If you’ve ever taken a marketing course, or read marketing literature, you’re probably familiar A.Maslow.
In the late 1960s, it was Maslow who developed a hierarchical, or layered, theory of human needs and values. Maslow focused on human potential, believing that people go through stages to reach their highest levels of individual capabilities.
For me and, I believe, every CRM and marketing practitioner, there are parallels to Maslow’s ideas of moving through basic needs to the highest level and what we are endeavoring to achieve with customer loyalty behavior optimization. The metaphor is easy to see in the rings and layered composition of a tree.
A supplier is the most exposed during the latest encounter or transaction with a customer. The customer-supplier involvement would be the outer layer or bark of the tree, the portion that is seen first when encountering the tree.
If, at your last visit to a local fast food restaurant, the counter person was rude, the order was taken incorrectly and the store was dirty, you’d hold the restaurant accountable and have negative feelings about the transaction. If the opposite occurred, your feelings most likely would be positive.
Whether the transaction is a purchase, service experience or communication isn’t particularly important. What is important is that the customer’s top-of-mind, tactical attitude about a supplier will certainly be affected by the most recent involvement.
Failure to reinforce a positive transaction can create a vacuum in the relationship; and the customer may be left to feel taken for granted, especially if an assertive competitor is working to create a relationship. If a negative transaction isn’t quickly and sensitively addressed, the customer may be looking for, or at least may be willing to consider, an alternative supplier.
Those of us who measure the loyalty effect of transactions find that we must look at them from both tactical and strategic perspectives: tactical, because our research can help groups like customer services or sales identify areas of process and relationship management “trigger points” or “moments of truth” that can be improved; strategic, because there may be direct linkage between these encounters and real loyalty. A supplier must determine the strength of that linkage to optimize CRM.
The middle layers
Once the relationship has been established, it is the supplier’s ability to deliver and provide perceived customer value within specific products and services over time that takes on importance. At the same time, you must understand the strength and vitality of the relationship—and the opportunity to build on tactically-created value.
Measurement protocols in the middle layers principally involve brand preferences and choices, plus performance over time. Consequently, we ask current customers about:
- Their perception of supplier (and key competitor) performance in key areas—and the importance of those areas—including reputation and image
- The likelihood that they will use the supplier’s products or services in the future
- The likelihood that they will consider the supplier as the primary—or exclusive—source for a product or service
- The likelihood that they would recommend the supplier
In these interviews, we look for evidence of performance change over time and of complaints, expressed and unexpressed.
The middle layers are where most customer loyalty researchers direct their efforts, principally because that’s what senior management, sales, marketing, service and related functions want. However, there’s a great deal more to learn at this level than just degrees of satisfaction with the supplier and competitor. We might ask the customer of a fast-food establishment to evaluate the aggregate of all visits over the past year.
Here, as well, we can identify both improvement priorities and potential program initiatives for enhancing ties and perceived value with these customers.
Many companies don’t delve into customer, employee and community perception at the heartwood depth—the central core—but deeply held emotional involvement has a great deal of loyalty-leveraging impact.
One of our areas of research activity, for example, deals with the level of staff loyalty toward the company, advocacy on behalf of the customer and the degree of alignment with the company’s customer loyalty objectives. We’ve found such a strong correlation between customer loyalty and staff loyalty and productivity that such studies are often conducted in tandem to get the most complete picture of overall value creation effectiveness.
To understand how the supplier is perceived at this level it’s vital to determine:
- How business practices (in other words, ethics) are regarded
- The supplier’s image in such areas as community involvement, public issues and the environment
- How deep the feelings of various stakeholders, especially employees, are and what their emotional attachment to the company is
Do customers feel they have a relationship with, or emotional commitment to, the fast food chain? Do the chain’s employees deliver value in an effective, positive way, reflective of the way the chain would like to be seen by its customers?
As with the middle layers, in the heartwood, you also would want to find out about top-of-mind, last visit impressions; the customer’s familiarity with, and comprehension of, the supplier’s various offerings; and how predisposed the customer is to purchase or recommend the supplier’s products or services.
There’s one last thing to remember about the tree growth-customer loyalty analogy, which applies equally to CRM—and, really, to all areas of customer management: It takes a long time, and a lot of effort, for a tree to grow and mature, but it can be cut down very quickly or slowly decay without nourishment. Keeping the tree healthy and protected, from the bark to the heartwood, is in every supplier’s best interest.
About the Author
Michael Lowenstein, PhD CMC, is Vice President and Senior Consultant, Harris Interactive Loyalty, a division of Harris Interactive (www.harrisinteractive.com), based in Rochester, New York. Harris Interactive is a top-fifteen research and consulting company, and provides research services for corporations in automotive, consumer/retail, financial services/insurance, business-to-business, telecom, hospitality, health/healthcare, and technology enterprise sectors. Formerly, he was Senior Vice President, Customer Management Center of Excellence, GfK NOP (http://www.nopworld.com/), a division of GfK Aktiengesellschaft, based in Nuremberg, Germany, and one of the four largest full-service marketing research and consulting organizations in the world.
With over thirty years’ management and consulting experience in customer and staff loyalty behavior research, CRM, loyalty program and product/service development, customer life cycle, service and channel quality, customer-driven corporate culture, HRD, and strategic marketing and planning to draw on, Lowenstein is an active international conference keynoter and speaker, workshop facilitator, and trainer, and he is a regular featured contributor to two customer loyalty newsletters. He also provides expert customer loyalty resource commentary to several professional CRM, marketing, customer service and HRD sites on the Internet.
He is the author of two widely-regarded customer loyalty books: Customer Retention: Keeping Your Best Customers (1995), and The Customer Loyalty Pyramid (1997). He is also co-author of Customer WinBack: How to Recapture At-Risk and Lost Customers – and Keep Them Loyal (2001), a Soundview Executive Book Summaries ‘Best Book of 2002’. Additionally, he is a principal contributing author to Redefining Consumer Affairs (Society of Consumer Affairs Professionals, 1995), plus The Answer Book for Customer Service Managers (Bureau of Business Practice/International Customer Service Association, 2000), and he has written several sections and the Afterword for Customer.Community: Unleashing the Power of Your Customer Base (2002). He has authored or co-authored over 125 customer-related journal articles and columns; and his new book on customer data gathering, storage, management and application for creating targeted customer value, One Customer, Divisible, was published in September, 2005, by Thomson/Texere/South-Western, in affiliation with the American Marketing Association. He is developing a new book, with the working title of The Advocating Customer.
Lowenstein is a customer life cycle workshop developer/facilitator for the Direct Marketing Association (http://www.dmawinback.org) , has been a customer loyalty instructor for Pennsylvania State University, American Marketing Association, American Society for Quality, Bank Administration Institute, Institute for International Research, eCustomer Service World, and the American Management Association, and for corporations such as Toyota, Aetna, Nestle, MetLife, BellSouth, Wachovia, Daimler-Chrysler and Charles Schwab. Additionally, he has lectured in the M.B.A. and E.M.B.A. programs of both New York University and Columbia University.
He holds an M.B.A. degree in marketing and management from the University of Pittsburgh, and a B.S. degree in economics and marketing from Villanova University; and his PhD is in Strategy and Program Management from ISGI Groupe Ecole Superieure de Commerce de Lille (ESC Lille), Euralille/Paris, France. Also, he holds a Certified Management Consultant (CMC) professional designation, awarded by Institute of Management Consultants, USA. He is listed in several regional, national, international, and professional Who’s Who editions; and he is an expert panel or advisory board member for several customer loyalty, HRD and CRM information sources, including CustomerThink, the leading CRM/customer loyalty portal (formerly CRM Guru).