Customer-centered Brand Management
Mar 6th, 2010 | By Gene A. Wright | Category: Leadership, MarketingFrom Harvard Business Review
Article Abstract — Customer-centered Brand Management
This article says that companies are focusing on the lifetime value of their customers. Really. I agree that they should be, however, I wonder how many actually are managing the Lifetime Value of their customers. The article promo states “Yet, few companies have come to terms with the implications of that idea for their marketing management.” The idea implications of course is that Lifetime Value Matters.
The article promo also goes on to suggest that managers are focused on brand equity rather than customer value. The article authors suggest some things that managers should be doing such as ” replacing traditional brand managers with a new position–the customer segment manager; targeting brands to as narrow an audience as possible; developing the capability and the mind-set to hand off customers from one brand to another within the company; and changing the way brand equity is measured by basing calculations on individual, rather than average, customer data.”
I will be grabbing my hard copy of HBR and reading this one. Most likely, it will be discussed in an upcoming class.
Comments?
I could not agree more with this article. As I read it all I can think about how important brands are, but how changes in the industry are geared towards customer service. The trend is towards mass customization, adn in order to achieve this, customer service has to be the first priority when it comes to developing and promoting products. If you can not define your customer segment you can not succeed on brand alone. Your customers buy into your brand, but only if you have targeting their needs to your brand.
I agree as well. Additionally, I think focusing on the lifetime value of a customer means that people beyond the marketing staff need to live the brand. All employees must.
As an example, at about 23, I attended a conference at the Waldorf-Astoria in NYC. To a person, the staff treated me like a second-class citizen due to age. (I’m assuming. I was dressed for business and acting professional.) They didn’t acknowlege I was there on my companies credit card, and more importantly, I (hopefully) had 50+ years of traveling ahead of me and an increased amount of spending money at my disposable as I get older. They could have wowed me and I would go to their chain (now the upper crust of Hilton) forever. Instead, I will take my money elsewhere. I guess this fits in with what Jsan is saying above-customer service needs to be woven into the brand!!
Lifetime Value of customers should be a high priority in all companies. Happy customers will not only be lifetime customers, but will be advocates for you as well. An angry or unahappy customers will tell his friends about the negative experience, potentially causing more customer loss. A friend leased a car and then realized how much a car cost when you include gas and insurance. He wanted to return it and the manager worked with him, even trying to get him better insurance rates, to allow him to keep the car. Very impressionable for a young person and probably a customer for decades to come.
The theme I get from the article is that companies need to remain agile and flexible. As market segments change, so should your marketing strategies and product offerings. The successful companies have the ability to do this.
Perhaps the reluctance of implementing a management position for lifetime customer value is due to the fact that its a new idea. The more companies that begin valuing the customers in this manner and showing the benefits, I’m sure others will follow suit. I would think customer value is more important that brand equity, without a loyal following of satisfied customers you have no brand equity.
I think there are several different approaches to this concept, as I understand it. Car companies are good examples of lifetime customer value, I believe. The concept of yesteryear is changing to adapt to the changes in people’s buying habits. An example would be Ford, where in stead of expecting customers to buy new, higher level car every few years, are recognizing that some customers are choosing to stay at a particular level for many years, long after they could afford to move to the next tier of automobile. To combat this, they are introducing the Ford Fiesta as their new entry level car and in 2012, the Focus (which includes a fairly large loyal following of both Focus and formerly Escort buyers) is being redesigned and bumped up into a higher cost bracket.
I don’t know if a rip-and-replace approach is necessarily appropriate, as the abstract states, where you should replace brand managers with customer segment managers. In stead, by recognizing both concepts are important, maybe a shift in thinking is required but not at the expense of brand.
I think the sticking point for me is “as narrow an audience as possible”. I fear a mentality like that would lead to products so specific as to be useless. Variety is the spice of life, but sometimes I actually want an “all purpose” cleaner and not “windex for glass top stoves that have spaghetti sauce scorched on it for more than 45 minutes”. Great care should be had to define the segments in a scenario like this.. too broad or too narrow, and you risk nobody interested in your product.
Although brand equity is very strong tool for companies, companies, such as GM, need to understanding of the change of its internal as well as external environment, so companies could utilize their brand equities in a way serve the long term goals.
The part of the article that seemed the most interesting to me was the Oldsmobile story, and how GM spent alot of time and effort to reposition the brand to attract newer customers (ie younger) and ultimately failed to do so.
Otherwise I agree with everyone that companies should focus on creating value for customers for the long term. The large investment that companies often make to gain new customers can then be written off over a lifetime, in essence creating a bigger profit margin. Also just think of all the customer referals. I think that this takes alot of work, but it is worth it. Companies must make sure to never let their guard down. From expierence there are some companies that had the potential to keep me as a lifetime customer but one interaction with them that went wrong changes all of that.
Companies are better equipped now than ever to manage lifetime customer value. They know can better track customer purchase history and overall buying behavior. With this wealth of data, they can tailor products/services to the customer that fill needs. I believe it varies product to product whether the focus should be on brand equity versus customer value management. Managing brand equity is more important in a physical good like Coke or Brand name house hold cleaners, while managing customer value is more important for services such as online banking.
Very good topic! Many organizations today cannot survive on Brand alone. I do agree that Branding is crucial however to continue the Brand, an organization must make sure they are bringing value to their customers. I hold a position where the focus is bringing value to the customer and how we do this is by showing them how to bring value to their customer by providing data and analytics to help guide and support their strategic vision and objectives. Related to the topic of Servant Leadership, you must serve to lead and in the case of organizations that want to lead they must serve their customers. I see it as one big circle of people that make up organizations that create commerce.