The abbreviation CRM is often regarded as part of the rubric of efficiency drives and new IT systems. But as consumers grow ever more fickle, customer relationship management has also become an important element of branding strategies.
Two reports published this month – one from Dunnhumby, the UK marketing and data analysis consultancy that devised Tesco’s loyalty card programme, the other from Carlson Marketing, the largest marketing services company in the US – conclude that companies need to do more to place their relationships with customers at the heart of their brands.
Dunnhumby’s report perhaps captures the new emphasis across marketing departments with its title: Customers Are For Life (Not Just Your Next Bonus).
Martin Hayward, the consultancy’s director of consumer strategy and the report’s author, believes the rot set in when senior marketers began looking to move jobs – and company – every few years to advance their careers. “Short-term commitment like this doesn’t allow time to truly engage with the customer and their needs and aspirations,” he says. “Many companies failed to organise themselves around the customer, too. This meant consumer insight was held by individual employees and weakened when they moved on, although, thanks to new tools, many businesses are now building some semblance of corporate memory.”
Second, he says the drive for efficiency and cheaper production costs has led to customers being left out of many businesses’ CRM strategies. “In reality, the customer was never at the heart of CRM,” Mr Hayward says. “It was simply about making the company machine as efficient as possible.”
Through its relationship with other brands, including Müller, Nestlé and US retail chain Kroger, Dunnhumby now holds the world’s largest database of consumer behaviour, with detailed purchasing information from 42m consumers in the US and a further 12m in the UK. From this, Hayward is in no doubt that consumer loyalty has fundamentally changed.
Strategies such as farming out customer service to call centres have ended up undermining customer loyalty, which is why brand owners are now struggling to engage with a new generation of twentysomething “serial switchers”. “These consumers have low brand loyalty and high confidence to move between rival brands at the drop of a hat,” he adds. “This new mindset is now the major challenge facing brand owners.”
Fast-moving consumer goods brand owners including Procter & Gamble and Unilever, for example, are working more closely with retailers such as Tesco to strengthen their relationship with their customers at point of sale. Meanwhile, British bank NatWest has bucked recent high street banking convention by acknowledging the importance of face-to-face customer relationships and maintaining rather than cutting local branches.
According to José Ferrão, president (Europe, Middle East and Africa) of Carlson Marketing, many companies have been slow to address this challenge because of unwieldy organisational structures that restrict the ability to respond to customer needs and an over-reliance on winning new consumers at the expense of holding on to and deepening their existing client base.
“Telecoms businesses in particular have struggled with customer service levels as many have evolved from landline business into mobile and cable through acquisitions, after which they continued to operate as separate units,” he says. “Customers’ services expectations from the brand owners they deal with are joined up; what they get from many, however, is anything but consistent.”
Carlson, which works for clients including Arla Foods, KLM and Volvo, this month published Relationship Builder 2005 – an examination of consumers’ attitudes towards the customer relationship strategies of 90 major brands in five different product categories.
Mr Ferrão argues that, with cut-price strategies always vulnerable to undercutting, companies should reposition their brands around customer needs and customer service. “Create a close customer relationship and it becomes far harder for that consumer to disengage from your business,” he says. For example, Kroger is currently moving towards a clearer, customer-led proposition to counter competition from Wal-Mart’s price-led business model.
Mr Hayward, however, concludes that both a customer-centric focus and low-prices are viable brand strategies. “Major brands currently struggling in national and international markets are those with neither a clear customer service or price-led market positioning,” he points out. “The riskiest place to be is somewhere in no-man’s-land between the two.”