Brands & System Design

How many times has a brand's computerized system made you frustrated or angry? Have you ever had to enter your user name and password more than once to get what you wanted either online or via the telephone? Have you been offered a price discount as a valued customer only to not receive it because the link on the push email sent you to the website without recognizing you? Have you ever encountered an automated customer service system that does not provide a choice for the issue you are trying to resolve? Or how about the automated system that keeps sending you in an infinite loop, never to reach your destination? How about when you have to explain your problem over and over again to each new person because they do not have a system of shared notes? My favorite is holding for say 30 minutes only to discover that the automated system sent me to the wrong department, resulting in another 30 minute hold. Once, I had this happen with four different telephone number transfers. I was really upset by the time that I finally reached the person who could help me. 

I encountered one website that only allowed me to buy one ticket at a time. (I wanted to purchase multiple tickets for the event.) I had to reenter all of my information including name, contact and credit card information for each individual ticket purchase. How ridiculous is that?

Most recently, I booked flights on Delta Airlines for my wife and I using Expedia's online platform. (I have been an elite status member of both Delta and Expedia for years.) Unbeknownst to me, the only Delta tickets that Expedia listed were Basic Economy fares. I booked my flights and discovered at the airport that we had no seat assignments. We were assigned separate middle seats in the back of the plane at the boarding gate, were boarded in the last boarding group and there was no room for our luggage in the passenger compartment. I politely inquired about this at the boarding gate, reminding the gate agent of my elite status, only to be told that I had purchased basic economy tickets with no frills. The gate agent even subtly implied that I was a cheapskate and that I got what I paid for. The only problem is that I did not know that I had purchased Basic Economy tickets and I was not given an option to purchase a better ticket. My wife kept asking me (sarcastically), "So, this is what you get for your years of loyalty and elite status?" I am definitely annoyed at both Delta and Expedia. 

The point of this blog post is to indicate how important system and process design is in creating and maintaining brand loyalty. 

On the flip side, I am a very loyal American Express customer. Why is that? Because their customer service systems work very well and I have always been treated very well by their customer service representatives. Ditto with Ritz-Carlton systems and employees. 

When designing your brand experience, don't forget about the role systems and process design play in customer satisfaction and loyalty. 

Brands and Loyalty Programs

The common view is that loyalty programs create customer loyalty and that it is better to market to a brand's "high loyals" than to other groups. 

Here is the flaw with that thinking. First, you will get the most sales lift from reaching out to less loyal customers, especially less loyal customers who are heavy category users. Second, rewarding the purchases of already loyal customers only reduces profit margins. Those customers were already loyal. Now you are offering them financial incentives for a behavior that they already exhibited. In fairness, loyalty programs have been shown to have a small impact on loyalty. However, the minor increases in loyalty usually do not compensate for the lost profit margins.

I am a very heavy purchaser in at least two categories, coffee houses and books. I belong to four coffee houses' loyalty programs. None of those programs make me more loyal. The quality of their coffee, what they serve with their coffee, the presence of friends in the particular coffee house, the convenience of their locations and their hours of operation affect which one I will frequent at a particular time on a particular day.

Regarding books, I buy approximately half of my books through Amazon.com but I am also a Barnes & Noble member and buy dozens of books through them in a given year. I just returned from a vacation in Maine during which I bought ten books from four different used bookstores. Whenever I am on a business trip, I buy at least one book at an airport bookstore. I also purchase books from at least four different book clubs/catalogs. Again, no one has gotten me to be highly loyal in this category except Amazon.com, but that is only because they are available 24/7, provide access to almost any book and consistently offer the lowest prices on all books. I would be more loyal to Amazon.com because they offer a superior overall value, however I want to support Barnes & Noble's economic viability because I want a brick & mortar location to browse and buy books. And, of course there will always be the impulse book purchase whenever and wherever it occurs.

A better use of loyalty programs is to monitor loyal customer's purchase preferences and habits and to provide another brand touchpoint and source of customer feedback/interaction. Understanding purchasing preferences can help a brand upsell additional items. Amazon.com does this well.

Consider how you are using your loyalty program, what changes in behavior it is creating and whether it is a financially viable program. Also consider from whom you might be able to generate the most incremental sales and what you would have to do to achieve that sales lift.

Customer Retention Issues

Some organizations have sought our help with customer retention. When calculating the cost of customer turnover, one must consider customer acquisition costs. If customer retention is brief, the value of the average non-retained customer may actually be less than his or her acquisition cost. What are some of the reasons for high customer turnover?

• You have targeted the wrong customer.
• You have targeted the right customer but your customer acquisition strategies and tactics have attracted other less attractive customers.
• Your sales force has been incented to acquire customers regardless of their profitability or suitability for your brand.
• You misrepresented the brand to prospects.
• You have not adequately reinforced your brand’s value proposition to the customer.
• You are not properly managing the customer relationship at critical points of change or disruption.
• You have not created an emotional connection between your brand and its customers.
• Your brand’s products or services are inferior to competitive alternatives.
• You have system or process failures that negatively impact the customer.
• Your system or process failures unintentionally terminate the customer relationship.
• You do not listen to your customers.
• You do not anticipate your customer’s needs.
• You mistreat the customer in some way and do not adequately redress the problem.

Discovering the specific source or sources of customer turnover is 90% of the solution. I wish you every success in increasing your customer retention.

Brand Aid, second edition is available here now.

Customer Retention

Are you having customer retention problems? Is it difficult to meet your growth goals when a significant portion of your business development efforts is used to replace lost customers?

It is much more expensive to attract new customers than it is to retain existing ones.

It is time for some organizational soul searching. Why are customers leaving? What is not compelling about your brand’s value proposition?  What is not working for them? What are you doing wrong? What could you do better?

One can use a combination of qualitative and quantitative research to understand what is going on. At a minimum, you want to talk with these three groups:

1. Current customers
2. Former customers (people you were not able to retain)
3. Competitors' customers

For the first group, you will want to explore the following:

• Attitudinal loyalty to the brand
• Emotional connection to the brand
• What they like about the brand experience
• What could be better
• Rate the brand’s delivery on a variety of potential customer benefits

For the second group, you will want to explore:

• How long they were customers
• Why they left
• Why the brand ceased to hold their interest
• Whether they have gone to a competitor or left the category altogether
• If they have gone to a competitor, what they like better about the competitor

For the third group, you will want to explore:

• Attitudinal loyalty to their brands
• Emotional connection to their brands
• What they like about their brand experience
• What could be better

For all three groups, you might also want to explore perceptions of the brand's personality.

Once you have gathered and analyzed this information, you will need to develop and commit to an action plan to solve the identified problems and create a stronger value proposition and delivery.

Good luck!