Hip Shots

With most products and services competing in largely parity landscapes, the relationship a brand, product or service has with its customers is often its only competitive differentiation. Said another way, businesses with strong customer relationships usually lead their categories. That’s because the economics of relationship marketing are compelling; there are five sources of revenue from loyal customers, so the positive impact of customer loyalty compounds and puts you ahead of your competition.

So, if a relationship marketing strategy is key, the question becomes, “How do I do it?”

The Internet is the ideal channel for a brand to practice relationship marketing principles,

• It is the place consumers go to find the information they need to make decisions about their lives.
• It is rapidly fulfilling, some say it has fulfilled, the human need for community that was once satisfied by moving to the suburbs and gathering around the TV to watch a favorite show.
• It is an active environment where people have the expectation that they can interact with and, to a large degree control their experience.

For these reasons and more (Hub and Spoke: A Marketing Strategy for the Rest of Us), the internet gives companies of all sizes the opportunity to create relationships with their customers.

The following are 5 areas you should consider to develop a relationship marketing strategy for your online marketing. They are based on my experience building relationship marketing programs in Europe and the US. Keep each in mind as you consider your own internet marketing challenges.

1. Focus on Best Customers. There are typically a small percentage of your customers who contribute the majority of your brand or product’s volume. There are also a small percentage of consumers who contribute the majority of the category’s volume. Understand who the heavy users are and what they need. It’s not what the majority need.
2. It’s a commercial relationship. It is easy and often useful to associate the principles of inter personal relationships to relationship marketing. Planners make their living from this. There is a key flaw in this thinking. There is a significant difference between interpersonal relationships, the relationships you have with friends and families, and commercial relationships. Success can be found in understanding the differences.
3. Build the relationship. Relationships of any kind don’t just happen. You have to work at them. Relationship equity needs to be created. This is achieved when value is created beyond the transaction and the functional benefits of your product or service. This is the heart of branding and it is often underestimated. There are a lot of products with names out there masquerading as brands.
4. Relationships are dynamic. A relationship goes through stages. This is true in terms of both the stage and the degree of intensity. This is obvious from your experience with inter personal relationships. Commercial relationships go through similar stages and each requires different emphasis on contact frequency and content. I use the following labels to describe the stages: Consideration, Prospecting, Connection and Loyalty. Keep in mind that the purchase happens in the middle not the end. Connection is the most important stage in terms of ROI and probably the least exploited.
5. Maintain the relationship. Once the relationship has been established maintaining it becomes vital. It isn’t hard but does require active involvement. One of the five relationship marketing principles is “Good customers expect to be rewarded.” Note, it’s “rewarded,” not bribed. This doesn’t preclude additional sales messages. In fact it supports the need for targeted, relevant sales messages. Remember, it’s a commercial relationship. When value is continually created, either through additional information and/or services or through exclusive access, or highly relevant sales offers you can maintain a profitable relationship for a long time.

I read something interesting at the gym last week in Seth Godin’s latest book, Linchpin.

Artists don’t think outside the box, because outside the box there’s a vacuum.

Finding an effective positioning for your business won’t come from thinking outside the box. It will come from re-imagining the box you are in, the market where you compete.

If you have ever worked as a consultant or tried to sell ideas you will know how hard it is to ‘splain multi-dimensional concepts to most business people. Bless the MBA schools, they sure know how to turn out highly qualified linear thinkers; X axis by Y axis, they get, but what about the Z axis?

Your opportunity is to consider your market, your competitive landscape, your customers’ needs in three dimensions to find an effective positioning.

I will give you an example.

I’ve been helping Red8 Studios re-imagine their business. Red8 is a successful, 7-year-old interactive production company. They have been going to market with the following positioning: low cost for quality code. Nothing wrong with this, per se, except that it describes most of their competition. And most of their customers, small and mid sized ad agencies and design firms, aren’t that price sensitive, because they pass the cost through to their clients.

In most categories there are three characteristic areas, three benefit zones, that define the market where companies and consumers interact. They are usually focused around the product, price/value and service.

Step one to finding an effective positioning, is identifying the three that best define your category.

Uncomfortable Airline PassengerThink about airlines: product = routes and schedules, Price/value = well, price and value, and service = well, usually not much.

Most airlines compete on one dimension, product, or routes and schedules. Some have tried to compete solely on price. ATA comes to mind. Some have tried to position themselves using service. Come fly the friendly skis. This only works if your are, in fact, friendly. But the few that are and have been successful, like Southwest Airlines and Virgin, use more than one dimension to position themselves in the market.

Back to Red8 for a moment.

The Red8 team produces high quality code. They can compete with anyone in this area. But the reality is, code is commodity. Lots of resources produce high quality code. Red8 is inexpensive. Well lots of resources, especially off shore resources like Red8, are inexpensive. Service, what do they offer beyond product and price? Now that’s an interesting question.

Lets look at the competition.

Off shore resources can give you code at a low price but they may or may not be able to complete the job when and how the customer wants it completed. So price.

Freelancers and Digital agencies produce great code, but it’s usually at a high cost and it often comes with a lot of ‘tude. So product.

Traditional ad agencies wouldn’t know good code if it held a flashing neon sign. They also cost a lot. But they have the service thing down to a fine art. So service.

So where’s the opportunity?

Great code at a reasonable price from a team that’s smart about technology and super easy to work with.
Hip Shot

Re-imagine your positioning considering the three dimensions that define your market. Look for where they overlap. If you can define your business where all three overlap, then you are on to something because chances are your competition is only thinking about one or, perhaps, two of them. Bless the MBA schools.