marketing

customer loyaltyMy credit card & wallet have had a busy few week lately. Some of this expenditure was planned, but the majority of it wasn’t. Some of these recent interactions with suppliers have got me thinking about the price / cost of loyalty. Here’s some background context on just a couple of my transactions:

Broadband. I moved from BT Business Broadband to BT Residential Broadband. A few years ago I moved in the other direction as I was having some technical issues that – according to BT – would be easier to resolve as a business customer. They weren’t, and as the contract period has now ended, I decided to move back. Why? The price decreased from £25 / month to £16 / month. BT even have a special department to help you do this (BT Migrations). When I asked what differences there would be if I moved back, I got the answer “Nothing, the only difference will be the department that sends you the bill”.  Oh and as a ‘new’ customer to BT Residential Broadband the first 6 months are free.

It seems that BT are charging their regular customer more than their new customers. The regular, loyal, customers are subsidising their acquisitions of new customers.

Car Insurance. I changed car recently (and that’s another – very – long story) so had to get insurance for my new vehicle. I’ve been insured with one company for over 10 years (and with an equally as long ‘no claims bonus’) and it was always easier to stay with the devil you know, rather than look around. I know the folks in the office that handle my insurance as they are based in my local high street. But, in this instance, I decided to look around and happened to land on one of many price comparison web-sites. I was doing this more to make sure I was paying the market rate and would be happy to stay with my current supplier even if it was a few quid more. But, I was amazed that I could save over £250 / year my by moving supplier. I also moved up from 3rd party cover to fully comprehensive as well to another one.

It seems that my insurance company is offering special deals to new customers as well. Deals that are not available to me. Weird.

There are other examples here and I am sure you will have some of your own as well.

So is loyalty being penalised these days? I can only conclude that: yes it is. This is mainly true in commodity markets (phones, banks, insurance, utilities etc.) where it appears that the main differentiator is price. If price is the main motivator – it comes at a cost. The cost of penalising current customers for their loyalty. Something feels wrong to me about this. Surely, a business model is not sustainable if you penalise the loyal customer?

Businesses that offer a commodity product are teaching the market place to be disloyal, to shop-around and to be motivated by the ‘deals’ on offer to new / switching customers. Even the government is encouraging you to switch your energy supplier and that it should be as easy as switching banks.

Much as I appreciate the open market and competition I am not a fan of what it is teaching us as consumers or the negative effect it has on the value of loyalty. That’s because the price fixation spills over into other – non commodity – markets. Here the value of a unique service or a differentiated product is rarely appreciated and the discussion often seems to focus on ‘how much?” I see this in the sales training workshops that I run, which are attended by business professionals, wanting help in explaining, justifying and defending their price.

So what to do? In a market that encourages disloyalty how do you build a long term relationship with a new client? One answer, from ‘Red’ Adair in the oil industry immediately comes to mind:

“If you think working with a professional is costly, try working with an amateur.”

 

Last week was Social Media Week in the UK.  As part of this I went to a very interesting Social Media conference in London. Now and again it’s worth stopping and taking time to stand back from a trend and try to get things in context. I took a couple of days out from the sales coal face to do just this and have some interesting discussions before, during and after the conference.

My observations – for the business person – that I have after all these interactions and downloads are:

1. Social Media is still being considered more of a B2C (business to consumer) tool, with very few case studies from the B2B (business to business) world.

2. After a few years of marketing departments using social media as another ‘channel’ to send out their ‘messages’ to ‘consumers’ they are starting to realise that the real opportunity is in listening and understanding the customer in more detail.

3. The main challenge in adopting a social media strategy is internal. Large (older) organisations are starting to face up to the problem that their staff may not be motivated, happy and enthusiastic. So, when customers attempt to engage with them a) marketing are not used to talking back and b) there is often a gap between the brand that marketing have invented and the reality of the organisation.

4. Newer, smaller companies are better placed to exploit the potential of social media as they do not have the hierarchical structure and control baggage of their larger competitors

5. There is a whole generation coming through who do not use email and do not believe what companies say about themselves on their own websites. This is the customer of the future and you need to be active where they are active. You need to go to them as they are not going to come and find you.

6. People may go on-line to buy, but they do not go on-line to be sold too. So you have to be creative in engaging with them. 50% of content (minimum) should be to entertain.

7. Average spend on-line (and donations to charities) are increasing. There is a direct relationship between this and petrol & parking price increases.

8. Marketing (and there close collaborators the agency and PR company) are very scarred that they are losing control of the image / brand that they want to project. It’s almost as if they are nervous about a future board meeting where they are confronted with the true facts of what the customer thinks / feels / believes.

9. It makes increasingly little sense to talk about ROI for social media in isolation of other ways used to engage with the customer (such as the telephone or email) and perhaps ROI is Return on Involvement (or ROE = Return of Engagement)

10. As we no longer have ‘jobs for life’, creating a personal presence on the internet which helps define our views, expertise and value increases in importance and will replace the CV in recruitment and collaboration decisions.

So. just my take on a very interesting couple of days in ‘that London’.

 

Is it possible for a small business to have a brand? Personally I have my doubts. And I am convinced that for a service industry that works business to business it’s not only impossible – but dangerous – to think in this way.

Let me explain in simple terms.

People buy people. Yes it’s a cliché, but like every cliché it’s based in truth. When you are considering a financial advisor – what’s more important, their logo design or their expertise and personality? Would you work with someone who you didn’t get on with too well if their website looked gorgeous and had consistent design elements? Of course you wouldn’t.

When most people are looking for a personal and professional service like an IFA, solicitor, accountant, architect etc. they turn to their network first and ask ‘Who do you know who…?’ Their network is far more trusted for insight than Google. We trust our connections and network far more than what we see and read on websites and in brochures.

Google is either a last resort, an impulse purchase or for delving deeper into those recommendations. I don’t think it’s the place where decisions are made. It’s where confirmation is sought.

For small businesses if you swap the word ‘Brand’ for ‘Reputation’ it all makes far more sense to me. An individual (or a small group of them) need to develop their credibility, expertise and advocates. This will go much further in developing their reputation – and over time their business – than having a pretty logo.

So all you small businesses out there: forget ‘brand’ and think ‘reputation’ in order to grow.