This column is adapted from Enterprise One to One: Tools for Competing in the Interactive Age (Currency/Doubleday, 1997).
Give your customers the opportunity to teach you what they want. Remember it. Give it back to them, and you will keep their business forever. That is the basic strategy for creating Learning Relationships with customers in order to increase customer loyalty.
The two requirements for creating these Learning Relationships are: 1) the organization wishing to develop the relationship must be a successful, cost-efficient customizer with an effective design interface and an accurate customer-specification memory, and 2) the customer will have to put forth an effort to teach the firm these specifications. Genuine loyalty is created as the firm learns and the customer teaches. Customer loyalty results when the customer is rewarded with a more individually satisfactory product or service for teaching the firm his/her preferences. Because of this Learning Relationship, the customer's loyalty is ensured.
For example, consider a shoe store that provides customized shoes. A customer's initial visit will require at least twenty minutes in the store for foot measurement and to answer questions about style, preferences and preferred type of sole. The customer needs to spend this twenty minutes in the store only the first time he/she visits. All information is gathered and the firm "remembers" it. Even if a competitor were to offer an identical service, it is highly unlike that the customer would take the time to educate another retailer she would remain loyal to the "remembering" shoe store.
Many types of organizations could benefit from "remembering" the information their customers provide. Banks, for example, have a great deal of information about their customers all stored electronically in their computers. This information could be used to complete (at least partially) a customer's loan application. Through the use of information technology, the customer could be spared the time and trouble of re-teaching basic information already stored in the bank's computers name, address, account numbers, balances, etc. To finish the loan application, the customer only has to provide information relating to loans and accounts held at other financial institutions. It is obviously much more convenient for a customer to deal with this type of "remembering" institution.
ATMs provide another opportunity for "remembering" customer preferences. If a customer has a fairly uniform pattern of ATM usage, why can't the bank remember this pattern to make the ATM transaction shorter and more convenient? For example:
Welcome, Mr. Jones. Would you like your usual $200 in cash with no receipt? Yes____ No____
While some may argue that this may be beneficial for the very high-value customer, they don't see the need to capture this information for small balance, high-cost customers. But, by speeding up the transaction time (a high-value customer may be waiting in line), this type of mass-customized service would soon prove less expensive to produce and deliver than one-size-fits-all services since the ATM would soon be able to process many more transactions per hour through the same machine.
However, developing Learning Relationships with customers must be supported by product and service quality. Customers will not return for more of a sub-par product. QQP is an abbreviation for the kind of quality necessary to compete as a 1to1 enterprise:
Q Quality of product
Q Quality of service
P fair Price
A 1to1 enterprise does not necessarily have to provide superior products or services; however, the enterprise must provide quality products and services that put it on par with its principal competitors. Since this is an age when every firm is focused on quality improvement, this equality between competitors is common. Regardless of the amount of effort put into quality, it is not possible to prevent competitors from putting forth the same level of effort.
By improving each individual customer relationship over time, it is possible to create an insurmountable barrier to competition. The enterprise that learns individual customer requirements and then executes to those requirements will be the enterprise that finds competitive success.
The 1to1 enterprise does not have to offer the lowest price but it must offer a fair price in relation to the quality of the product and service. The range of prices charged for products and services must be more or less similar to the range of prices charged by an enterprise's principal competitors. However, a customer will place a higher value on both the product and the convenience of dealing with a "remembering" enterprise as the product becomes more individually tailored.
Learning Relationships are about convenience for the customer. By remembering customer preferences, a 1to1 enterprise can create a "barrier of inconvenience" so that a customer will never want to deal with the competition again provided that the 1to1 enterprise continues to deliver QQP product and service quality at a fair price!
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