2011 was another very difficult year for UK PLC and indeed for many parts of the
Eurozone and North America. It was the year that debt built up over decades finally started to become unsustainable and in which, according to Sir Mervyn King, Governor of the Bank of England, the liquidity crisis which developed during the credit crunch became a crisis of solvency. Governments introduced ‘austerity’ measures and the latter part of the year was characterised by almost daily speculation about whether Greece and Italy would default. Sentiment on the money markets was consistently negative, levels of confidence fell sharply and consumer behaviours were increasingly driven by fear. Many consumers reacted by reigning in their spending and focused instead on reducing debt and the result was that businesses faced very challenging conditions. The continuing decline of high streets in towns and cities illustrates well the difficulties – and as recently as last week Hawkins Bazaar and also Past Times entered administration, and La Senza announced its intention to early in 2012.
And given that many forecasters seem to think the coming year will be even more difficult, the need for every business to engage with its customers is greater now than ever. It will be a core part of the strategy for every successful business and indeed may be the difference between survival and failure.
Customers want to feel good about every element of buying a product or service. They demand a
positive experience and if they don’t get it they will simply go somewhere else. The traditional marketing mix (Product, Price, Place, Promotion) are not enough, they don’t reflect the overall customer experience. Process and People must be added.
So to ensure true customer loyalty every business must provide:
· the right product
· at the right price
· in the right place
· using the most suitable promotion
AND
· using a process which is designed around the customer
· by people with the right skills
Courageous companies will pursue changes to process and people, despite them being the
most difficult to change. Most will focus purely on product, price, place and promotion.
So what things can companies do to deepen engagement with their customers in 2012? Here’s what I see as being the main areas of opportunity:
1. Changing the recipe
Thinking about the traditional marketing mix first, the key activity will be deeper and
more regular price discounting in order to maintain revenues. The companies who do so will be forced to also reduce costs in order to protect margins.
This is a short term strategy with obvious flaws.
Other and perhaps more innovative approaches will include:
Place
Online sales will continue to grow but there will also be more experimentation with different retail formats as retailers seek cheaper, smaller and sometimes temporary ways to respond to identified opportunities. This will also include off-premises sales, despite the increased EU regulation relating to direct sales.
In addition collaboration will rapidly increase as businesses try to find opportunities to partner with complementary businesses for mutual benefit.
Promotion
In the UK in particular there will be a huge focus on the 2012 Olympics and to a lesser extent on the Euro 2012 Football Championships as a promotional opportunity for businesses. We’re likely to see some weird, wonderful and sometimes very tenuous links to these events.
Smarter organisations will look more broadly at what can be done and will consider other
opportunities:
2. Employee Engagement
John Lewis has consistently bucked the trend in retailing in recent times and I read again just this morning of it's excellent Christmas sales results. Curry’s electrical superstores has started to create a reputation for knowledgeable staff who provide excellent service. Why? The answer is that they have put their people at the heart of their strategy. John Lewis is owned by its employees, who are partners in the business. It is one of the few businesses to have a written constitution, which places the happiness and well-being of its partners at the heart of the business. Partners know the aims of the business and are committed to achieving them. Curry’s identified that its success was dependent on the help and advice customers received in-store and the way it was delivered by their people. So they invested in a training programme for their people and the results saw uplifted sales of up to 15% through Curry’s stores.
The latest research shows that truly engaging customers is dependent on first
engaging employees. It’s a pre-requisite, it’s what the great companies do, engage their employees first, knowing that they will in turn engage customers. It isn’t easy - but it is
worth the effort.
3. Customer Involvement
One of the benefits of having engaged and knowledgeable employees is that they can overcome weaknesses in processes. Executives in most organisations will say, and probably truly believe they have processes which are customer friendly but in reality, the vast majority have designed processes which are for their benefit and the customer has to comply with them as a condition of buying. It’s true that customers will forgive if the people they deal with overcome the problems inherent in the process – although there’s no substitute for truly designing processes around the customer. How best to do that? Involve customers and ask them how processes should operate in order to work most effectively for them.
4. Imperfectionships
One of the most important elements of the relationship any organisation has with its customers is trust. It’s critical to how customers feel, is difficult to win and very easily lost. Ask executives from UK banks about how difficult it’s proving to be to rebuild their tarnished reputation. The problem is that the actions required to do so are counter-intuitive. Rather than covering up problems it requires a level of honesty that’s been rare in most companies in recent years.
In the early 1990’s a mortgage lender analysed levels of customer satisfaction amongst new borrowers and found that it seemed to be slightly higher for customers who had experienced a problem which had then been resolved. To establish whether this was coincidental they then ‘invented’ problems on a small number of cases, rang the customer to tell them there had been a problem but that they’d overcome it but in the interests of openness they wanted the customer to be aware of it. What they found was that satisfaction levels of such customers was noticeably higher.
Despite the temptation to introduce this as a standard approach, the organisation decided it was unethical, the trial stopped and was soon largely forgotton.
Years later, and with customer mistrust at all time high levels, there is a real opportunity for organisations to create customer relationships built on trust - by being human, being honest and admitting mistakes. The evidence suggests that customers will forgive and providing they’re able to see a genuine commitment to put mistakes right and prevent them happening again, will be more satisfied and more loyal than they were before.
5. Community Engagement
The phenomenon of social networking continues to grow and online communities are ever more influential. At the same time though I believe we are starting to see a counter-trend caused by the economic difficulties we are facing. My view is that as the effect of austerity measures bites more deeply people will become increasingly concerned about the impact on the communities in which they live and that there will be a resurgence of local community groups seeking to safeguard and improve their locality as a result. This will present a rich opportunity for businesses to focus on community and to generate loyalty through their contribution to that community.
6. Customer Networks
Consumer networks are likely to grow in importance as customers group together to seek
maximum value and businesses pursue relationships with them. The emergence of movements like carrotmob.org illustrate the beginning of a consumer desire to collaborate to leverage their
collective buying power and it won’t be long before community groups work directly with businesses, either to benefit their community as in the example above or for other purposes.
For more information or a conversation about what 2012 will bring, contact Tim Hadfield at Accord Engagement (accordengagement@btinternet.com) or on 07906 650019
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