Thursday, December 20, 2007

Five Stages of Customer Bonding

Customer-driven quality improvement is critical to long-term profitability. Increased competition and concern over diminishing market share motivates companies to invest in their futures.

Customer loyalty develops from personal relationships and trust between the company and the customer over time. This includes keeping customers involved throughout the product lifecycle as well as developing products and/or services to meet changing customer needs and desires.

This bond results from effective one-on-one communication, mutually-beneficial interaction, the company's genuine interest and involvement in the customer's life and lifestyle, a combination of customer allegiance and company advocacy, and a shared sense of purpose. Several years ago Richard Cross identified five important aspects of customer bonding; namely, awareness, identity, relationship, community and advocacy. I think these five aspects are still applicable and hence have described them in some detail below.

AWARENESS
The art of earning customer "share-of-mind" involves creating an impression of personal identitication with the company's products and/or services. This first stage, awareness, represents the weakest aspect of a relatioinship because it is non-interactive and depends entirely on the customer's perception. Madison Avenue advertising agencies know that because nothing is required of a customer at this point, advertising must capture the atention and stir the emotions of prospective customers, without a clear understanding of who they are.

A company does not know the basis for a customer's positive or negative reaction to a communication or advertising message at this stage of the relationship.

IDENTITY
The identification stage occurs when a potential customer asks the question, "What's in it for me?" A customer idnetifies a product of service as meeting one or more important personal needs, such as self-fulfillment, status, or belonging. A customer may perceive the company as having values and preferences similar to his own and begin to form a relationsip with the company.

At this stage, customer and company interaction is limited to one-way communication, so the customer's perception is his reality because no feedback loop exists. Because an impression results from minimal information, the "relationship" remains extremely tenuous and a cusotmer can be easily swayed. Druing this initial stage of contact, the goal is to entice potentional "best" customers to take action relative to using a company's products and/or services.

RELATIONSHIP
At this stage, the customer receives the benefit of products and/or services tailored specifically to his individual needs (at least as nearly as the company can provide). Once a customer interacts with the company, repeated experiences of individual customer satisfaction take on significant importance.

Thus, customer satisfaction is an on-going process rather than a single discrete event. Customer satisfaction is not a goal, it is an obligation. Customers expect that products will work and that they will receive good service. Customer delight results largely from how a product is sold and is serviced as well as how the company responds to inquiries and solves problems.

Customer retention is critical becuse it typiclly costs five times as much to attract a new customer as it does to retain and existing one. (This statistic first came to me through stories by Tom Peters author of "In Search of Excellence" and several of his follow-on books). I do not have evidence that this statistic is true, but it seems reasonable and it seems to be used by many who tout the value of customer retention. In any case, focusing on product and service qualtiy provides an effective customer retention strategy and barrier to competitive threats.

One important aspect of a successful customer-driven marketing strategy is the use of comprehensive and accurate databases to frequently market products and services to specific customers. Because the process of relationship-building involves direct and intereactive communication, the customer learns that the company recognizes his specific interests and values his business.

Service, a second critical element of an effective customer retention strategy, relies on the premise that each employee within the company must recognize that if he if not directly helping a customer, then he is helping an employee who is.

As bonding occurs, the customer has an investment in participating, maintaining and perpetuating the relationship. A customer requires awareness and idnetification with potential personal benefits of the company's products and/or services prior to investing time and energy in a relationip with the company. By the time the intersaction develops to this level of satisfaction, loyalty and trust begin to accrue.

COMMUNITY
Customer bonding requires high levels of effective interaction. When the company integrates its products and services into the life and lifestyle of its customers, communal bonding occurs. The community relationship stage achieves an integration of values, preferences and priorities between customer and company where each derives mutual benefit. Companies that achieve this type of loyalty consistently delight their customers.

Depending on the type and frequency of interaction, loyal customers are more resilient to competitive threats and/or higher price points because of their perception of shared values.

ADVOCACY
At this advanced level of custoemr bonding, the company services as an advocate for the customer, and the customer shows an allegianfce to the company; word-of-mouth advertising flourishes. Because the company now can encourage buyer-get-a-buyer programs through appropriate incentives, it must be prepared to follow through professionally to make new recruits feel as valued as the advocates who recommended them.

The bottom line is that loyalty results from customer bonding and does not automatically follow from successive customer interactions without a plan to build the customer bond. Building the bond with the customer is one of the most often overlooked aspects of customer loyalty.

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