Smart Marketing

We’ve entered an age of extremes. "Extreme customer service" has become the mission du jour for marketers, and firms everywhere are now incorporating their "customer satisfaction indices" (CSI) into their management strategies. The hard-sell at car dealerships has been replaced by warm, fuzzy schmoozing, in which "non-negotiable" prices are followed up by questionnaires asking customers to rate the sales team’s performance. Gourmet coffee-chain cashiers remember you by name, and video store clerks greet you at the door with a scripted "how are you today?" By and large, the quality of goods and services has become a given, and the service of those goods has become what sets a company apart.

But what does it all mean? Alas, there is a deep irony at work here. Good customer service does not translate into customer loyalty. Consider the case of AT&T, which began examining customer satisfaction levels more than 10 years ago. In one study, AT&T customers in Pennsylvania had a 97 percent satisfaction rating for one product, while customers in New York scored 78 percent for the same product. Problem was, the product was losing market share in Pennsylvania and gaining ground in New York. There are three possible answers to such puzzling incongruities:

Customer satisfaction is no guarantee of financial results. So if you are betting big-time on the power of CSI scores, it’s time to rethink your strategy.
Only stellar satisfaction levels make a real difference in customer loyalty.
Customer satisfaction is only relevant when compared to your competitors. New Yorkers may have been less satisfied with a competitor, giving AT&T an advantage.

The correct answer is "All of the above." There is a far more effective strategy for keeping customers than simply making them happy. Consider the pluses and minuses of these two customer-service examples:

Last year, Xerox Webmaster Bill McLain made a media splash when the news surfaced his staff responds to every e-mail inquiry, no matter how trivial. McLain’s Web crew has answered questions on how many colors of M&Ms there are (26) and how long it would take to vacuum Ohio (33,661 years).

Gund Inc., the Edison, N.J.-based manufacturer of stuffed toys, has a rapid-response program for any customer complaint. Every retailer is given a card with the home phone numbers of top Gund executives, and customers are invited to write in or e-mail problems to the company. If a child loses a stuffed animal, Gund will bend over backwards to find a replacement. The company will even dig through its warehouses searching for a discontinued item, often based on a parent’s photograph of the lost toy. "Even if it doesn’t result in a sale from a particular consumer," says Diana Dunn, Gund VP of marketing, "it results in positive messaging about our company which they communicate to someone else."

These are two examples of extreme customer service. Anyone who receives an immediate response from Xerox or has Gund hunt down a beloved child’s bear is going to think highly of these companies, and will probably come back. But what if another competitor is even more helpful, striving to take that customer’s business? The problem with good customer service – when the service is administered the same way for everyone – is that in the final analysis it becomes just another selling point, like low prices or quality goods. You, the marketer, are simply at the mercy of the most helpful competitor. This is not to say that it isn’t important to have great service – because it is. What we’re saying is that great service is necessary for keeping customers loyal, but not always sufficient.

Retaining any single customer’s business in the face of competitive offers requires the enterprise to make it more convenient for that customer to stay loyal rather than switch to a competitor. The only sure way to do this is to involve the customer in an interactive, collaborative Learning Relationship – a relationship that gets smarter with every interaction with that customer. In essence, such a system requires a customer to teach you how to cater to his or her individual tastes. Once you incorporate what this particular customer has taught you into how you treat this customer, it suddenly is easier for that customer to stay with you. The only alternative is for that customer to re-teach a competitor what you’ve already learned.

A Learning Relationship simply turns the idea of customer service around and looks at it from the customer’s perspective. Customers require more than being satisfied in one transaction. Customers have needs that evolve over time – and a business that builds a relationship with each customer will be able to learn how to satisfy those changing desires.

Root.net is a new business that builds Learning Relationships to provide truly customized service. This New York-based company is really a digital concierge for business people on the go. Customers invest time in teaching Root how to meet their needs, and Root uses the knowledge to book plane tickets, manage stock portfolios and screen e-mail. An executive flying to Hong Kong can call Root on its 800 number and explain she needs Internet access upon arrival. Root, armed with detailed knowledge about that customer, will make sure the proper computer cables and ISP connection are waiting in the Hong Kong hotel room. As Root becomes "smarter" about its customers, it is able to anticipate needs: for instance, it will provide a list of possible computer upgrades, at the best possible prices, that meet a customer’s specific business requirements.

Seth Goldstein, co-founder of Root, recalls helping a client who traveled frequently and needed to keep track of numerous contacts. Root researched electronic organizers, compared them to the customer’s profile, and came back with a recommendation for a PalmPilot. Goldstein also asked the customer to messenger Root his business cards – and then Root scanned all of the contacts into the new electronic organizer. "When he got it," Goldstein recalls, "he didn’t know the technology, but he said, ‘Wow, my contacts are in here. This is valuable to me.’ "

Even companies that sell basic commodities can usually customize some type of service for their customers simply by expanding the definition of their customers’ needs. In this way they can ensure that each customer gets involved in a collaborative, one-to-one relationship. N.V. Nutsbedrijf Westland sells natural gas in the Netherlands, delivered by pipeline. Talk about your basic commodity. Many of the firm’s customers are greenhouse firms raising – you guessed it – tulips and other flowers. So to keep these customers not only happy but loyal, Westland offers to manage the overall greenhouse environment. Rather than simply selling gas by the BTU, Westland will heat a customer’s greenhouse to the right temperature. In addition, it monitors and controls the humidity and even the CO₂ content of the atmosphere, based on specific measurements of plant progress and soil characteristics.

So, do you really want to keep your customers loyal? If so, then you have to go beyond the idea of "extreme" customer service. Give each of your customers, individually, a stake in specifying the product or service you deliver for that customer. Involve the customer in an interactive, collaborative Learning Relationship.

DON PEPPERS and DR. MARTHA ROGERS are co-authors of the best-selling Enterprise One to One and The One to One Future. Their newest book, The One to One Fieldbook, co-authored with Bob Dorf, will be published in January 1999. Their consulting firm, Marketing1to1/Peppers and Rogers Group, is based in Stamford, Connecticut.

This article was scheduled to run in February 1999 in Sales & Marketing Management.