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Customer Value Drives Growth

What Being Close to Your Customer Really Means

The basic business and consumer models are broken and most executives don’t know it. Everyone accepts that in today’s environment it is critically important to get close to your customers. Moreover, most believe, and accept, that the pace of marketing is picking up, primarily influenced by the Internet. The headline of a recent article by C.K. Prahalad says it well: “In Volatile Times, Agility Rules.” But few companies seem to have thought seriously about how these factors should impact their own internal marketing and management processes.

Rare is the company marketing and managing with the intensity possible using today’s Internet tools. The pace of marketing, and management, in most companies today seems almost leisurely. This is largely because they haven’t assimilated the lessons of pace—the ability to know your customers in great depth and respond to them every single day.

Let’s examine how this applies to consumer packaged goods companies (CPGs). The core of most marketing processes historically has been limited by the realities of their traditional business. CPGs don’t have immediately available, and deep, knowledge of their customers because the retailer usually stands between them. They have long supply lines to their customers’ point of purchase, so they have little inherent ability to take advantage of the real-time nature of today’s available customer information. And they have marketing processes that are based on annual plans, future drive periods, and one-off market research surveys that take time to prepare, field, and analyze—and are often driven by separate market research departments that have their own leisurely decision-making pace.

Against all this, the Internet looms as a transformative medium that can address many of these inherent limitations, and lead to a complete revamping of customer marketing in these big companies. Most important, the Internet allows marketers to know their customers, on a real-time basis and in great depth, and to act immediately on that knowledge.

But the Internet offers its own set of challenges. Customers are in much greater control of their destiny on the Net. They are attracted by such benefits as time and place utility, the ability—and then expectation—to be known and targeted individually, the competitive transparency the Internet offers, and the fact that one’s competition is only a click away. Moreover, all this occurs with an immediate, real-time rhythm, which allows companies that do business over the Internet to forge a much deeper ongoing bond with their customers.

Building loyalty online
As marketers approach the Internet environment, they ignore these consumer demands at their peril; most have to rethink and rework their customer propositions to be more effective online.

In fact, attracting loyalty from one’s customers, while it is no easy feat on the Internet, is the key differentiator. On a successful website the vast bulk of visitation is made up of past transactors or past visitors—usually bookmarked in some way or another. Few new customers come in via search ads or other forms of digital advertising. Yet most Internet marketers spend too much of their time concentrating on sales leads—through digital advertising—rather than focusing on perfecting their websites to build long-term relationships and increase the lifetime revenue of their customers.

The focus on Internet advertising has in important ways obscured the fact that the Internet is the single greatest means to figure out how to generate loyal and sustainable customer relationships. The data, the ability to interact, to react, the real-time environment—these give a good marketer all he needs to develop profitable relationships.

Additionally, Web development for Internet participants is driven by a set of metrics—digital clicks, conversion, behavioral tracking, and behavioral targeting—that are powerful in some respects but inadequate in others. What is missing is the measurement and treatment of customer attitudes, image perceptions, and intentions. This monitoring is readily available in a real-time, actionable context. But traditional marketers—who do, in fact, measure and understand these things—don’t effectively exploit their real-time availability online, and “born on the Internet” marketers are, generally, really not practiced in these dimensions.

While one can argue that the reality for most packaged goods companies is that they don’t sell much on the Internet, which is true, that is not to say that these values should not influence—and even change—their marketing processes. Most large companies have websites, and they have millions of visitors at least over the course of a year. They can learn from these customers in ways that can translate into how they market every day through their traditional channels, and they can test and promote their products and services even if they are ultimately sold offline—and they can do it quickly. But, again, much of this appears to have been stunted by the cultural inability of these ponderous marketing departments to think differently about how they run their business.

Consumers today are operating more and more on a real-time basis, and the Internet is providing much of the impetus for this—I call it “the search for instant gratification.” You must assume that your prospects and customers are accumulating information on you and your competition on a real-time basis and that, if you don’t insert yourself into that process, you are likely to lose that customer to a more enterprising competitor. Put another way, companies that can monitor and react to changes in purchase behavior, brand image, and perceptions on a real-time basis, today, are in the distinct minority, and the bigger companies are actually handicapped in this respect.

Integrated efforts
The future I see is, more and more, the coming together of offline, where the bulk of sales still exist, and online, where the transformative tools exist. Few companies are going to want to build out as many physical distribution points as they did before, and the capital markets won’t allow it anyway. But the online world will have to think differently, too, moving beyond how “cool” and basically separate their medium is, and embrace the challenge of integrating these customer-driven Internet values and pace more effectively into the overall commercial fabric. This is a hybrid model, where the Internet exists not only as a “reach” vehicle, to cover markets fully and more effectively than stores alone, but also as a consumer “front-end” for physical distribution points, thereby picking up the pace and customer focus of all marketing activity. I see neither side, online or offline, very effectively em-bracing this transition.

Change can often be glacial, and there are more people today in business who want tomorrow to be just like yesterday than there are people who want tomorrow to be different…and better. For them, getting close to their customers is just so much sloganeering.

The Internet remains an untapped opportunity for most organizations, and used correctly, it can not only invigorate tired businesses but—through pursuit of the values of in-depth customer knowledge and real-time activity—can significantly impact the management and marketing of many companies.