What is the #1 job of marketing? The answer usually revolves around building a brand. It is what classically trained marketers have been doing for generations, the goal underpinning billions of dollars in strategic and tactical investments, tracking systems, CRM database management, etc. However, there is mounting evidence that building strong customer relationships will add even more value to a business.
You may ask yourself, “Isn’t brand and customer relationship building the same thing?” After all, if I attract my customer with the right ideas, inspire them to buy me instead of a competitor aren’t I building a relationship? To quote a famous car rental brand, “Not exactly.” It requires a different set of skills.
We have been working with many clients across different industries to demystify the concept and help them execute, track and optimize better means to that end. What follows is our perspective, experience and rules of the road for building deeper and more durable brand/customer relationships.
Relationship Building Vs. Brand Building
In the most ideal sense, brands add value to people’s lives. It’s long been the fact that a great brand gives customers the clarity and confidence they need to select them. Assuming they’ve done their jobs right, customers’ needs are satisfied and will likely reward that brand with continued patronage. A lot of work goes into creating that sense of clarity, with brand frameworks, positioning workshops, archetype development and all the testing that validates every outreach and touchstone. All stakeholders, from marketing to sales to retail associates, make sure the right elements are in place to deliver optimal distinction that gets more customers to side with them over their competitors. However, there are changes that require us to reexamine how we go about inspiring customers.
Much has been made about the death of a brand as a result of technology turning us from image-based shoppers to data-driven selectors. Access to information empowers us to compare, contrast and choose the best option based on what matters to us. We hear from our peers about their experiences, a check of sorts on whether a brand is living up to the promises it promotes.
In the early days of social media, we heard about how we as marketers could have stronger relationships with customers based on the assumption that this new media allowed for frequency, reach and conversation between customers & brands. Before Facebook or Twitter could afford to charge advertisers a king’s ransom, the internet was littered with brand-centered outreach based on a presumption that customers wanted to hear from their brands more often which would lead to a closer, more intimate relationship. A lot has changed since then.
Technology has given us the biggest bullhorn in history where “word of mouth” is taken to a scale once unimaginable. We can make our thoughts and feelings known in an instant, to support who or what we love, call on the carpet those who fail to live up to their word. We are no longer a captive audience but partners in a brand’s success. Any brand that still thinks it’s just about their positioning statements or archetype will be in for a rude awakening.
There is a big difference between brand and relationship building. Smart, inventive brands are taking the opportunity to reassess what they do and how they do it. Some of the most important pivots include…
A peer-to-peer priority – one-way authoritarian control is being replaced by a two-way dialogue. Customers as collaborators and co-creators.
Value + values – a seamless weaving of commerce and conscience where the principles one holds can bring a customer closer to you.
From brand-defined to consumer-defined role – it’s not what you say you do but rather what the customer experiences and therefore the role they give you that makes a difference in their lives.
Naturally, not every choice is shared between customers and brands. However, the days where it is a completely one-sided affair are fading fast. Consumers have far too many options available to them, so brands have an incentive to deepen their connection. It’s easy to point to the idea that it is good practice from a PR standpoint. Being seen as an upstanding member of the world community creates a halo of goodwill and positivity. But, does it have a financial incentive as well?
Investing in Customer Relationships Pays Off
We’ve often thought of brand names as having a financial value all their own. For instance, take Coca Cola. Back in 2017 Forbes published an analysis of the value of the brand name, with figures ranging from $34 billion to $73 billion. Why the disparity? As they put it, “It turns out that there is just as much subjectivity in developing a brand valuation formula as there is objectivity running brand calculations.”
However, there is evidence that shows the value of customer relationships to a company’s overall value. HBR published an analysis using data from MARKABLES, a platform that assess the value of trademarks, including “88% of all intangible value.” They examined 6,000 mergers and acquisitions worldwide between 2003 and 2013. Per HBR, “Upon acquiring a business, companies have to value the different assets they acquired for their accounts and balance sheet in accordance with accounting and reporting standards.” Those assets included brand (trademarks) and customer relationships.
Source: “Why Strong Customer Relationships Trump Powerful Brands” (HBR)
As a percent total of the enterprise value, over the course of 10 years brand value fell by nearly half (18% to 10%) while customer relationship value doubled (9% to 18%). What this tells us is that the long-term prospects of a company are increasingly driven by the strengths of its customer relationships more so than the strength of its brands. In fact, it can be argued the latter is increasingly more an outcome of the former.
This signals an important shift in the marketing paradigm. A strong brand is still meaningful but it is no longer a one-way conversation. In fact, brands are now more dependent and impacted by customers’ direct experience and the relationship with the firms producing it. The next step is knowing how to harness that dynamic to your company’s benefit.
A New Imperative Requiring a Bigger Mission
It is no secret that brands need to deliver value to their customers. The better you do on that score relative to competitors the more loyalty you will accrue. However, in today’s world many brands offer good value in the form of fair pricing, ready access or a host of other basic expectations.
There has also been a lot of discussion on the role of marketing, even the value of the CMO. For generations marketers have been stewards of communications, from splashy ad campaigns to social media to promotions. Lately, there’s been a lot of talk around the notions of “Customer Experience” or “Customer Centricity,” and for good reason. Per Forbes, “…according to a portfolio of publicly traded companies drawn from the top 20% of brands in Forrester’s Customer Experience Index – these companies that invest in customer experience had higher stock price growth and higher total returns than a similar portfolio of companies drawn from the bottom 20% of brands.”
What exactly is Customer Experience? Type it in Google and you’d think this was some brand-new idea. It is being touted as the next competitive battleground for brand distinction. The fact is that what seems new is actually a very old concept, one perhaps as old as commerce itself.
That said, the context in which we live, the channels in which we operate and the degree of scrutiny means living up to a higher standard…TRUST!
It should come as no surprise with everything that has happened this past year we are hungering for trustworthiness. In fact, The Edelman Trust Survey found that 81% of respondents agreed that personal vulnerability (around health, financial stability and privacy) is a reason why brand trust has become more important. This has made trust an incredibly important marker, with 70% of people in that same survey saying that trusting a brand is more important today than in the past.
Of course, we recognize that an unusually challenging context may raise expectations (it is a natural psychological phenomenon). However, trust is an evergreen idea at the heart of humanity, so it is critical to understand it so that a brand/customer relationship is formed and managed, thereby building a foundation that will sustain it through good and bad times.
Such a lofty ideal must come with a complicated formula, right? Actually, it is quite simple. Consider people we trust. They act on their promises to us, they meet or exceed our expectations of them, and do it consistently. It is no different with brands. It is what makes a brand trustworthy, something you can count on to be there solving our problems and improving our lives better than anything else.
Doing it right leads to profound benefits. From the same Edelman survey, those who say they have a high trust in brands also reward them with…
Loyalty: 75% will pay more and buy new products from them
Engagement: 60% will share their information to get added benefits, as well as paying more attention to their advertising
Advocacy: 78% will repost brand content, recommend to others and defend the brand against criticism
Consider the last point, advocacy. It has two sides to it…promoting and defending the brands that earn trust. In a world where peer to peer protection is all around us, this is currency every brand should make a priority to build up.
Source: How to make your drug launch a success – Bain & Company, 2017
Take the pharmaceutical industry. A recent analysis by Bain & Company points out that physician advocacy is an underappreciated differentiator. The trust imperative and resulting actions can be a potent tiebreaker that demonstrates a deeper customer commitment.
There is also the matter of defense against missteps. Despite the vigilance of internal and external stakeholders, mistakes are bound to happen. Recall United Airlines, the “friendly skies” being torched in social media for mistreating a musician’s guitar or Chipotle where E coli sullied their promise of food integrity. In both cases the problems happened locally but their reputation was damaged throughout. The depth of trust built by a brand can lessen the impact of “bad news,” assuming proper handling.
Evidence of this dynamic comes from a study jointly conducted by the University of Toronto and Duke University to assess how the nature of one’s relationship with a brand impacted their perceptions post problem…
“In one study [they] set up a situation in which the consumer didn't get what they paid for and wasn't remunerated for a mistake made by the brand. When customers were treated with respect and dignity after the mistake, those who had communal relationships with the brand responded well, possibly because it reassured consumers about the caring nature of their association with the brand.”
To quote the study authors, "Adverse outcomes happen sometimes. People are treated badly or a product fails. Marketers must understand the type of relationship that they have with the consumer so they can figure out how to make good that unfair outcome." In fact, the nature of the relationship should be a guide towards the appropriate response: a sincere apology letter works for a communal relationship whereas a refund is better for an exchange (transactional) relationship.
Requires New Strategic Inputs & Guides
Relative to the means by which we keep tabs on the progress of brand perceptions, equities and conversion, little has been done to provide the same discipline in charting progress of relationship building. Moving from one stage to the next is impossible without knowing where you stand and what is required to get to the next important milestone towards building deep trust and strong bonds. There are many steps and stages requiring unique developmental strategies.
This detail is best represented by the work of Mark Knapp, a University of Texas professor famous for his efforts in evolving interactions, including the road towards the interpersonal involvement between two people.
While we’ve all heard the phrase, “Love at first sight,” in most cases relationships take time and steps to develop. Consider the five steps that lead to bonding, as defined by Knapp’s model:
INITIATION: a very short stage that is all about making favorable impressions, with physical appearance as primary medium.
EXPERIMENTATION: exploring and analyzing the other for information or a common interest to decide whether to maintain a relationship.
INTENSIFYING: The relationship becomes less formal, with people revealing their personal information, and nurturing to strengthen interpersonal development such as gifts, spending more time together, etc.
INTEGRATION: the level of intimacy progressing to a further relationship.
BONDING: announce it to the world, make their relationship recognized, indefinite and only to be broken through a formal notice, agreements, etc.
Every new customer starts at INITIATION but they do not all move up in the same way nor at the same pace nor for the same reasons. The granularity of a model like Knapp’s points out that customer relationship management is more than just a database, but the science of knowing where you stand and the art of activating customers to move to the next stage.
Sadly, there is little in the marketing toolkit that shines a light on relationships with this level of detail. In fact, most metrics are blunt instruments that offer little insight into where customers sit in relation to your brand.
One of the more popular approaches is Net Promoter Score (NPS), a fine tool to assess the degree a brand has more Promoters than Detractors. Then there is the typical brand tracker, a tool built to measure the impact of marketing investments. Both offer valuable inputs in certain respects but have considerable limitations from a relationship building standpoint.
They tell you what is happening but offer no insight into why
Ground you in a transactional rather than a relational sensibility
Are focused on brand-centricity, counter to a consumer-defined milieu
Provide no guidance on what it takes to move the relationship forward
We believe the social sciences can help brands of all sorts build more profitable and mutually beneficial relationships. However, it will take a more tailored approach designed with that end in mind to deliver the insights that lead to the most effective outcomes.
A More Comprehensive Approach
While the value of building strong bonds with customers is only now being appreciated by the marketing community, it has been a central aspect of our work for many years. Back in 2012, Zain Raj shared a model to systematically move brands from transactional to bonded relationships in his best-selling book, “Brand Rituals.” The fundamental premise is that brands with an integral place in a customer’s life have a sustainable advantage that can defy competitors for decades.
This premise and framework became the basis for a specific method, the S+R Relationship Monitor™. It is based on years of experimentation and validation, resulting in an algorithm that enables brands to know where they stand and the strategies required to move customers to more bonded relationships.
Relationships are broken out into granular status levels cutting across three fundamental levels:
Transactional (Passable/Optional) – used because of limited options or basic curiosity
Connected (Popular/Convenient/Accepted/Trusted) – validated performance based on personal experience, popularity or other value metrics, leading it to be a steady member of the repertoire
Bonded (Dedicated/Devoted) – a personal and passionate sense of connection, an experience well above and beyond any other option
As illustrated above, it can tell you what it takes to move customers to the next relationship level, a ready to action relationship “here to there” path.
Case Study: Predicting the shift in I-O Category Captaincy
We have decades of oncology experience, including charting the battle between Opdivo and Keytruda, which provides an instructive lesson for every brand looking to build a strong relationship.
In 2016, Opdivo defined the I-O category. The promise made it a very attractive option yet (not surprisingly) vulnerability existed in the early years with enthusiasm and skepticism in equal supply. That meant at this EXPERIMENTATION phase confidence was a critical ingredient to success.
Then came Checkmate 227, a moment that change the fortunes of both brands. Opdivo designed its trial in such a way that it made it more difficult to achieve success. By contrast, Keytruda stuck to its biomarker knitting and met its goals in untreated NSCLC patients. What Keytruda understood that Opdivo may not have is that the early days require building confidence, and therefore being judicious in keeping one’s promises.
To quote from one perspective on this changing dynamic, “Merck's drug has an advantage over Opdivo as it was successful where Opdivo failed, and Keytruda will likely be the drug of choice for lung cancer patients.”
Fast-forward to today. Both brands have turned out to be very successful, but Keytruda is the pace setter in many respects. As each enters new indications, forms new partnerships via combination therapies, and supports the oncology community in its chosen ways, time and the right mode of measurement will tell how these actions influence their respective relationships.
In Summary
Technology has shifted the balance of power from companies to customers at a level and pace we have never experienced. Forging mutually beneficial relationships is critical to combatting competitive forces, sustaining growth and building protection in the face of missteps. Beyond its PR value, evidence points out the long-term financial benefits in creating more bonded customer relationships.
That said, there are lack of disciplined approaches that can offer the clarity clients need to assess their status, make the right investments and smartly manage their efforts to move customers up the track. The S+R Relationship Monitor™ answers that call, delivering more insight into starting, building and forging a tight bond that brings value to your customers, brands and company.
We look forward to talking to you more about how we can help advance your agenda.
Shapiro+Raj
S+R is a research and strategy firm that uses social and behavioral sciences to solve the toughest business and marketing challenges. Our next-gen methods dig deep to unlock market-ready insights. Then our brand planners turn these into strategic marketplace actions that create brand evolution and innovation; customer experiences and loyalty; and new platforms for growth.
