Customer Insight-Driven Relationship

Customer Insight-driven relationships help strengthen brands to anticipate and deliver against customer needs and expectations. Consider the extremely high interest generated by a pilot brand relationship program implemented across six different dairy brands in France. Of the 4,000 consumers selected for the pilot program –

• 65 percent declared the brand relationship program to be a tangible benefit because it showed the brand’s willingness to provide recognition for them as highly valued customers.
• 78 percent looked at the brand relationship program as proof that the brand wanted to better meet their needs.

Technology now allows both the collection and processing of data on individual customers in many industries as well as the detailed evaluation of supply performance. Leading brands use “customer friendly” technology to become easier to do business with and to achieve closer and more interactive communications with customers. These brands also use technology to improve the efficiency and effectiveness of marketing processes that add the most value for the customer.

New technologies such as the Internet have opened a whole new way to reach customers, and the growth in the use of these channels over the past 18 months has been truly explosive.

The idea of relationship marketing has been around for some time, but a new area of Marketing Automation Systems (MAS) is emerging that has the potential to radically change the brand marketing processes and advances the concept of one-to-one marketing from theory to reality. These new MAS are designed to automate the marketing function, enhance its efficiency, and tie together many of the promising, but often limited, technology solutions that have been emerging in marketing over the last several years.

The ability of the brand to generate incremental and sustainable value is related to its ability to

• Differentiate by providing the basis for non-price competition (Davies 1992), thus commanding a premium price.
• Secure a customer franchise by establishing a strong preference for its relative added value, thus maintaining and growing its average share of customer.
• Expand relationships with its customers by developing an affinity with them in order to sell other products/services (i.e., cross-selling, add-on selling).

Extending the case of umbrella branding (Tauber, 1988), the actual relationship between a brand and a customer can be considered to be an “umbrella” relationship. This relationship makes it possible for the brand to develop new relationships by “monetizing the equity” of this existing umbrella relationship.

Next Evolution of Brand Management

Earlier decades of brand management focused on generating trial and high share of requirements (i.e., the product’s market share for a specific consumer). This concept was known as brand loyalty. If a brand had a high share of requirements, then its brand equity was high. It is important to recognize that high share of requirements (often mistaken for loyalty) is transient. If the sole focus of a brand is on high share of requirements, the brand is highly vulnerable.

The survey has revealed that even consumers showing a high share of requirements could enhance their already very positive perception of that brand through an effective brand relationship program. It is important for you to recognize that “real” loyalty is a more complex concept than share of requirements. Both preference and attitudes must be factored in.

Linking the Brand and the Customer Together

The relationship between a customer and a brand is an exchange relationship. Consumers enter into a relationship on the basis of expected equity and the desire to increase the predictability of exchange outcomes (Peterson, 1995).

The length and strength of the customer relationship is a result of the relative value the customer perceives in the brand; in other words, the implied utility associated with the product features, the tangible value of these features, and the intangible value the consumer assigns to the brand name. The utility is a function of the capacity of the brand to consistently deliver an experience in alignment with the customer’s expected equity. Consequently, it reflects the convergences of the customer’s perceptions and expectations. In summary, the stronger the individual relative utility, the stronger the preference, the higher the share of customer, the longer the lifetime and the greater the lifetime value (LTV).

Customer Equity Is Driven by Brand Equity

The more extensive, comprehensive, and intensive the preference is, the higher the customer and target customer base-wide average utility will be. This also results in a higher average LTV. The current and future revenues or profitability derived from a customer by a brand also reflect the willingness to pay a premium in terms of price and/or time. The stronger the relative utility of a brand, the stronger the consumer’s willingness to pay a premium. The LTV of a customer reflects the influences of the customer’s preferences and situational constraints (e.g., promotion, availability, location). The stronger the brand equity, the higher the LTV

Customer-Centric Revenue Management

The heart of Brand Relationship Management is customer- centric revenue management, which optimizes profits for each customer relationship based on the price a customer is willing to pay for his or her perceived value. This is an important concept for brands that are too focused on Product Revenue Management instead of Customer-Centric Revenue Management. In transactional relationships with tens of millions of consumers, analysis often reveals that just a small percentage of the customer base is truly profitable. By refocusing some of its marketing expenditures on that part of its customer base, a brand may significantly increase both its revenues and turnover.

Individual revenue management decisions must consider the value of the individual customer to the brand in terms of future revenue potential and cost to serve. This new customer- centric revenue management philosophy has a profound effect on all aspects of traditional Brand Management, including product offering, pricing, market communications, and so on.

Thus the focus shifts from the product or service to the relationship developed with the customer.