Posted on: Friday 25th of July 2014
Talk to most marketers and you get the impression that they know what makes their customers tick. They have piles of marketing research to prove it. But do they really? The recent fast.MAP Marketing Gap Tracker looked at the differences between what marketers think and what customer think. Surprise, surprise, it found that marketers don’t really know how their customers think at all.
One of the Tracker’s key findings was the importance of customer trust. The annual Edelman Trust Barometer looks at how much customers trust business across a range of factors. The most recent Barometer made for pretty sad reading. It highlighted that customer trust in companies of all types has fallen significantly over the past few years to the point where only 44% of customers now trust business.
Although most companies are aware they must do something to bridge the trust gap, they typically look for prophylactic trust ‘sticking plasters’ rather than try to repair the underlying reasons why their businesses unintentionally destroy trust. Trust is one of those things that follows a hysteresis curve; it takes a long time to build but can be destroyed in a very short time by stupid, short-term or immoral behaviour.
How Data-driven Marketing Destroyed Customer Trust
As far back as 1994, Morgan & Hunt wrote about the importance of developing trust in customers. They showed that trust was necessary to develop working relationships with customers. Seth Godin understood this very well when he wrote his excellent book on Permission Marketing. Unfortunately, feeding the quarterly product beast meant that the majority of marketers opted for data-driven targeting for short-term sales, even at the cost of potentially more profitable future loyalty.
This short-term approach inevitably resulted in the erosion of trust and the growth of what Liljander & Roos called spurious relationships. They estimate that as few as 5% of customers have true relationships with companies and then usually through someone they know personally. This can have very expensive consequences; it should come as no surprise that mobile telcos typically spend over 70% of their marketing acquisition budget on replacing customers that churned to competitors the previous year.
Inger & Roos have shown that customers are more often pushed because of critical service failures than jump because of better offers. Mobile telco marketers are as unhappy about this as customers are, but few of them are willing to risk not making their net adds targets by switching budget from acquisition to retention marketing or heaven forbid, to customer service. And when they do it is much more likely to be through an innovative co-created mobile telco startup like giffgaff than an incumbent like its parent telco Telefonica O2.
More of the Same Failed Marketing Will Not Rebuild Trust
Despite all of this, I see a lot of companies actively looking at how they rebuild trust with their customers. Not for its own sake, but as a driver of customer engagement. Faced with the proliferation in channels, an explosion in modular content and the fragmentation of customer segments, marketers have been at a loss how to respond. As a pair of Economist Intelligence Unit studies on Beyond Loyalty: Meeting the Challenge of Customer Engagement (Part 1 and Part 2) suggests, managers believe that developing stronger customer engagement will increase revenues, increase customer loyalty and thus, increase profits. Unsurprisingly, this has got marketers rather excited.
Unfortunately, their response has typically been a more finely-grained version of their current data-driven targeting approach. For example, Marketing Week’s Programmatic Buying Essential Guide suggests that up to 75% of all display ads will be bought programmatically by 2017. And this in-spite of the fact that 69% of customers find highly personalised ads ‘creepy’, 47% want more control over the ads that are displayed to them and 38% use ad blockers to block them entirely. Companies will ultimately be the losers in this war of attrition between pushy marketers and uninterested customers.
Building Engagement through Marketing-as-a-Service
There is some hope however. Aimia, (the operator of multi-sided loyalty programmes such as Nectar and AirMiles, and frequent flyer programmes such as Air Canada’s Aeroplan) described in a recent white paper on The Four Futures: The Digital Loyalty Survey how it is focusing on a two-pronged strategy based on a combination of emotional engagement with customers and customer control over their own data. This is an interesting approach, though it does have its challenges: how to give customers increased control over their data in a way that engages them, for example?
Perhaps part of the solution is providing ‘Marketing-as-a-Service’ to support customers’ making contextual decisions, as Ctrl-Shift’s recent post on Flourishing in a Personal Information Services Environment. This would have the added advantage of turning marketing into a service that enables customers to co-create more value (see my recent post on How Contextual Marketing Turns Marketing into a Service). Ultimately, this may lead to a full-scale ‘MeCommerce’ multi-sided platform that facilitates customers’ life event management, either provided by brands themselves (through a platform solution like MyWave or by an external intermediary.
But this is hard to pull off. As a recent article by Andrei Hagiu on Strategic Decisions for Multi-sided Platforms points out, building a winning platform is very difficult, particularly if the platform is run by an external intermediary rather than a trusted brand. And as another article on Mastering the Intermediaries suggests, Cos are starting to fight back against external intermediaries.
What Do Customers Really Want?
Through a combination of short-termism and lack of vision many marketers have managed to undermine customers’ trust. Rebuilding that trust is an important driver of improved engagement. Many marketers see engagement as the key to increasing revenues, customer loyalty and thus, profits. Unfortunately, many marketers are responding with more of the same data-driven marketing that destroyed customer trust in the first place. Helping customers make decisions through Marketing-as-a-Service would be a better approach to building engagement. This might pave the way for a MeCommerce platform enabling customers to remove the hassle from managing their key life events. At the end of the day, it will be customers that decide whether MeCommerce thrives, or whether it dies on the vine.
Ladies and Gentlemen, place your bets.
Graham Hill, Ctrl-Shift associate