It is obvious that a business’s customer base is its source of income. Customers spend money with businesses: You hope!
But your customer base in more than a supplier of cash. Your customers are your primary source of marketing data. Marketing and business are knowledge-based activities. If you know your customer base, its attributes and opinions, you can predict its movement and they ways it may change. You can identify what your customers see as best value and develop your organisation to deliver that value.
Customers have both financial and information value. To capture those customers in the first place, you also need knowledge.
Previously in this blog, I have discussed the concept of the customer value ladder. A similar concept is the ‘ladder of advocacy’.
There are five ‘rungs’ on these ladders:
At each stage up the ladder we have different expectations as to the actions of customers. At the lower levels it could just be purchase or re-purchase. On higher rungs it could be partnership sharing and referring your business to others. Obviously if you expect different actions by consumers as they move up the ladder, you will need to employ different tactics and use different promotional techniques and channels.
It is also worth considering that it isn’t only the customer who is moving up the ladder; so are the people they are talking to about your company.
Cross and Smith (1997) advocate that you bond with your customer in different ways as they move up the ladder:
- Prospect: Develop Awareness bonding to move them to;
- Customer: Where you concentrate on identity bonding to move them to;
- Supporter: Where bonding focuses on relationship development so that the customer becomes an;
- Advocate: Where bonding concentrates on creating a community. As the community becomes closer, customers become:
- Partners: Where you develop partnership bonding
Developing customer relationships is a two-way process. Simply pumping out emails, newsletters or social media posts is not building a relationship.
On the first rung of the ladder you create a bond through brand and product awareness. You need to invest in obtaining ‘share of mind’. Once you have obtained a share of mind you need to work to keep it. You need to work to build on the target customers needs and wants. This is often best achieved through traditional promotional techniques and channels, e.g. advertising or visits by representatives. You also need to adapt your marketing mix to meet those customer expectations.
On the second rung of the ladder, you need to build the relationship with your customer group beyond awareness. You need to attract ‘share of heart’. A bond developed out of shared values and aspirations. You develop this bond through ’cause marketing’. this could be through charity support, environmental standards and issue sponsorship.
Berry (1995) defines four types of relationship you can have with a customer:
- Legal: You have a contractual relationship with your customers and that contract provides legal obligations. You have statutory responsibilities towards your customers such as their sale of goods rights, product safety standards and responsibilities with regard to product description. You have data protection responsibilities towards your customers.
- Fiscal: You have mutual financial relationships with your customers. You may offer credit or deferred payment. Credit terms can be a method of financial bonding.
- Social: Businesses have social links with their customer base. Football clubs offer stadium tours and opportunities to ‘press the flesh’ with current and former players. Venues offer patron-only previews of concerts. Shops give valued customers ‘pre-launch’ opportunities to view new products. Restaurants offer ‘soft opening’ opportunities to regular diners to test new menus and at new restaurant locations.
- Organisational: In business to business markets there are often organisational relationships between customers and suppliers. These often develop into ‘partnerships’.
On rung three of the ladder values begin to be exchanged and deep knowledge of customers begins to be developed. The relationship itself has value at this point. Customers at this point are now getting something out of their relationship with your firm. This is the beginnings of building a community. This is where owners’ clubs, social media groups and internet forums begin to have value. You need to encourage feedback and information exchange. Loyalty programmes can develop relationships at this point. Bear in mind that, like many coffee outlets, a loyalty programme has little benefit if you offer membership to everyone! You cannot ignore customer feedback and keep customers on this rung.
The value to your brand is:
- Having knowledge of your target segment and the wider environment
- Your developed ‘share of heart’ and,
- The ability of customers on this rung to support those on lower rungs of the ladder
On rung four of the ladder you need to bond through creating social relationships with customers. Here is the true and proper use of social media in marketing. But you need to go further. You need to offer opportunities for your customer base to meet not only your organisation but each other. This is where customer conventions and fan events are useful. You can develop product owner’s clubs and offer members discounts on things like servicing and accessories. Community members need the opportunity to bond
Rung five is the development of partnerships. This is a further development of developing a community. An example is Ugg the sheepskin bootmaker who offer ‘brand fans’ opportunities to work for the brand and to help design their footwear. As a result the customer develops very deep loyalty for your brand. In business to business markets things go even further where suppliers offer onsite maintenance and service and locate employees in the premises of their customers. Suppliers may get involved in their customers product design e.g. Rolls Royce helping to design the planes where their engines are to be located. Suppliers may take over the running of a customers stock control processes and develop systems to help their customers produce products e.g. Just In Time supply software. Partnership requires mutual respect and the integration of value chains.
At each stage of the value ladder you need to collect different data, use different marketing techniques and promotional tools. It takes marketing skill to move your customers up the value ladder and to keep them on its higher rungs.