Customer equity: brands are still getting it wrong

Cus­tomer equi­ty, or the prof­it-based life­time val­ue of your cus­tomer base, is where your firm derives its val­ue. But today’s mar­ket­ing depart­ments are not always well organ­ised enough to man­age this crit­i­cal met­ric.

All too often, cus­tomer and brand expe­ri­ence are man­aged by sep­a­rate teams in organ­i­sa­tions. We think this has to change, giv­en that a cus­tomer is a recip­i­ent of both the cus­tomer expe­ri­ence and the brand strat­e­gy.

The per­son who sees your ads is the same per­son who vis­its your store, inter­acts with you vir­tu­al­ly and expe­ri­ences your offer­ings. There­fore, it is cru­cial that busi­ness­es bet­ter inte­grate brand and cus­tomer expe­ri­ence man­age­ment to build more sus­tain­able cus­tomer equi­ty.

New challenges, old thinking

Most com­pa­nies man­age their brands and cus­tomer loy­al­ty pro­grammes in a lin­ear fash­ion, in part due to the struc­ture of their organ­i­sa­tions, which tend to silo man­age­ment teams look­ing after sep­a­rate parts of the brand and cus­tomer expe­ri­ence.

So they talk con­fi­dent­ly about expe­ri­ence man­age­ment, yet still employ “sat­is­fac­tion” tools and tra­di­tion­al think­ing – name­ly that deliv­er­ing a high­er-qual­i­ty prod­uct or ser­vice makes cus­tomers hap­pi­er, more sat­is­fied and loy­al. This clas­si­cal under­stand­ing of cus­tomer sat­is­fac­tion and loy­al­ty grew out of the qual­i­ty-man­age­ment rev­o­lu­tion of 1980s and still per­sists with­in many com­pa­nies.

Sim­i­lar­ly, the brand fun­nel, so often viewed as a sil­ver bul­let, real­ly is now an out-of-date view of how con­sumers progress through dif­fer­ent states from aware­ness, to inter­est, to desire, to myr­i­ad actions. This think­ing fol­lows the same recog­nis­able lin­ear error and paints a fun­da­men­tal­ly mis­lead­ing pic­ture of the cus­tomer jour­ney.

The dis­course in both brand and cus­tomer expe­ri­ence cir­cles, both aca­d­e­m­ic and in prac­tice, has large­ly accept­ed that today’s cus­tomer jour­ney is not lin­ear.

Success in the new reality

Speed and trans­paren­cy of the data rev­o­lu­tion has revealed the lin­ear path or fun­nel doesn’t cap­ture the real forces that dri­ve con­sumer behav­iour. Loy­al­ty has changed and so has our rela­tion­ship with cus­tomers.

The con­sumer econ­o­my has evolved well beyond the realm of prod­ucts, ser­vices and brands into the age of expe­ri­ences and the rela­tion­ships built over the con­sumer jour­ney with a brand. Tech­nol­o­gy has trans­formed, and con­tin­ues to trans­form at an accel­er­at­ed pace, not just con­sumers’ lives, but also the busi­ness real­i­ties of the com­pa­nies vying for our atten­tion.

We under­stand our cus­tomers’ behav­iour and per­for­mance bet­ter than ever and we know much more about them, thanks to our abil­i­ty to trans­form big data into smart data. This greater con­nec­tion enables us to take a longer view and has altered the dia­logue between con­sumers, the prod­uct and the brand from a uni-direc­tion­al dia­logue to a bi-direc­tion­al one.

To be clear, we need a fun­da­men­tal­ly new approach to under­stand­ing and man­ag­ing loy­al­ty to be suc­cess­ful in the new real­i­ty.

It’s no easy task. Accord­ing to the CMO Sur­vey 2015, almost 70 per cent of all com­pa­nies con­tin­ue to organ­ise by prod­uct or ser­vice groups rather than cus­tomer groups. This makes it dif­fi­cult to deliv­er on crit­i­cal cus­tomer equi­ty-focused objec­tives, such as increas­ing cus­tomer pur­chase fre­quen­cy, cross-sell­ing oppor­tu­ni­ties and new mar­kets across exist­ing silos of prod­ucts, ser­vices and often brands with­in the same com­pa­ny.

Aware­ness, image, qual­i­ty, sat­is­fac­tion, loy­al­ty and oth­er sin­gu­lar func­tions must be com­bined into a more inte­grat­ed and dynam­ic organ­i­sa­tion, putting the cus­tomer at the cen­tre

Lead­ing com­pa­nies are start­ing to lever­age mar­ket­ing and cus­tomer man­age­ment tech­nol­o­gy, such as cus­tomer rela­tion­ship man­age­ment, pre­dic­tive ana­lyt­ics and micro-tar­get­ing, to engage cus­tomers at each stage of the rela­tion­ship or jour­ney.

So where to begin if evo­lu­tion is a more real­is­tic, albeit less lofty, goal than rev­o­lu­tion? For starters, we strong­ly encour­age com­pa­nies to con­sid­er more inte­grat­ed approach­es for under­stand­ing and mon­i­tor­ing their brand man­age­ment and cus­tomer man­age­ment strate­gies and ini­tia­tives.

At the cen­tre of this rapid shift is the focus on build­ing cus­tomer equi­ty of which prod­ucts, ser­vices, brands, expe­ri­ences and cus­tomer rela­tion­ships are all an instru­men­tal com­po­nents.

Brand man­age­ment and cus­tomer man­age­ment silos must be tak­en down. Aware­ness, image, qual­i­ty, sat­is­fac­tion, loy­al­ty and oth­er sin­gu­lar func­tions must be com­bined into a more inte­grat­ed and dynam­ic organ­i­sa­tion, putting the cus­tomer at the cen­tre.

The focus needs to shift to cre­at­ing brand, prod­uct and cus­tomer expe­ri­ences that leave a pos­i­tive, mem­o­rable emo­tion­al imprint. Com­pa­nies need to orches­trate these expe­ri­ences dynam­i­cal­ly across the cus­tomer jour­ney to build rela­tion­ships and stim­u­late them to grow. Final­ly, they should use data inte­gra­tion to increase the speed and effec­tive­ness of actions in the mar­ket­place.

In fol­low­ing this shift, suc­cess­ful brands will man­age new mobile, social and cus­tomer expe­ri­ences in a more inte­grat­ed and cus­tomer-cen­tric way, mov­ing beyond prod­ucts and ser­vices to expe­ri­ences and durable, long-term rela­tion­ships. In our expe­ri­ence, this ulti­mate­ly dri­ves com­pa­nies’ bot­tom line and sus­tain­able growth.

For more infor­ma­tion con­tact Andrew War­den, glob­al direc­tor, Prod­uct 

Mar­ket­ing at andrew.warden@gfk.com 

or vis­it www.gfk.com/bace/