Building Customer Relationships by Design
Editorial by Ted Mininni, President, Design Force, Inc. (www.designforceinc.com)
The ultimate goal of corporate marketing departments is to connect with and cultivate meaningful relationships with consumers. It takes time to build brand relationships, and executive management must commit to this for the long term.
Retailers that sacrifice long-term relationship building for short-term top-line growth are short-changing their businesses and customers.
Consumer-directed campaigns (AKA sales promotions) drive traffic and sales in specific retail locations. While necessary, the transactional, sales-oriented promotional plan should be only one component of a balanced consumer campaign strategy.
The ultimate goal of consumer campaigns should be relationship building because that is what creates brand loyalty and equity over time.
Relationship-Building Promotions
There are four evolutionary phases in promotional brand building: Brand Initiation, Brand Involvement, Brand Affinity and Brand Devotion.
Every consumer relationship begins with Brand Initiation. This involves reaching out to the appropriate, targeted consumer demographics with the right message.
Brand involvement requires more extensive campaigning, gets more personal with the consumer, and explains product or service features/benefits in detail. By creating promotions that uncover what I refer to as the product’s “Enjoyment Assets,” positive consumer experiences with brands lead to emotional connections to those brands.
Brand affinity is the third phase of relationship building. Here, the relationship between product and brand has deepened. Smart marketers work actively on strengthening the relationships they have with existing customers, even as they seek new ones via transactional campaigns.
Brand devotion is very difficult to obtain; even harder to sustain. If products/services continue to deliver the brand promise, with unfailingly positive or enjoyable experiences, they cement emotional bonds with the customer. When corporate brands support worthwhile causes, charities, or tie into cultural icons like The Nature Conservancy, Disney, or the NFL, they create devotion among legions of fans.
The Home Depot illustrates my points. In spite of its giant corporate size, the retailer – 1900 stores and $70 billion in sales in 2004 – has an easy-to-shop format and neighborhood appeal. Knowledgeable salespeople inform DIYers with ease, elevating the customer experience.
John Costello, former EVP of merchandising and marketing, explained how the retail giant’s research led to building stronger relationships with its customers, acknowledging in recent interviews that even though the retailer knew 50 percent of its transactions were with women, the company was still marketing itself far more aggressively to men.
Since women initiate home renovation projects in large numbers, in-store “Do-It-Herself” classes, initiated in 2004, specifically targeted women. In a little over a year, 200,000 women signed up for these classes; a whopping 97 percent claimed they would attend more! By publicizing the workshops in local media and on its web site, The Home Depot has enabled women to easily sign up and give feedback on their experiences.
Additionally, The Home Depot has sponsored Kids’ Workshops. The company’s sponsorship of NASCAR is more than a sponsorship opportunity; The Home Depot also offers interactive activities and contests for kids at the racing sites.
In order to better educate customers: in-store kiosks are filled with product spec sheets and brochures explaining features/benefits of appliances, tractors and other category products. The corporate web site offers customers information online for every appliance category, making it easy for customers to research in advance of purchasing. This saves time for salespeople and customers alike.
When it comes to building customer relationships, The Home Depot has gone beyond offering special discounts and everyday low pricing. By mining customer data and engaging in meaningful marketing research, The Home Depot should continue to pioneer consumer promotional campaigns like these to build long-term brand loyalty and equity. And that is where the real profits of retail lie.
Moderator’s Comment: Do you believe many, perhaps even most, retailers are sacrificing their ability to build equity for their brand by focusing on short-term
sales promotions? Which retailers have done the best job of finding the right mix between sales promotion and brand building? Which retailers have done the best job of continuing
to build their brand even while engaging in sales promotions? –
George Anderson – Moderator
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9 Comments on "Building Customer Relationships by Design"
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Without question, Wal-Mart has done the best job of building their brand. They have a clearly staked out positioning as the lowest price all-the-time, they deliver the low price benefit to the consumer consistently, and no competitor seems capable of challenging this positioning. They have paired this benefit with greeters and a smiley face and real employees in their ads to put a human face on the company. Simple and hokey, but effective. Further, since they have a cost advantage, they are getting superior financial returns (high return on assets compared to other retailers).
With all due respect to Mr. Mininni, he’s presented the typical ad agency pitch that’s a little out of touch with reality. As a consumer, I don’t want a “relationship” with retailers or consumer brands. I just want a clear benefit — a reason to shop or use the brand.
Even though Wal-Mart has built a Brand, not sure that the ‘loyal’ shopper is satisfied. Has Wal-Mart made a quarterly
gross profit number yet? It has missed a number of times on the top line. It is hard to build on low pricing without an eventual decline in shopper loyalty.
As for the supermarkets that do have the needed balance of sales promotion/pricing, and are creating the engagement with shoppers, plus keeping their point of difference in front of the market’s consumers, Publix does it best! Yes, you can add Wegmans, the old Dominick’s Fresh Stores, Ukrop’s, Harp’s, and Nugget in northern California.
But, someone mentioned the key. The top executive and his
first line reports have to commit to the program, if you
will. But it is more than commitment; it is demonstrating
every day their support, and belief. Now we are speaking
about the hardest thing to gain; adjusting the culture. Hmmmm
The handful of retailers that are doing a good job in this arena have already been identified. Retailers need to think like a brand and act like a retailer. Branding does not differ by category (product, retail, person, etc.). The key branding question is does the product or service occupy a clear, distinct, and desirable place in the mind of the target market? What actions must be taken to achieve this unique position? The idea of building a customer relationship is the result of a great branding effort, not a goal in itself.
BrandManager certainly does seem to grasp the essence of branding. Look at the retailers most often cited here as the exception to the rule. Whole Foods, Trader Joe’s, Home Depot — all have one thing in common, a singularly focused positioning on a tangible benefit. “Natural”, “Unique”, “Everything Home”. All of us (and more importantly, consumers)can “name that retailer’s tune in one note”.
And then the granddaddy of them all “Wal-mart”. Perhaps the best single brand in the world in terms of global brand equity and value. And they built it all on a fanatic, maniacal (some might say demonic — but those are just now defunct retailers)focus on communicating and delivering low price.
Now the mystery question. How does Wegman’s do it? Does everyone who shops there know Danny by his first name, too? Is it as simple as “Stew Leonard’s on steroids”?
During the middle of recent day-long seminar, an independent grocery describing his brethren, said, “We chase dollars rather than investing in customer relevance.” Perfect! Retailers understand tactical short term sales. They don’t understand or execute long term strategic differentiation strategies!
Retailers are extremely focused on daily sales numbers. Most don’t have the patience required to build a brand. Barnes & Noble, particularly the bricks and mortar division, has built an excellent brand. I noticed that Home Depot has a great alliance with the AARP, which has 30 million members. Home Depot mails coupons to AARP members, recruits employees via the AARP web site, runs monthly ads in AARP magazines, and publicizes classes for AARP members. No other major retailer has made a significant alliance with the AARP, yet many non-competing categories are up for grabs.
Karen mentions Trader Joe’s–a perfect example of building customer loyalty. This company has a rabidly loyal customer base that spans several demographic groups who are almost cult-like in their devotion.
Why? Because the stores offer an unusual array of high quality, reasonably priced private label products which account for 85-90% of everything on the shelves. The products brand the store and create an unheard of level of consumer loyalty. And Trader Joe’s does it without sales and virtually no advertising.