blog: customer-centric methodology

The Religion and Politics of Branding

Credit to Chris Koentges for his article entitled “Can a brand speak to both the lunatic left and right? There is plenty of evidence of brand partisanship from political, social, environmental or religious perspectives.

The question we should really ask “what is the implication of defining consumers by their partisan leanings?”


There are many characteristics shared between opposing factions that gave John Lennon a reason to believe in the Brotherhood of Man: Hassidim use cell-phones , anarchists eat potato chips, and most men with two legs put on their pants one leg at a time. If you take religion, countries or politics out of the equation we have more in common than what divides us.

As a marketer we have some choices in how to align to customer values. Do you define a segment by what sets it apart, or by what unites it? Take single, overworked single Moms on low income as an example. If research states that 70% of them have strong socialist leanings, do you press that button for stronger brand affinity – or do you stay true to the broader human condition? If your competitor takes aim at a customer segment by sponsoring a cause, do you react, up the ante, go in a different direction?

There is no right or wrong except by measure of results. Some products will relate better to an ideology and some to a basic human need, but brands don’t determine personal values. So do you have a rule of strategy, or do you just play along with an opportunistic grin.

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The Government is the Nanny of the State

It could have been the worst teaching night of my experience, talking for 2.5 hours about the role of government in business to first year Under-Grad Business students. (okay, we took a five minute break). It ended up not quite so bad after I hit on the metaphor of the Government being the Nanny of the State.

When the children play nice, Nanny gets on with her knitting. Catch a boo-boo? Run to Nanny. Misbehave? Watch out for Nanny. Playing the bully? Nanny takes the bully down. Best case scenario, Nanny stays away until it’s time for treats.

The consensus of the class was: “Keep Government out of business as much as possible.” “Only as a last resort.” “Well, if the economy is completely failing, then of course we do need Government to step in.” I will not rant politics because the general consensus is “Right now we need Nanny”.

One part of my presentation to take home for the customer-centric marketer was ‘The reason why some industries self-regulate: to avoid the imposition of external regulation’. The ad industry is a good example in many countries, where advertising standards are self-adopted, rather than deal with the government as the ombudsman of integrity in advertising. Financial markets were also self-regulating (:o(.

The key point to be made is that, when an industry regulates itself, it generally does so with the goal of protecting itself from the consequences of being regulated from elsewhere. Regulation that is seen to be done, is not designed to protect the average Joe. It protects the industry it serves from a greater imposition of authority. Kids playing by the rules to keep Nanny out, rather than to be really, really fair. Did I mention that Financial markets were self-regulating (:o(

I believe increasingly, that the standards by which all commercial activity will become judged is through the regulatory lens of the CUSTOMER. The customer represents the primary moral imperative to ensure business continuity, customer frequency and loyalty. I wonder how the class would have reacted if I had inserted the word CUSTOMER in place of government throughout the entire presentation? We are not so resistant to the actions of our customers within private enterprise as we are to the Nanny of the State..

The Nanny of the State certainly has the customer in mind in times of crisis. Stimulation of retail activity, Keynesian economics to prime the pump of consumer spending et al. When will the penny truly drop that, by applying the right integrity and values within our business and our marketing, we can bypass the Government and do very nicely?

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The Fool’s Gold Rush

Early adopters are frequently thought to be the leading edge of the next mammoth venture, inviting speculators and venture capitalists to whet their expectations for the next iPod/iPhone/Blackberry revolution. Yet, in many cases early adopters turn out to be the only segment that values the product or service and the venture stalls beyond this low-hanging fruit. This is probably not what a myriad of high-tech hopefuls want to hear right now. But I am not the voice of despondency. The meltdown did that already. I am saying that there is a way to eliminate the threat of over-promising and getting burned.

How does the over-promising come about? The goals-oriented marketer defines a market, measures performance based on test marketing (or early adoption) and extrapolates based on an exponent of the total market volume. Call this building Castles in the Air, based on a model built on the ground. We love to do it and dream of success delivered through incomparable genius. It’s exciting, and on paper it works for accountants as well as marketers. Take a business model, then maximize it to the power of ten or a hundred, or a thousand. Be as greedy as you dare. “Gee! If we only tap into 5% of the total market we’ll be gazillionaires. And our product is 25 times better than anything out there.”

How to avoid getting burned: The customer-centric marketer researches the values a customer has in regard to a particular product or service, and then defines the market potential according to those values.

Example: Grocery Gateway – goals-oriented approach: online order, home delivery, early adopter uptake is great, shows significant growth potential. All things being equal, 2 million shoppers in the GTA. Wow! Sink $30 million dollars into this and see where the rainbow ends.

Result: Grocery Gateway is now the private property of the Longo’s chain with 15,000 claimed customers and a constant viability issue how to make more money. Could be lots of reasons: logistics, costs, customer experience. The point is, when it launched, the world thought that Ship of Grocery Retail had embarked on a Dramatic New Course. Reality is that it is a niche segment for which the early adopters are probably still loyal customers. Plus $30 million invested. I think it is a good idea, but that all other regional online grocery delivery businesses are marginal players. Perhaps, one day, like the funeral home, school bus or waste management businesses some entrepreneur will buy each in turn and figure out an economy of scale to make a ton of money -– but on such thin margins I doubt it. More likely it will be the customer database that has more value than the retail business, and Longo’s that holds onto it.

Had the analysis been using a customer-centric methodology, the research would have come out differently, distinguishing between those who like to shop, those who don’t trust the Internet, those that are comparison shoppers, those whose strange work ethics prohibit ordinary shopping habits, those who are agoraphobes, insomniacs et al. And the answer might have been “You need $4 million” and there are only 15,000 potential customers for this service. $30 million for a GTA based distribution franchise sounds chunky to me. I think they were hoping for 150,000 customers – less than 10% of the market. Instead they have less than 1% of the market.

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Loyalty and Price Elasticity

In recent marketing history the belief was formed that rewards increase customer retention. Up to what point is the value of the reward negated by a price increase? Forget rewards – with any price increase, what is the melting point of intrinsic loyalty?


Hypothesis: Wal-Mart unilaterally increases its pricing by 15%. Could the Wal-Mart brand handle a 15% bump in prices?

Fact: gasoline goes up universally 50% and is absorbed. At 100% it starts to topple one of the world’s biggest companies. What do you do next?

Experience: your insurance company surcharges you on your dental plan because your dentist increased his fees outside the range of their policy limits. Do you swallow the difference or find a cheaper dentist?

Air Miles Rewards offers to double its rewards on select brand name products. Do you buy them or go for the store brand at the lower price?

Your hair-stylist: on whom you depend doubles his/her fees. To what extent is that reflection in the mirror worth the increase?

The answer to all of these questions depends greatly on to what extent price was a factor in the original decision. In the blog entry “Price, Shmice!”, I posited that Price is an indicator of value, but marketers should evaluate the decision criteria that precede it before they start messing with their prices, and presented the following as predetermining factors ahead of price valuation:

Achievement: how well will this decision help me to achieve my goals? Convenience: how easy is it to engage or acquire this product or service? Comfort: can I use this product or service easily or with peace of mind? Esteem: how will I be respected for this decision (by self or others)? Pleasure: how will I derive pleasure from the outcome of this decision? Trust: how can I trust that all my expectations will be met?


Wal-Mart could not handle a unilateral 15% increase across the board because the trust that it has built up with its customers is based completely on price-point. Wal-Mart doesn’t cheat like some other discount retailers. All its products meet its discount values standards and any departure would breach the trust of its customer relationship.

Gasoline is oligopolistic. Come one price increase come all. But there’s no love lost. If you were to put your pump price up $0.001 cent above the gas shack down the street, watch and wave your kishkas goodbye, as no self-respecting driver will want to be seen in your station. There is zero loyalty now in the gas station business and I am bona fide PetroPoints customer. 2 years ago I would have given them a penny premium. Not any more.

Your choice of dentist has nothing to do with price. Trust, convenience and comfort are important values in play here. The surcharge on your insurance will only affect you if it brings economic hardship. You would sooner look for a better insurance plan.

Air Miles: doubt it. Most consumers put off future gain in favour of immediate gratification. That’s why personal savings are at an all-time low, credit card debt is an all-time high and most people fail to keep to their diet. If you are pre-disposed to buy the branded product and the rewards come gratis, you should buy in bulk while the promotion lasts, giving the branded product a false sense of accomplishment and the likelihood of repeating the mistake when sales falter over the next 3 months.

Hair-Stylist: offer to sweep the floor for them, or spread the visits out by a week or two. If it costs $300.00 for you to have your hair done with highlights and the whole bit you will see the increase as more reflective of the true value of you than the stylist. Esteem, achievement, pleasure, trust, comfort all come with a successful trip to the personal image reinvention store.

The customer-centric marketer will seek to constantly over-deliver value relative to the price. This is insulation against price increase, as the increase will then only reflect true commercial value. It is the quintessential value-add. As the price increases the customer-centric marketer will create more value-add offsets to the price escalation. Most marketers don’t put the customer at the center and when the prices increase there is no elasticity. Loyalty rewards are an artificial stimulant to fabricate a customer retention framework but they don’t offset price increases.

I am not an opponent of rewards. I simply don’t regard them as effective incentives for loyalty. As long as they don’t cost anything I will enjoy them. But increase the cost and bye-bye. I reward customers because I believe that they deserve them, not because the reward will keep them loyal. The customer-centric marketer will match price elasticity with values for long-term customer retention. That is what is meant by “Customer-centric marketing increases loyalty, frequency and continuity.”



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