Creating Customers for Life
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Creating Customers for Life In todays world where your brands are quickly becoming the most important assets on your financial statements, the connection between marketing and brand equity has become well understood. What remain elusive, however, are the exact measurements; the ROI and the effects of marketing efforts and levers on profitability. Consumer loyalty, satisfaction, and value have all had their turn as the key to your consumer profitability, but have proven to be poor indicators of future consumer behavior. So, what measures should you gauge for optimal brand performance, for immediate sales return and future brand strength?
Creating Customers for Life
The Problem with Customer Satisfaction and Loyalty
For three decades, the marketing research industry has revolved around the notion that satisfaction was necessary and sufficient
for profitable customer relationships. As a result, brands have gotten pretty good at satisfying customers. The promised
financial payoff, however, has not followed.
Data from the auto industry, for instance, shows that greater than 90% of new car buyers are very satisfied, but less than 40%
of them purchase their next vehicle from the same brand. Measuring satisfaction without measuring customers relationships
and how they got that way leaves employees chasing scores that most often do not predict future behavior.
Some seemingly satisfied and loyal customers remain simply because of convenience, or lack of a more appealing alternative,
while others have deep enduring relationships with your brand. Traditional measures never truly discriminate between these
groups of customers who have very different brand expectations and need very different focus from your company and brands.
Relationship Investment Model (RIM)
We, at TRGiSKY, understand this concept. Our Relationship Investment Model (RIM) steps into the gap and defines meaningful
connections between corporate actions, customers relationships with your brands, and profitable customer behaviors.
RIM guides you, the brand owners, through the sources and benefits of enduring customer relationships. The model is based
on an understanding of the processes and connections that transform performance satisfaction into long-term investment in
the relationship.
Case Study in Relationship Investment
TRGiSKY used its proprietary Relationship Investment Model
(RIM) to establish levels of customer investment at nationwide
dealerships of a leading automotive brand and overlaid this
fundamental ranking with important customer purchasing
and loyalty behaviors.
Key Findings:
Invested customers each spend over $50 more than
uninvested customers annually, even during their warranty
period; when out-of-warranty, the difference jumps to
$375 per customer.
Dealerships with the most invested customers experienced
half the attrition of those with the least invested customers
by their third service visit.
For the complete report, please visit our website at www.trgisky.com
or contact one of our market research specialists.Creating Customers for Life
Relationship Investment
The Theory Behind
Customers relationships with a brand begin with satisfaction,
but that is only the start. Relationship Investment defines the Quality
strength and nature of customer relationships and implies a Reliability
durable motivation to act in profitable ways towards a brand, Satisfaction
Function
now, and in the future.
Pricing
Satisfied customers believe a brand is competent and reliable,
which causes them to develop functional connections to that
brand. However, customers with strictly functional connections
Functional
act capriciously and have transitory brand relationships. They Reliability
Connection
are also vulnerable to minor brand failures and to competitors
actions. That is, they are less forgiving of brand failures and
are open to acting upon competitive offers.
It is when a brand demonstrates that it has the customers best
interests at heart that satisfied customers begin to feel that the
Service
brand cares about them. When this happens, a level of trust
Greeting Brand
and engagement with the brand ensues, the brand establishes Cares
Dependable
fidelity in the mind of the customer and a personal connection
Timely
develops. Thus, only if a brand demonstrates reliability and
fidelity will a customer trust the brand, and trust is the secret Personal
to transforming satisfied customer experiences into meaningful Fidelity
Connection
relationships.
Relationship Investment works where other measures and
methods fail because it captures, not only the immediate result
of customer experiences, but also their impact on relationships.
Fully invested customers have functional connections with the
brand, based on fulfilling their practical needs, and personal
connections, which indicate reciprocal loyalty and emotional Trust
investment. Reliability
Relationship Investment
Crucially, those customers who are invested in their brand Fidelity
Functional Connection
relationship behave in different ways than those who are merely
satisfied; they are invested in keeping the relationship going Personal Connection
long term, notice competitors less, check out their favored
brands products and services more often, spend more per
transaction and yield a greater share of wallet to their favored
brand. Thus they give greater financial payoffs to your brands.Creating Customers for Life
Relationship Investment
How it Works
Relationship Investment Model is an algorithmic model innovated by iSKY that is used to predict future customer
behavior. The model takes in market data, defines relationship investment in the brand and determines the drivers of desirable
consumer behavior.
The 7Ps are indentified and
consumer behavior is
measured RIM captures customer
attachments and
psychological constructs
defining the Relationship RIM then determines the
Investment drivers of Positive Behavior
and recommends actionable
steps to strengthen
customer relationship
There are 4 steps in the process that ends with actionable recommendations for sustained growth in revenue and brand
equity.
Step 1
Identify the 7 Ps - these may include hundreds of parameters and variables.
Friendly/Helpful B=.017
Knowledgeable B=.455
Give Sound In-Store
B=.072
Advice Appearance
Keep me informed B=.368
about safety and
recalls
Easy to find
shopping cart B=.062 B=.373 Personal
or basket
Television Ads Store Brand Purchase &
Clean B=.286
Consideration
Personnel
Possible RIM Newspaper Ads Modern and
B=.144
inviting Relationship
Drivers "7Ps" B=.162 Strength to Pay More
Well laid out
Circulars and organized B=.227 Retailer
People
Process Efficient Checkout B=.339
Radio Ads Check-Out
Product Encourage Friends
Promotion Accurately Charged B=.446
Magazine Ads
Price B=.193 Functional
Packaging Favorite Canned
B=.114
Items Favorite Items
Placement NIn-Store Promotions Stocked
Favorite Boxed Items B=.235
B=.076
Internet Ads
Locally Grown
B=.073
Produce
B=.076
Organic Products B=.092
Blood Pressure In-Store
B=.083 Convenience
Machine
ATM Machine B=.143
CoinStar B=.072Creating Customers for Life
Step 2
Measure the customer, including buying behavior, spend and general brand interactions.
Customer A spent $ X on BRAND in June 2009.
Telemarketing
Surveys Customer B blamed BRAND packaging for choosing a competitors Campaigns
product in a recent survey.
Customer C makes a BRAND purchase on average every 3 months.
Client Customer D purchased 4 BRAND SKUs in the month before the 2008
Thanksgiving Sale promotion and 2 in the month following it. POS
CRM
Data
Customer E has a dedicated link to BRAND page on Facebook.
Step 3
Capture Customer Motive: Why do consumers buy the brands they do? What is the correlations between what consumers
think and what they actually do? What, if any, are the disconnects between opinion and behavior?
Investment considerations
I am a committed BRAND customer
I feel a sense of loyalty towards BRAND
BRAND is my favorite brand
Personal Connection considerations What Customer What Customer
BRAND is very responsive to my needs
THINKS DOES
BRAND will do anything to make me happy Functional Spends
I feel a sense of personal relationship with BRAND Personal Gives wallet share
Direct Becomes loyal
Functional Connection considerations Indirect Recommends
I know what to expect from BRAND
I am satisfied with my BRAND experience
I buy BRAND because I get a good value for my money
Step 4
Determining the link between customer and brand: RIM determines statistically significant links between historical
outcomes (customer spend, frequency of store visit, survey response, etc.) and brand association. It yields a model of
the drivers of strong invested relationships that allows brand managers to identify where to place resources and for
what potential gain.
Brand owners want to know how much of their customers RI is caused by parameters included in the 7 Ps: Product Quality |
Price Point | Advertising | Brand Perception | Hand Raising Activity (social media, loyalty clubs, etc.) | Channel | Other. These
represent the marketing and operational levers available to the brand owners. Brand owners can then target their efforts and
resources towards initiatives that directly impact RI.Creating Customers for Life RIM is Highly Customizable and Universal RIM takes a holistic point of view that includes both the functional (i.e., sales experience, interaction with customer service, product durability, etc) and the personal (i.e., I trust the brand, I feel good using the brand, etc). While the concept that relationships matter is not new, RIM takes general theory and pinpoints the component building blocks of deeply invested relationships, tying these to practical business recommendations and strategies. The results encompass the entire customer experience, empowering different segments of your organization to make better strategic and tactical decisions. RIM also helps with forecasting models to support improvement initiatives by giving insight at the granular level, paving the way to fully invested customers. Customer Loyalty Redefined Fully invested customers are loyal by any measure. They spend more, engage more often, and are virtually immune to other brands competitive advances. They overcome obstacles that deter customers who are simply satisfied or merely intend to be l o ya l . F u l l y i nvested c u sto m e rs a re p ro f i ta b l e a n d m a i nta i n a p e rs o n a l i nte rest i n a b ra n d s s u c c es s . For companies seeking to acquire and nurture customers that will be loyal and profitable over the long term, a new approach that considers their relationship investment in their brand(s), and the operational and financial drivers that affect this connection, is a necessary first step to building sustainable brand value. About TRGiSKY TRGiSKY is a market research, analytics and consulting firm that specializes in providing customer behavior and market insight. TRGiSKY has taken a leadership position in the development of innovative solutions for the management of customer relationships; from the first interactive customer follow-up program to the leading-edge Relationship Investment Model, the company has been at the forefront of market research for over 20 years. TRGiSKY is a wholly owned subsidiary of The Resource Group (TRG), a global provider of business process outsourcing and customer management solutions. TRG has over 50 locations in five continents and employs over 5,000 professionals worldwide. Contact Us To learn more about our market research solutions or the Relationship Investment Model please contact one of our market research experts. Steve Newman Executive Vice President & General Manager +1 240 377 7983 Suite 350 14401 Sweitzer Lane Laurel, MD 20707 www.trgisky.com
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