Imagine this weekly grocery-shopping scenario: Log on to Cyber-Foods, key in a few needed items, and you’re reminded to include Braun coffee filters, Green Giant corn, and Plax mouthwash. Place the order, pay via credit card or direct debit, and have the groceries delivered to your door 20 minutes after you get home from work. Now let’s suppose you’ve been ordering online for months–long enough for Cyber-Foods to have built a database detailing your shopping preferences and to have monitored the rate at which you consume products. Soon, a second automated grocer is launched, offering the same services, quality, and price. But for you—or any customer–to get the same customized service provided by Cyber-Foods, you’d have to spend months placing orders. So it’s in the customer’s best interest to remain with the original grocer, who’s now gained an insurmountable competitive edge.
Whether you sell groceries or create greeting cards, market footwear or financial services, you can learn from clients, customize your services, and beat rivals using information technology. It’s what authors Don Peppers and Martha Rogers call customer-driven competition in their latest book, Enterprise One to One (Currency/Doubleday), from which this article is excerpted. This new form of marketing was inconceivable to entrepreneurs a few decades ago. But today, with huge databases; interactive mechanisms such as online storefronts, PINs, and debit cards; and customized distribution tools, businesses can serve clients better and build loyalty.
Track What Customers Tell You
Scores of businesses could gain an advantage by remembering the things customers teach them. For instance, Burger King has been promoting itself for years as the “Have it your way” fastfood chain, but few take advantage of this service because the company doesn’t recall how any particular customer wanted it the last time. It’s more trouble to specify what your way is than to say, “I’11 have a number 3.”
But imagine the success of the Burger King that allows its customers to identify what their way actually is by entering personal identification numbers with each order they place. In time, individual clients could announce “I’ll have my number 3, please.” Now that would be a fast–rood company that has made it convenient for people to eat there.
Whether you run a large franchise or small operation, you will gain an edge on the competition by being customer-driven. Take the florist who, after a client has ordered flowers for his Mom’s birthday, e-mails a reminder the following year–in advance of her birthday; the travel agent who remembers that a client prefers window seats on planes, four-door sedans, and hotels with dataports; and the bookshop owner who, by keeping a record of a customer’s past purchases, knows she likes mysteries, self-help, and romance novels and sends a notice when a new book arrives.
Inspire Clients to Inform
For you to gain information about customers, however, you must ask them to expend effort to teach you. Consider The Custom Foot approach. This made-to-order footware chain based in Westport, Connecticut, asks its customers to spend about 20 minutes informing its system. First, the client places her feet on a scanning device that measures each foot’s contours. Next, she sits at a computer, answering questions about the type of wear she’s experienced on current shoes. Then, after an additional set of marketing questions are answered, the customer is ready to make her purchase decision.
Once the customer has selected a combination of styles and features from the firm’s database, the information is sent online to Custom Foot’s manufacturing facility in Italy. Three weeks later, the shoes are either shipped to the store for the customer to pick up or delivered directly to her home. Sure, the Custom Foot customer must take the initiative, but once she has, she’ll think twice before switching brands.
Increase Loyalty, Lower Your Costs
Until you build a solid base of established customers, you’ll have to attract new ones with discounts and two-for-one offers, which get expensive. That’s because even though your promotions were intended for new clients, any current ones–many of whom would have been willing to pay full price–may also take advantage of it. In general, loyal customers are more willing to pay regular price and less likely to look for discounts. Therefore, your marketing costs for loyal customers decrease.
If lower marketing expenses aren’t enough to convince you to become a customer-driven company, consider this: Repeat clients buy more frequently, in greater volume, and over a longer period of time. Your firm has a higher value to your best customers, because you’ve reduced their risks. They don’t need to search for a new source, to qualify a new service, or to waste time making a decision. In short, they’ll pay more.
A perfect example is Streamline, a Boston home shopping service. By closely monitoring each of its subscriber’s purchases, the company knows exactly which tomatoes to select for a customer’s pasta, what videos his or her kids can watch, and other detailed information. With every order, Streamline is locking in the loyalty of subscribers by building a database. And because of this, the company can expect a larger portion of customers to be willing to pay extra for this convenience. To structure its fees fairly, the company charges subscribers who remain with the firm–and thus have a larger database–a “data handling” fee. What’s best, this approach is quite different from the unfair practice of charging the faithful customer full price for the exact same service that new customers get discounted.
Add Customized Services
Picture your company as an onion, with layers of ancillary services and features you could supply customers who purchase your core service. Besides building stronger bonds, you can beat competitors by finding out…
* how a customer likes a service delivered;
* when he or she wants to be invoiced; and
* what software the client prefers financial statements and other reports to be formatted in.
If you’re a building contractor, for example, it’s a safe bet that new homeowners will need insurance, mortgage financing, legal help, and leads to home inspectors. If you run a dry-cleaning plant, why not hold on to the extra buttons and material swatches that come with a new suit or dress? That way, when a customer’s suit needs repair, he doesn’t have to dig through drawers to find these items. Even better, offer a used-clothing donation service for clients. “Tired of those old dresses? Bring them in, and we’ll donate them to charity for you–and send you the tax receipt.”
In Colombia, Hotel La Fontana has locked in the loyalty of its international business customers. Guests simply inform the hotel that they have a trip planned to Bogota, and the hotel will set up their appointments in advance. There’s also a lawyer on staff for guests with such last-minute legal issues as customs regulations and tax transfers.
Indeed, the focus of your company should not be to find more customers, but to find more services for buyers. And if clients’ needs fall outside your core business, form alliances with firms that cater to similar customers. Capitol Concierge, for example, was launched to offer concierge-like services to office-building managers in and around Washington, D.C., allowing Capitol’s clients to enhance their offerings to their customers. Mercedes owners who lease their cars can benefit from Capitol’s services as well as Alamo Car Rental’s frequent drivers. There’s one caveat: This customization must take place within your enterprise; if the customer retains these services for himself, then your leverage could vanish.
Unfortunately, some businesses have nothing to offer clients at the time of the sale, even if they aligned themselves with noncompetitors. In that case, entrepreneurs must create a stream of value after the sale.
Consider the enterprising home builder who, to generate referrals, calls each customer a week before his or her one-year warranty expires and offers to inspect the home for any persistent problems. This builder is locking in customer loyalty–as should you, no matter what media you use to sell your services.
Customer Service in Cyberspace
The Internet is an inherently interactive medium. But at many sites, visitors see the same pages, no matter how many times they’ve been there. The sad fact is that most companies use Web sites to present what’s essentially “brochureware”–information taken almost verbatim from written, hard-copy documents and presented the same way to every customer.
A better way to customize your site to individual visitors would be to assign an identification number to each first-time visitor. Thereafter, each of those customers is managed differently based on his or her online interactions. Now combine this with a tool that allows the host to differentiate messages and visuals based on prior prospect data, and business owners can tailor home pages for various types of customers.
With such a system, small-business owners can create a dialogue using the Net. Here’s how.
Don’t ask for everything at once. Dialogue is not a onetime occurrence; it’s a series of events linked through time. And enterprising entrepreneurs will have an information system that points out the next logical question to ask customers when they call to schedule an appointment, when they call to ask a question, or when they call just to complain. Inventory your customer interactions to ensure that every action builds on the previous one.
Let the customer choose. Customer-driven companies allow clients to communicate through a variety of media. And your goal is to accommodate as many different ways as your customers might desire. For instance, do you know whether this particular client prefers to be mailed, e-mailed, or called? Do you know the best time and place–at home, in the office, or in the car–to call? If a client wants to be called on Saturdays, be sure this information is in your database.
Make the customer’s life better.
Selling with technology works only when the customer is inconvenienced less, his life improves, and he therefore places a higher value on your business services.
Establish a privacy bill of rights.
To build a database, you must get clients to willingly participate in a series of more and more intimate dialogues. To do so, you should adopt and publicize a policy that includes:
* the kind of information you generally need;
* the benefits clients derive from offering their time; and
* the things you’ll never do with customer information.
In the end, there’s no way to prevent competitors from matching your product, service, and price. That’s why you must excel in your execution. But there is a way to prevent rivals from copying your innovation. And that’s called customization.