Why Companies Need Their Customers to ‘Love’ Them
Everyone today realizes the
importance of digital technology and social media. For most firms, however, the
road ends with “likes” on Facebook and promotions on Twitter. According
to Barry Libert, Jerry Wind and Megan Beck Fenley, these limited
strategies leave a lot of value on the table when customers are looking for a
company to “love.” The winners in the market will be those firms that can pivot
their business model for great customer intimacy and inclusivity, they write in
this opinion piece.
Every
morning, like us, you probably pick up your Apple iPad, check your Facebook
feed to see what family and friends are up to, and then Google something that
catches your eye. If you like what you see, you probably purchase it with your
Amazon Prime account and receive it the next day. All we now need is for our
iPads to dispense our morning Starbucks coffee and we’ll be happy campers.
For
many of us, Google, Apple, Facebook and Amazon (the GAFA four), feel as
essential as the air we breathe. It’s hard to imagine our lives — working,
socializing, shopping and entertaining — without them.
Sure,
we may interact with other companies. But it’s less frequently and with a lot
less enthusiasm. We merely “transact” with these other firms. They have not
created endearing or profound relationships with us, and we don’t want to share
much, if anything, with them. We save all that good stuff for Facebook.
The
GAFA four are outstanding in the intimacy that they create with their
customers. They make a strong effort to understand the unique characteristics
and preferences of each customer and use the insights that they gain to serve
the customer better. Further, they see each customer as a complete personality
with needs around different facets such as work, play, socializing and self.
They serve these needs wholly — and this, in turn, encourages more sharing and
openness from their customers.
In
short, these four companies are building a long-term, holistic and generous
relationship with their customers. It’s almost as if they love us — not like
our parents or spouses, of course, but by way of “unselfish,
loyal and benevolent concern for the good of another.” And the result? In 2014,
Google’s revenue was up 19% year over year, Amazon’s sales were up 20% year
over year, Facebook’s revenue was up 58% year over year and Apple’s revenue was
up 7%, ending the year with their best-ever quarter.
Likes vs. Love
Traditional
brands are trying to join the game and gain that essential-as-air quality. But
they find it difficult to move beyond a transactional relationship. Usually, we
only see and hear from them when they want something from us. These companies
are very focused on whether or not customers are loyal to them, but they rarely
consider how loyal they are to their customers. Their actions often seem
self-serving; soliciting Facebook “likes” to promote themselves. This short-sighted
approach stems from a common view that customers don’t have much to offer
beyond what’s in their wallets.
For
example, you have probably purchased many cars over a period of time, but it is
unlikely that any car company has offered you a loyalty program that allows you
to buy four cars and get the fifth for free. Nor is it likely that they have
asked you to partner for the design of their next car — except, perhaps, a
company like Local Motors. They probably haven’t asked you for anything other
than your purchase, and haven’t offered you anything other than a vehicle. The
once-every-few-years transaction you have with a dealer is unlikely to create
“love.” A car company that wants a relationship with you would act differently.
For
those organizations that take a new perspective and build genuine and mutual
relationships with each customer, it is a win-win situation. These
organizations move their customers along the spectrum of affinity from
“transactors” — who have no relationship beyond the purchase, to “supporters” —
who regularly interact with the firm, to “promoters” — who share their
enthusiasm for the brand with friends and family, to “co-creators” — who
actually feel that they are partners with the organization
The
good news is that your customers are already there, seeking to share and
collaborate with corporations. For example, customers are already sharing
opinions on Yelp and TripAdvisor; they are helping create advertising for
Danone yogurt, designing new Nike shoes, offering products on Etsy and eBay,
and creating content for LinkedIn and Facebook. And by doing so, they are
offering these companies their skills and assets, plus a great deal of insight
into who they are.
Need to Change the Business
Model
But
most established firms remain hesitant when it comes to this type of customer
equality and mutuality. Our research on the business models of the S&P 500 Index
companies (based
on data from 1972 to 2013) indicates that at present more than 80% of companies
employ older business models where customers are valued only for their dollars
and not for their assets, insights and contributions. If your organization can
break ranks and adopt this new way of thinking and acting, you will see that
the more you share with your customers and the more you understand them, the
more they will love you.
Some
companies are building initiatives and the technological capabilities needed to
develop co-creation relationships with their customers — lasting relationships
that are mutual and self-reinforcing. Nike, The North Face, Jeld-Wen and many
more firms now offer customer co-designed products, and the sharing economy is
growing from cars (Uber), to lodging (Airbnb), to clothing (Rent the Runway).
Many firms, however, are only building a token Facebook page and Twitter
account. In the journey towards “love,” creating a social business is only a
small step. The final destination is one where [both] customers and companies
enjoy success, fulfillment and shared value.
So,
the real question is: “What does it take to love our customers and be loved in
return?” The answer: Serve your customers the way they want to be served.
Fulfill their needs not just for products and services, but also for
connection, community, participation, recognition and fulfillment. Of course,
we recognize that customers are not heterogeneous and have unique preferences
in how they wish to interact with different companies. What we suggest is that
you create opportunities for those customers eager to have a relationship with
you.
Changing
your relationship with your customers means changing the way you interact with
them. Most companies attempt to do this through marketing initiatives and
social media. As mentioned above, this is a very superficial approach. The most
successful and most loved companies adapt at the level of the business model
and find ways to share value creation with their customers.
The Winning Moves
Let’s
return to the GAFA four, and see how they have created network businesses that
expand the customer relationship.
Google:
Google made the decision to make two of its most popular products open source:
Chrome (a browser that is open source through Chromium) and Android (an
operating system). This allows users to help guide the development and get bug
fixes and desired features faster. People love Chrome so much that it dominates
the browser market with three times as many users as the next popular browser.
Apple:
Along with its wildly popular products such as the iPhone and iPad, Apple
formed a developer network to help outside parties create software for its
platforms. This ensures that there is a great market for the apps the customers
want, and allows those with an interest to participate. In 2014, 59% of iPhone
users described themselves as“blindly loyal” to the platform.
Facebook:
The world’s largest social network, where the users create all of the content,
Facebook allows users to communicate with their friends and family and share
whatever they want to with the world. In Q1 2015, Facebook had 1.4 billion
users, nearly 20% of the world population, and 70% of them interact with Facebook on a daily basis.
Amazon:
The behemoth Internet retailer allows both individuals and companies to sell
through its online channel. This increases the selection available to customers
and probably also brings down the prices through increased competition.
According to the 2014 Harris Poll Reputation Quotient study, Amazon.com had the best reputation
among U.S. companies (for the second time), and it also was the leader by way
of emotional appeal.
If you
would like to join this movement and expand your business model, partner with
your customers and cultivate “love,” we recommend a simple, five-step process,
PIVOT, to build these capabilities in your own organization:
Pinpoint: Know
your starting place. Gauge customer sentiment and how well you know your
customers and how well they know you.
Identify: Take
inventory of the places, if any, where customers contribute to your
organization. Take inventory of your customers’ groups and their
characteristics.
Vision: Envision
a new future where you partner with your customers in a new business model,
allowing them to participate and share in the value.
Operate:
Begin shifting a small amount of your capital (including time, talent, and
money) to this new business model. Start small, insulate from the politics of
the larger firm, and prepare to iterate.
Track: Put
in place new metrics appropriate for this customer-centered, network effort.
Add key performance indicators (KPIs) such as number of interactions (sales or
other), number of customer-partners, and value returned to customers, to your
standard financial measures. Use these to guide rapid iteration.
Despite
their incredible size, the GAFA four are still rapaciously eating up companies
and expanding into new industries. They are gaining more and more attention
from, and forging deeper intimacy with, their customers. And it’s not just
Google, Apple, Facebook and Amazon that incumbents should be worried about.
Their emerging and younger siblings like Uber, Airbnb, Pinterest, Instagram and
Alibaba have hundreds of millions of customers the world over that spend a significant
time of their day with them.
The
stumbling block that most companies encounter on the path to “love” is simple:
Leaders believe that “love” belongs at home and not in business. Companies also
believe that customer partnerships bring dangerous risks and loss of control.
But that old way of thinking now brings its own significant risks as Google,
Apple, Facebook and Amazon garner our “love” across an expanding industry
profile.
To
capture customer attention, organizations need to move beyond their everyday
tactics of “faster, better, cheaper.” They also have to elevate their game
beyond the current mantra of “delivering a quality experience” or the latest
fad, Facebook “likes.” These steps are important, but still insufficient to
compete in a world where your competitors know your customers as unique
individuals and partner with them to create shared value.
In
short, remember this phrase: In a world of likes, “love” matters. Companies and
individuals used to believe that our business lives and personal lives are, and
must be, separate. But that is no longer true. Cultural changes and technology
have broken down these traditional silos, creating an environment where people
want to interact with organizations in new and very personal ways. If you don’t
believe us, just watch what happens over time to your top and bottom lines as
customers contribute their dollars, plus their assets, skills and ideas, to the
companies that listen to them, share with them and love them.
http://knowledge.wharton.upenn.edu/article/why-companies-need-their-customers-to-love-them/?utm_source=kw_newsletter&utm_medium=email&utm_campaign=2015-08-05
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