The role of the customer: Asset or partner?

Jul 01, 2009 9:30 PM  By

Retailers have long viewed customers as hard assets — a valuable commodity we smugly thought we owned. For decades, we used our customer files as a means of determining the value of our companies when seeking loans or putting them up for sale or liquidation.

In cataloging, where such hard assets as real estate and fixtures are a relatively small part of most businesses, we “milked” our house file when times were tough in hopes of generating more income from our best customers, our most valuable asset.

We derived income from our customer files through list rental. If brick-and-mortar retailers did not rent their house files, they considered their assets to be leases, inventory, buildings, property, fixtures, furniture — not customers. A store’s list of propriety charge-card holders was usually viewed as “debt liability,” unless the retailer moved the management of the credit file to an outsourced specialist. In that case, the retailer would transfer all management — including risk and liabilities as well as possible profit.

Viewing customers as assets has usually meant evaluating their worth in the marketplace in terms of dollars and cents. Even lifetime value studies tend essentially to capitalize customer worth as future earnings or to justify dollars that may be spent acquiring new customers.

Rarely are “soft assets,” such as loyalty and good will, factored in because they are so difficult to quantify.

The problem is, seeing customers strictly as a commodity has warped our relationship to them. It has often blinded us to treating our customers as a valuable resource, where there is a give-and-take partnership.

When we start to initiate a dialog between the buyer and seller, we open up more possibilities for communication and engagement. This in turn creates greater monetary value in the long term.

We’ve recently started to call retailers who place a high value on the role of customers “customer-centric” companies. The term indicates the central role customer information and input plays in marketing, merchandising and customer service.

Now, however, customers are demanding an even greater role in determining the nature of their relationships with all types of companies, but particularly with retailers.

As many marketers have pointed out, 2001 was a watershed year — it marks the turning point when customers began demanding a more active role in the retailer/customer relationship. The Yankelovich Monitor “State of the Consumer 2001 Report” indicated that, over the prior decade, power had begun shifting from the marketers to consumers.

And in each subsequent year, the customer has gained greater power and, thanks to online reviews and blogs, a louder, more insistent voice.

ASK FOR CUSTOMER INPUT, THEN ACT ON IT

Companies do not need to implement elaborate or state-of-the art customer review processes. And they don’t even need programs to encourage customer input in all business areas, including co-creation of product or policy development.

What’s more, retailers don’t necessarily have to monitor blogs and social media, even though that’s a good idea. Asking for customer input can be relatively low tech. But when you ask customers for their help or solicit their ideas, you need to act on their input or risk alienating them.

In other words, when you think enough about the customer, you ask their opinion first. You do not make assumptions about what they want. Following this advice is sometimes difficult, especially when retailers need to make systemic or procedural changes in business operations.

But if companies value customers as partners — not as assets — such decisions override the short-term difficulties and costs and look instead to long-term customer satisfaction, loyalty, and a delayed payoff.

Although it’s ancient history now, here’s a business case taken from the early ’90′s at Bloomingdale’s. The lessons of this case still apply because procedures around point of sale (POS), whether at a Website’s shopping cart, in catalog phone sales, or at the cashier site — any POS customer touch point — still predominate.

Bloomingdale’s decided to open a store in the Mall of America in Minneapolis, where there were already many holders of the Bloomingdale’s proprietary card and several thousand other customers whom the credit department had prequalified. As part of prestore opening plans, Bloomie’s conducted focus groups with a sampling of the new card holders.

It discovered some unexpected customer attitudes that would require a major replanning of the personal-check POS approval process. Even though these customers held cards, they said that they planned to write checks. Why? Because they considered credit — even if it were paid in full at the close of the billing cycle — to be debt and therefore unacceptable.

The store operations planners determined that check writing at POS would cause long delays. First, long lines would result while cashiers explained the check approval process.

Then there would be longer check approval lines at customer service where checks were approved, plus the possible loss of the customers due to inconvenience or the prospect of another line back at the original POS after check approval. To expedite the process at this store, Bloomie’s revised the check-writing policy and the cashiers’ training.

Although check-writing days at POS may be over, the point is that POS is a powerful customer touch point. And it’s often undervalued by marketers because the customer experience does not take precedence over operational issues.

Just look at the high abandonment rates at Webstore shopping carts as a case in point. What may be cheaper or easier for you operationally may just be the proverbial straw that drives customers to other sites, stores or catalogs.

Previous Page: The Customer as “Individual,” Not Just a Transaction

Previous Page: Ask For Customer Input, Then Act on it

THE CUSTOMER AS “INDIVIDUAL,” NOT JUST A TRANSACTION

Some marketers really get it when it comes to thinking that their customer is more than a purchaser. A few relatively low-tech examples taken from all channels include:

  • Rest rooms for families, with changing tables in both men’s and women’s rest rooms
  • Comfortable chairs for the nonshopping spouse
  • No-charge coat and luggage rooms
  • Surprise premiums and discounts on birthdays or anniversaries
  • Personal or personalized follow-ups — phone calls from personal shoppers, personalized e-mails asking about the customer’s recent purchase
  • Phone and e-mail reminders for holiday shopping, records of previous gift buying with the names and addresses of the giftees already in place
  • Arranging for deliveries within a tight hourly time frame, scheduling deliveries after 5 p.m.
  • Specified delivery and dates of gifts or cards
  • Specialized convenience services:One Swedish supermarket chain offers working customers who use public transportation and shop at lunch hour the convenience of putting their purchases in a refrigerated locker to be picked up after work
  • Changing merchandising based on customer feedback, like Best Buy’s recent decision to offer private-label electronics, and many more.

Knowing your customers’ habits and preferences, which you have obtained either through qualitative or quantitative research or database analysis, and acting on the information may give you the edge over your competition.

Customers are individuals and their experience of you most often involves the so-called intangibles — how you affect them by your customer service, the ease of ordering from you (online, at POS, or via phone), the channel and frequency you are using to market to them, and the manner in which you recognize them or settle any disputes.

As customers assume more control in the customer-retailer partnership, don’t be surprised if those hard assets you thought you once owned suddenly assert themselves, often loudly, when you override their individuality in an effort to cut costs.

Francey Smith (francey@franceysmith.com) is president of retail marketing consultancy Francey Smith & Associates.

ADVERTISER INDEX

Receive supplier information fast using Multichannel Merchant Advertiser Index

ADVERTISER PAGE PHONE WEBSITE
Dydacomp 5 800-858-3666 www.dydacomp.com/mmm
Endicia 19 800-576-3279 www.endicia.com/mcm
Escalate Retail C3 888-777-6811 www.escalate.com
FedEx SmartPost C4 800-GoFedEx www.fedex.com/us/smartpost
Global Response 12 800-537-8000 www.globalresponse.com
InOrder Enterprise Management System C2 888-667-7332 www.getinorder.com
MeritDirect 3 914-368-1000 www.MeritDirect.com
NewPage Corporation 15 877-855-7243 www.NewPageCorp.com
NXTbook Media 4 866-268-1219 www.nxtbookmedia.com
Search Engine Strategies 2009 37 www.SearchEngineStrategies.com/sanjose
U.S. Monitor 18 800-767-7967 www.usmonitor.com
U.S. Postal Service 11 www.usps.com
Verso Paper 29 800-258-8852 www.versopaper.com
Walter Karl, Inc. 6 845-620-0700 www.walterkarl.com
Zephyr Media Group 33 847-328-1519 www.zephyr-media.com