winebecause we used our Disney card to buy our meals. This is thekind of granular data that most direct marketers would kill for.

Great story, but unfortunately there’s no fairytale ending. Disneydidn’t stay in touch despite collecting a huge amount of personaland family data. They never re-marketed Disney World (despiteexperiencing the post 9/11 travel downturn), never sent us advanceinformation on their films or DVDs and never sent a promotion toget us to visit one of the Disney Stores in Manhattan. They nevereven asked if we enjoyed our trip. Simply mind-blowing.

Solutions

First of all, say “thank you.” These two little words have an amazingimpact on the psyche—and ultimately loyalty—of customers. I’msure Walt understood the power of “Thank You” and would haveused these simple words to maintain our relationship.

Stay in touch. I mean, what’s up with not staying in touch and

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building loyalty with someone who just dropped six grand on aDisney vacation? Disney had my email address, my home addressand was privy to my every move. They should’ve stayed on top ofus to keep a good thing going. Trips to Disney World are built onthe idea of shared family fun. We might have gone again before thekids 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 kidswith different interests) and calculated lifetime value to anticipateand drive future sales of Disney Resort visits, Disney movies,Disney toys and viewership of the Disney Channel. Disney is knownas one of the great, integrated marketing machines. Integrate me.

Stimulate referrals. Give me an incentive to tell my friends andfamily about our experience. Give us a template and we’ll send iton. Team up with Kodak and help me send out my snap shots. Allviral marketing does not have to be in the sprit of Burger King’s“Subservient Chicken.” Sometimes all you have to do is to askcustomers to tell their friends about you and your services

Want more? We traveled in October, at the start of the holidayseason. We lived outside of New York City. Disney should have sentus a coupon to go shopping at the Disney Store in New York. Thiswas a gimme. Or at least should have been.

JUST MISSED IT.

Situation

My son was 12 when he went to Nike iD to custom build a pair ofNike Shox. In case you don’t have a teenager at home, this is theNike Web site (www.nikeid.com) where you can use an interactivetool to create your own Nike shoe. He chose the model, the colorsand the words. He was one of the first people I knew that boughtinto the promise of mass customization that the Internet isdelivering and Nike pioneered. He also spent over $120 of his ownmoney to make this purchase and, with my help, provided enoughpersonal information to complete the order. He was thrilled withthe experience and was one of the coolest kids in town when hetoured in his custom Shox.

The problem was, Nike dropped him like 3rd period geometry. Nikenever followed up or kept him in the loop—any loop—about upcomingofferings he would have been interested in. Two years later, he wears

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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 thedesigner of Nike Shox or even Phil Knight? Maybe there could havebeen a Nike iD club, where membership does have its privileges.

Twelve-year-old boys don’t get much mail. I think that a bit ofpersonal attention might have kept him in the loop and, moreimportantly, held him as a Nike customer.

INTERESTINGLY, THIS VIRUS ISN’T CATCHING.

Situation

I subscribe to McAfee Security’s VirusScan. It is easy to use, haskept my computer virus-free and is a good deal at an annualsubscription of $39.99. (If you have ever had your hard driveblown away, you’ll agree that $39.99 is a small price to pay forvirus protection.)

McAfee knows who I am and even sends me update notificationsvia Security Alerts. However, they don’t make a valiant effort to up-sell me. Yes, they occasionally tell me that they also have firewallprotection, but it’s a weak sales pitch. In fact, McAfee, a companythat I now love, has lots of other products and services that I mightwant. Cool-sounding software like Antispyware, Spamkiller andsomething called Quickclean to keep my computer running at peakperformance. All of these products would be worth a good, hardlook if McAfee ever tried to grab me. McAfee has a great businessmodel. It has a direct on-going digital relationship with me. It couldmake a pretty compelling sales pitch borne of safety-from-fear. Butthey don’t. And I’m not in their grip.

Solutions

Play up the fear factor. I already receive McAfee virus alerts sentdirectly to my home computers. Why not tie in alerts that alsodrive incremental sales? Tell me about the potential problemsassociated with spam. Tell me about spywear. Make me nervousand give me a great deal on new products. At least test it.

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Look at subscription lengths. Why not a multi-year deal instead ofan annual subscription? Lock me in long-term and reduce bothattrition rates and future marketing expenses.

OF COURSE, THERE ARE TWO SIDES TO EVERY STORY.

The companies that I’ve profiled are sure to have a response toevery one of my criticisms and suggestions. In fact, they mighthave some very good reasons for not building their DelightedCustomer relationships.

For example:

Hotel Lucia might say that it is difficult to get reception staff toact as marketers.

Kodak could point to the fact that they do not actually own theprocessors and are dependant on third parties to collect thoseyellow 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.

Nike isn’t a direct marketing company and it is focused on nextseason’s shoes.

McAfee is already in touch.

So, yes, they probably have some perfectly “legitimate” reasonsfor losing their grip on me. The question is, are these reasons goodenough? Is it worth losing the customers they’ve paid so dearly tocultivate just because of a few challenges, a paradigm shift, or anunwillingness to get outside of their existing marketing box?

I don’t think so. If these brands want to build real ROI for theirmarketing efforts, they need to work smarter, not harder. They needto take a few extra steps, think like direct marketers and do a littlemore active marketing in order to cultivate Delighted Customersthrough a system of ongoing stimulation and retention. Period.

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WHAT TO DO? SIMPLE: GET A GRIP.

Change the way you think. Go beyond just getting customers toholding them. Determine the next step. Then the step after that.Really spend the time to think through the “acquire, stimulateand retain” cycle. Nurture the customer and the relationshipthrough experiences that build goodwill, brand loyalty and aninterest in repeating a pleasurable experience.

Bottom line: work toward creating what we call the DelightedCustomer, that holy grail of patron who buys more, buys moreoften, buys at higher margin and tells their friends about yourproducts and services. Use some of the strategies suggestedabove to begin garnering—and keeping—Delighted Customers.

Now that you are in my grip call me. In addition to actuallyhelping clients think through and deliver retention strategies wehave the direct marketing chops, including the mostsophisticated email management and delivery system in thebusiness, to help you get the job done. I’d be delighted to help.And, I will say “Thank You” for your business! I promise.

WHAT IS V IEW?

View is a series of white papers featuring marketing insightsfrom Ralston360 CEO Peter Levitan. View provides businessand marketing professionals with new perspectives on whatmakes marketing communications work. Not yesterday. Nottomorrow. Not in theory. But in the real world, right now.

To get a fresh outlook on the business of creating, nurturingand maintaining Delighted Customers, check out Peter’s next View. You’ll find a visionary approach to marketingcommunications. And a 360º view of how to make it work.

Past Views can be seen at ralston360.com.

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WE DELIVER

Ralston360 is dedicated to helping clientsexceed marketing objectives. We are dedicatedto getting our clients and their messagesnoticed. We use lots of gray matter to makethis happen.

We do not have a one-size-fits-all solution, andrecognize that the most effective program isbased on the right brand strategy, advertising,direct response, PR or grass roots marketing.

Our mantra is simple: We help our clients acquire,stimulate and retain Delighted Customers.

WHY WE DELIVER

Ralston360 is a full-service marketing companywith 19 years experience in national and localmarkets. Our management has worked in majoragencies in San Francisco, Seattle, New York,Minneapolis and London. We offer strategicresearch and guidance leading to effectivemarketing solutions for print, broadcast,corporate ID, collateral, direct marketing, trademarketing and the Internet.

WHO WE HAVE DELIVERED FOR

Just a few of our clients in Oregon, Washington,and Idaho:

ACCENT OPTICAL TECHNOLOGIES—the global leader in

optoelectronic process controls

BANK OF THE CASCADES—nationally recognized

Northwest bank

CLEAR CHOICE HEALTH PLANS—Medicare-Plus

insurance program

FARMERS & MERCHANTS STATE BANK—Idaho’s

largest community bank

IDAHO POWER—publicly traded regional electric utility

MICRON TECHNOLOGY—North America’s largest

computer memory supplier

SAFECO—one of America’s most respected insurers

SUNRIVER RESORT—the Northwest’s leading golf and

destination resort

And some clients from our staff’s deep, dark past:

ADIDAS INTERNATIONAL

AMEX

AT&T

COCA-COLA

GENERAL MILLS

JOHNSON & JOHNSON

NORTHWEST AIRLINES

PBS

SARA LEE

SUZUKI

We make it easy to reach Ralston360:

www.ralston360.com 877 577 5790 toll free [email protected]

19797 Village Office Ct. Bend, Oregon 97702 877-577-5790 fax 541-388-4381 www.ralston360.com [email protected]