In a 20 minute webinar designed for Consumer Products manufacturers, but applicable to all businesses, LRC’s Aldy Keene guides you through why you should measure their relationships with customers and what you can learn from this kind of research. Using this information, he helps identify if your main challenge in obtaining greater share from those customers is a design, execution, or messaging issue.
Watch the video below (or scroll to the text beneath the video for an edited transcription) to learn more:
My name is Aldy Keene. I’m President and CEO of the Loyalty Research Center. I’m also your host for today’s video: Consumer Product Manufacturing and Customer Loyalty. In this video, we’re going to show you a construct that you can use that’ll help you understand your business and make better business decisions. Our clients have found this gives them the ability to move more quickly, making powerful changes that give them a competitive edge. We’re going to go through a mini case study at the end. It’s representative – certainly there are so many different situations that arise in this environment. We can’t try to capture all of them. It should give you a sense of what you can get out of this construct.
So let’s move forward.
Well, loyalty to who? In this case, we’re looking at your loyalty from the distribution channel, if you’ve got one, and your consumers – your customers. So both of those can be used interchangeably. We’ll be using those and discussing them throughout.
What does loyalty with these two groups mean?
There are three different aspects. First, behaviors. Second, relationships. And the third, the issues and challenges that arise from trying to manage this relationship.
Let’s start with behaviors. Well, that’s your goal: that’s what gives you the financials that you need to be successful. Ultimately, it’s at the top of the pyramid; that’s what you want to achieve. You want to drive those behaviors in anything that you do and relationships help get you there. The one things that we found at the Loyalty Research Center over the past 18 years is that relationships drive behaviors. Strong relationships drive strong behavioral patterns. That’s why you want consistent behavior. Weaker relationships drive weaker patterns. Are there exceptions? Absolutely!
Certainly, you can probably speak to certain instances in which you’ve been involved where you have a strong purchase – maybe purchase over a few periods with an organization with which you’ve got a weak relationship. It’s situational. It’s like the person that’s 500 miles from a gas station in the middle of the desert, buying gas from a company they swore they’d never do business with again: it’s situational. What you’re looking for in terms of ongoing financial success are sustained behaviors by your customers and your distribution channels.
The last piece, the issues and challenges, are related to the controllables that you have at your disposal to try to change and manage that relationship. It’s the customer experience or the distribution channel experience. It’s what the customer or distribution channel goes through in dealing with you.
Let’s go through this in the context of a model. We like to model things. and this is a complex and valuable model. Once again, at the top is behaviors. The behaviors that you’re looking for as an outcome of what you’re doing. On the left you see share of effort. Well that pertains to the catchall, all the behaviors undertaken by the distribution channel for your benefit: the shelf positioning, the shelf space you’re given, the stocking. When the customer comes in, how much suggestive selling is pushing them toward your product vs. an alternative? Well, there are all of the things that the retailer can do to support your overall strategy. That’s a great partner, that’s a loyal partner.
On the other hand, you look at consumers. That’s straightforward as well. First of all, that’s retention, the consistency we’ve been talking about. But it’s also share of spend. In that product category, as they go through these repetitive purchases from that product category, we want the highest share of spend. Certainly a target could 100%, but many customers don’t give 100% to any one brand within a product category, so we’re happy to take the biggest. How do you get there? How do you get that great effort or great share of spend from the consumer? Well, through the relationship!
The relationship that says this is the strongest relationship I have, that being with this manufacturer, your company. What does that mean? Measuring loyalty, measuring that relationship means that you’re better than their alternatives. For a retailer, it means when they deal with other manufacturers in that product category, you’re the best. You provide them with more help in being mutually successful. You may be just equal to a lot of other manufacturers – you’re at parity. You’re nothing special. Or others could do a much better job, which puts you at a disadvantage. It makes you vulnerable. You’re not going to get their best effort.
On the other side, with consumers, they have to make decisions among a lot of alternative brands. How do they view your brand relative to the others? Again, if it’s superior in all aspects of the customer experience, they’re loyal to you. If you’re the same, you’re neutral. If you’re worse, you’re at risk or vulnerable. And that strength of relationship drives their behaviors. You can understand that. Measuring loyalty is measuring you relative to the alternative.
When you look at that profile of loyalty, for either the distribution channel members with whom you work or the consumers that buy your product, or the entire market, it’s driven by the customer experience. Or the dealer experience, the distributor experience. It’s driven by all the touchpoints in which they interact with you during the course of the business day or whenever they come to shop. We’ve depicted some here: price, sales, product, convenience, service. Those are some aspects that the customer or the retailer could go through in working with you. How do you do? How do you do on these components relative to others? Are you stellar? Or are you weak?
When you look at these customer experience elements, there are three things to think about. One is design. You design your business model to provide a certain level of product or product line at various price points. You design your distribution strategy to make your product available in different retailers around the country. You receive a certain level of support in selling them and post-sales support. You’ve got an 800 number, call-in service, website – you’ve got all kinds of things to support different kinds of issues arising in your customer base. But it’s not one size fits all. Customers have different needs and business models differ in which customers they’re targeting either explicitly or implicitly.
When you design your business model, you’re by extension designing the target market you’re going to appeal to. Whether you recognize it or not, you’ve got a target market that’s going to say, “That business model is exactly what I’m looking for” – or at least you better hope so, or you’re not going to be in business very long! So the first part is design. And that design determines your target market.
Then, how do we execute against it? To the extent that I’ve got strong relationships, I’ve got loyal customers. It’s because I’ve got a design that appeals to them and I’m executing strongly against it relative to the competition: “Hey, this is exactly what I’m looking for and they do a good job day in and day out.” When you hear that, you know you’ve rung the bell. When you don’t, you may have taken a Loyal customer and turned them into a Neutral or Vulnerable customer.
Finally, the last element of this is that you have to message. You have to tell people about it. Especially because the marketplace is dynamic. You’re making changes, the competition’s making changes. You’re trying to improve, you’re trying to fix some execution. You may be doing design tweaks. You need to tell the market about that to make sure they’re making decisions based on accurate information.
So again, this is a really powerful diagram that really gives you a lot of information about who you should be targeting, who you should not be targeting. You can easily be, and this another video altogether, targeting and listening to Vulnerable customers with whom you have no chance at all of migrating to a stronger relationship. They’re unhappy, they don’t like the experience they’re having with your organization. It’s a bad match. The design is such that they simply are not in your target market, and if you listen to those customers and make decisions based on what they’re telling you, you can be led down a path of real trouble and failure. That’s an important takeaway.
So what are some of the other takeaways that result from that modeling? Again, the biggest is the big segmentation that comes out of it is your business model, your design, determines who your target market really consists of. There are are great potential customers in there, either existing or potential customers. Then there are some near-perfect customers: you almost deliver on them. And you know what? Those can be great customers for you as well! It’s a spectrum of the extent to which your model, your design, matches up with their needs and you’ve got to recognize that.
Then, you come down and say well how do you execute against it? We told them this is what we’re going to do. You said this is what we’re built to deliver. Well, do you? Do you execute against each one of those elements? It’s important to recognize that. Because those execution elements, that’s what businesses are really built to identify and fix.
“Well, let’s fix the right ones.” What do you mean, fix the right ones? Well, let’s start by making sure we’re listening to the right people. We don’t want to be listening to bad-match customers and fixing a low priority item. For our real target market, that would be squandering our resource and wasting time. We’ve got to focus on the keys. It’s called separating signal from noise.
We worked with a grocery chain several years ago. Their customers complained of shopping carts in the parking lot. Series of questions helped the store managers focus on that issue. Is that a driver of the customer experience that creates vulnerability? Well, if we fix the shopping carts in the parking lot, if we eliminate them, will you give us more of your shopping dollars each month? The answer that came back was “No!” Well, if we fix the shopping carts in the parking lot and eliminate them, will we be able to raise our prices slightly? The customers came back again: “Absolutely not!”
Well, let’s go the other way. If we do not fix the shopping carts in the parking lot, will you give some of the shopping dollars you give us every month to someone else? A slower response came back: “No.” So the takeaway is, I’m complaining about this, I’m vocal about it, but change doesn’t result in changing their behavior. If I fix it, it doesn’t change their behavior. If I don’t fix it, it doesn’t change their behavior. It’s really not resonating with them. You have to be careful how you allocate resource. We have to look and see to what extent is this a design, very expensive, very risky, issue; an execution issue; or a messaging issue. We’re doing it already, it’s just we have to make the market aware of it.
Let me give you an example. This is our one case study for this video. It pertains to the Android market. Several years ago we were working with Samsung. Samsung was making a foray into the Android market, and as you know, they ultimately became very successful. However, they were selling through some major electronics retailers and their products were being returned. We did some research, we talked to people who returned the products and we got their top reasons for returning them. Samsung looked at this and said, well the top five reasons are not problems, they’re just questions that the consumer has and/or things that they need to be trained on. They’re not complaining about the product – they simply don’t know how to use it.
Going to the retailer, the retailer says of course we help and train the customer. But the research was just so strong, Samsung decided to take it one more step. So we went out and bought a few hundred of these Androids, built a script, and returned them to stores around the country with one of the five reasons – here’s why I’m returning it. 95% of them were accepted, no questions were asked. So Samsung knew their answer. Those questions were not being addressed.
Now let’s think about it from the modeling concept. We’ve got a great target market and it’s not paying off. From the Samsung perspective, it says if I ask the customer, they would say the product is the driver and here are the reasons. But Samsung would say this is a messaging issue. They don’t understand. Messaging, training, communication. They don’t understand how to use it. It does everything they want it to, it’s this easy.
However, from the retailer’s perspective, you could see them saying – all of our research shows the customer wants post-sales support to be very easy and to make it easy to return things. So they’re not giving any push-back to their customer, simply accepting it. And that provides conflict for both the retailer and for Samsung. Whereas these managers and counter people thought they were doing the right thing and listening to the what the research said, they were actually doing the wrong thing. They weren’t really helping the customer solve their problems. It would have been a win for both if they had actually delved into why it was being returned and helped them understand the product. Ultimately that’s what happened. Samsung got much more involved in the sales and post-sales support in many of the retailers as have many manufacturers of technology-based products. A lot of the retailers simply don’t have the wherewithal to explain it either sale or post-sale. That’s how this model applies.
I hope you’ve enjoyed this video. Please look around further on our website to learn more about us. We’d love to talk to hear your feedback.
A few notes – what really sets the LRC apart – is that we have a real focus on the linkage between relationships and behaviors. We know our clients live or die based on the behaviors of their customers and their constituencies. We have a unique and proprietary analytic toolkit that really helps us understand the experience issues of that customer that drive the relationship and finally we engage in a very collaborative and consultative relationship with our clients to help them bring about transformation of their enterprise to achieve those behavioral changes in the marketplace.