Tuesday, March 31, 2009

The (Loyalty) Gospel according to Seth.

Fans of Seth Godin’s blog know that while he often offers smart, I-never-thought-of-it-that-way insights, he sometimes states the obvious—but does it in a way that can serve as a fresh and useful reminder of the simple marketing truths we already know but may have forgotten.

In a recent post, Godin talks about the folly of spending more money to acquire new customers while ignoring the loyal customers you already have. These current customers represent two potential opportunities for growth, both by increasing their share of wallet and by mobilizing them as word-of-mouth advocates.

Here’s Godin’s take on companies now spending “more” for customer acquisition:

The reason this is a mistake is simple: it's expensive. Attracting a new customer costs far more than keeping an old one happy. Not only that, but an old customer is far more likely to bring you new people via word of mouth than someone who isn't even a customer yet.

Which is why share of wallet makes so much more sense than share of market. How much does each of your existing customers buy from you? Do they count on you for all the things they buy in this market, or just some? Does Toyota sell me every car my family drives? Does Chubb get to insure every single thing I own? Usually not. Because marketers are so focused on more that they forget to take great care of what they've got.

It’s a good reminder, in a bad economy or a good one, in loyalty and in life: stay focused on the things—and people—that matter most.

Thursday, March 19, 2009

The last gasp of a dying brand.

As most US-based readers know, General Motors (GM), one of the “Big 3” US automakers, is now on the verge of bankruptcy. After receiving a $17-billion bailout from the government, GM is still losing billions of dollars each month.

To help stem the bleeding, GM recently announced a number of cost-cutting moves, including a plan to end production of a subsidiary brand called the Saturn Corporation by the end of 2010.

Launched in 1985 as a "different kind of car company", Saturn operated outside of the GM structure for many years. And during that time it really did feel like a different company. (In fact, I’ve bought two Saturn vehicles over the years and drove one to the office today.)

What made the company different?

Well, for starters there was an effective ad campaign that showed the company to be comprised of dedicated, hard-working men and women all pulling together under the common cause of making a better automobile.

There was a no-hassle, no haggling sales policy, by which the sticker price on the car was the actual price you paid for it—no tense back room negotiations by which some buyers got a better deal than others.

And importantly, there was an on-going customer communications effort to keep Saturn owners loyal to the brand. These included a regular stream of loyalty communications, including invites to an annual “owners” barbeque held at the brand’s main factory facility in Spring Hill, Tennessee.

But over the years, something changed.

As Saturn was slowly brought back into the GM fold, the warm and friendly correspondence disappeared. It was replaced by shrill and gimmicky mailings from the local dealer pitching the latest holiday promotion. And in time, Saturn didn’t feel a whole lot different than any other American car.

Now, there is a last ditch attempt to keep the Saturn brand alive.

Over the past year, a Saturn social networking site was set up with little fanfare in an attempt to reengage with owners. I recently stumbled upon it, and by the looks of the sporadic company postings, it’s not getting the attention it deserves.

Then, a few days ago I received a single-page, two-sided letter from a person identified as the General Manager of Saturn, a 22-year veteran of the company. In the letter she says that Saturn is investigating the option of forming an independent company, apart from GM, and to “stay tuned”.

There’s even an attempt to rekindle the old Saturn mojo, as the Saturn veteran pointed out “it feels a bit like it did back in the 1980s when the original Saturn project was being developed” and implores that “as loyal Saturn owners and enthusiasts, I know you support this brand.”

Only now, years after they’ve sent me a truly meaningful piece of communications, it feels like it’s too little, too late. The hard-earned emotional bonds of loyalty were taken for granted and over time slowly broken, replaced by, at best, ambivalence.

I’m reminded of the once classic car a friend has parked along side his driveway. He once planned on fixing it up, but never quite got around to it. And neglected year after year, this once sterling automobile is now a rusting heap, too far gone to ever bring back.

Monday, March 9, 2009

Will WOM kill advertising?

I’m currently reading a fairly entertaining, Google-worshipping book titled What Would Google Do? by Jeff Jarvis. But there was one passage, a lengthy endorsement of word-of-mouth (WOM) advertising, which stopped me in my tracks:

Here’s the goal. Eliminate advertising. Or at least fire your ad agency….every time a customer recommends you and your product to a friend is a time when you don’t have to market to that friend. It is possible today to think that one good word can spread as far as an ad word.

Here’s why that’s a bad idea: While every marketer’s dream is to have a product that is so good everyone is talking about it, real life rarely works that way. For starters, there just aren’t many category-busting companies like Google out there.

Unless you’re in a niche market with an established customer base (like my local seafood market which has no competition within 20 miles), some form of advertising is needed to assure your continued success—not just to attract and acquire a steady stream of new customers, but more importantly, to tailor relevant communications to connect with your existing customers.

A recent study by my friends at the loyalty marketing think tank COLLOQUY showed that the best word-of-mouth proponents for any business are its most loyal customers—most specifically a group they termed “Champions” who are most likely to spread a good word on behalf of your brand.

Yet, it’s my belief that Champions aren’t just born, they can be created. How? Through a steady diet of personalized communications via mail, e-mail and members-only Web sites, that show your most loyal customers you truly care about them and their individual needs. (After all, you’ve got to show some love before you can expect some WOM love in return.)

Another helpful tool in pumping up word-of-mouth: company blogs where you have an actual dialogue with customers, and don’t just try to market to them. Conversations in the new public square of blogs and social networks are just like the old one—bystanders are listening to every word—so the potential upside of these exchanges is amplified and could result in earning you additional brand loyalists.

So by all means, if you’re not happy with your ad agency, fire them as Jarvis suggests. But do it because you’ve found another vendor who can better meet your customer communications needs, who among other attributes can take the necessary steps to help your word-of-mouth efforts succeed. These days, you need all the help you can get.