The Empty Whitecoat

Customer Advocacy and Customer Intimacy: Aren't they the same?

Recently, I was posed the following question through the OMC Group website (shortly to be relaunched with a new design) by a strategic marketer in a large European financial services company:

Can you tell me if there are any differences between customer advocacy and customer intimacy? If so, can you explain them.

This was too interesting a challenge to pass up so I wrote a bespoke reply. I can now share a summary, generic version with Empty Whitecoat readers...and here is an extract:

There are indeed differences between advocacy and intimacy - but they are subtle and are mainly concerned with the particular emphasis a company places on being more open and transparent, creating trust, building dialogue, involving customers, changing its style and tactics of relationship marketing and the alignment and incentivisation of business partners.

... The basic goal of advocacy is to earn much higher levels of customer trust, which can then be transformed into greater loyalty, reduced marketing costs and better innovation / learning potential. The problem with many customer intimacy approaches is that they have been turned "inwards", with the primary aim to improve the company's operational performance and productivity at the expense of moving closer to customers. Advocacy aims to correct this misalignment by organising the entire firm behind a unique trusted advisor or customer consultant position. Once performed consistently, this can generate authentic loyalty.

To read or download the full response (158 kb pdf paper - registration required), click here. And do send me your comments or additional questions either through the blog or in private.   Thanks!

Killing Off Strategy

Cristian Mitreanu over at RedefiningStrategy.com writes a powerful piece in MIT Sloan about the failures of organisations to create effective corporate strategy. He traces the problem to interpretation of the word strategy itself:

The original meaning of the word derives from the Greek strategia, which is the ability to employ available resources to win a military conflict. This etymological heritage generates problems when the concept is used in a business context because it implies the existence, even the necessity, of opponents. As a result, in most managers’ minds, the notion of a corporate strategy implies a strong focus on competition. Since competition takes place almost exclusively at the offering level, most organizations concentrate their strategic efforts on constantly improving the goods and services they offer. This overemphasis on the temporary success of a given offering, however, can often obscure the kind of thinking and emphasis that would lead to sustained success. Even a continuous repetition of temporary successes does not equate to sustainable strategy. In an effort to increase the value of single offerings, the organization may be distracted from larger questions of structure, mission and opportunity.

Cristian's analysis is similar to some thinking about the problems of militaristic overtones in old logic marketing (campaigns, targets, response etc.) But he goes one step further in his discussion of the role of objectives:

Strategy has yet another martial connotation that can be detrimental in a business context. In war, objectives can often be clearly defined, and so strategy is thought of as a means to a specific end. This view has persisted in the corporate world where strategies are conceived as plans to accomplish specific goals. Although corporate strategy can be very goal-oriented, especially in the early stages of a company’s development, the very nature of goals implies temporary success. By contrast, sustainable success is not, and cannot be by definition, an end unto itself or a goal to achieve. That is, goal orientation becomes arguably inappropriate when success has to be indefinitely sustained.

His conclusion neatly brings the customer - and especially the continuous cultivation of a deep understanding of what customers value - back into the picture as to what strategy should be:

So how should strategy be, in a most literal sense, redefined? Clearly, it cannot rely too strongly on objectives nor can it focus too heavily on competition. A more fundamental concept is needed to guide an organization in seeing its big picture. And that concept is the customer. To create sustainable, long-term success, an organization must first and fundamentally understand and relate to its customers. It is the ongoing cultivation of that understanding — based neither on specific competitors nor temporal objectives — which must be at the heart of any real strategy. And it is that from which all objectives should naturally flow.

Unlike like most MIT Sloan pieces, you can read the full article here.

Cranfield SOM launches podcast service

Experts in logistics and supply chain management at my research school, Cranfield School of Management have started a podcast service to inform businesses about the importance of supply chain management. Supply chains – often the weak link in a company’s procedures – can be affected by numerous external factors so ensuring a chain is as robust and well-managed as possible can be vital to a company’s success.

Professor Richard Wilding, Cranfield School of Management’s Professor of Supply Chain Risk Management, has provided a series of podcasts, which can be easily downloaded to run on any PC, or loaded onto an iPod or MP3 player, or even burnt to a CD, whichever is more convenient.

The full range of podcasts currently available is:

• A One Minute Overview
• Background and Rationale What is Logistics & Supply Chain Management? (Featuring an interview with Professor Martin Christopher, one of Europe’s leading academics specialising in Supply Chain Management)
• Developing & Implementing Supply Chain Strategy (Featuring an interview with Professor Alan Waller OBE, President of the Chartered Institute of Logistics & Transport, UK)
• Operating in China (Featuring an interview with Professor Linda Sprague, China Europe International Business School, Shanghai)

There are plans for further podcasts including one focussing on Reverse Logistics, which is due to be released later in this year. Professor Richard Wilding has devised the podcasts (each from 20 to 30 minutes long) to enable listeners to learn about supply chain managements, and keep up with new concepts and developments in subject, while travelling or at their desk:

“Many people are swamped with email news letters from various organisations and simply don’t have time to wade through the information. Within the podcasts I explore effective supply chain strategies and include interviews with leading academics and practitioners, review of papers and sources of other information so the subject is discussed in a lively and informative way.

“New podcasts will be released on a regular basis and are aimed at all those involved in or interested in the supply chain from undergraduate students to board level directors. They will educate, provoke new ideas and generate enthusiasm for supply chain issues and, best of all, they are free and can be downloaded by anyone!”

The podcasts, which also include embedded pictures, PowerPoint slides and web links, are available via Cranfield’s website at www.cranfield.ac.uk/som/lscm or alternatively at www.supplychainpodcast.info. They are also accessible through iTunes.

"The greatest danger in times of turbulence...

...is not the turbulence: it is to act with yesterday's logic. "

I love that quote from Peter Drucker as it describes perfectly how marketing is struggling to adapt to create and deliver value in today's experience-centred, co-creative markets.  Here is a quick contrast between the "old" and the "new" marketing logics:

Old Marketing Logic

• Emphasises value-creation at point of delivery
• Communicates mostly tangible value through attributes of the product
• Focuses on transaction and exchange value
• Can't help but provide asymmetric Information (selective communication of product value attributes to stimulate desired customer response)
• Customers are viewed as passive objects or resources to be acted upon and owned for lifetime value
• Aims to merely satisfy the customer through mixing the firms marketing resources (4P's)
• Manipulates the language and systems of relationship marketing to suit own ends
• Places primacy of firm over customer value

New Marketing Logic

• Emphasises engagement and exchange of intangibles such as skills, knowledge and processes
• Provides "offerings" which generate experiences which create personalised value
• Generates a two-way flow of value between firm and customer, therefore values these interactions as learning investments
• Moves into the customer sphere of "value-in-use" by assisting the customer to derive value from multiple, ongoing interactions with the firm and its products and services
• Focuses on assisting customer to achieve multiple experience desired outcomes, which vary according to unique customer events and contexts
• Develops customer capabilities and makes knowledge the primary source of competitive advantage
• Aligns business partners with the customer's view of value
• Creates mutual alignment and a blurring of roles between firm and customer and the co-creation of value
• Marketing shifts to centre stage as an holistic organising process of value-creation

What is preventing Marketing from making this shift to a new logic? There are several factors, each of which is deserving of a blog entry in their own right. They include:

• The lack of a "new marketing logic" representation in many marketing education and MBA syllabuses
• Separation of strategy, innovation and marketing functions and specialisations
• Marketing's love of strategic planning, SWOT and PEST and the fallacy of strategy-plan-act approaches
• The thrill of the customer chase ("hunter and the hunted") embodied by the militaristic marketing language and mindset of "campaigns", "targets" and "frontline" staff
• The challenge of identifying desired customer experience outcomes, i.e. knowing what customers want and how these vary across events and contexts
• The complexity of creating experience environments and multiple partner management

If you want to read more about the new logic, check out this great series of resources on the service-dominant logic at www.sdlogic.net

Market and Non-Market Co-Creation: HOG Events

When I think of market and non-market co-creation, I think of Harley Davidson HOG events. Putting it simply, if you think about it there are three kinds of co-creative interaction going on here:

(1) Harley Davidson (HD) execs dialogue with Bikers - where HD is engaging the biker to find out what they want / what isnt working to sell them more HD gear / products / better experiences. This is a market-based form of innovation where there is a value on the exchange of ideas, which HD is willing to invest in.

(2) Biker to Biker exchange - where bikers are buying and selling components or swapping gear based on a market-defined price or bartered value of ownership. This is also a market.

(3) Biker to Biker dialogue - exchanging tips, ideas, experiences, providing best advice to each other, arranging other events and discovering ways to adjust HD's bikes to get better performance or add parts.. This is a non-market form of co-creation. There is high reciprocity and a social interaction for no motive other than to feel part of an active community.

The common theme is that they are all engaged in some form of learning, but some of these interactions are underpinned by a market or profit motive, others by a participation motive and a sense of belonging. OK, this is an oversimplification and not entirely original but the premise is that by stimulating type (3) co-creation, then firms have a better chance of growing their brand equity.

Market and Non-Market Co-Creation

It is important to identify that co-creation is not just about firms improving their social marketing, open innovation, community-building and learning efforts to generate new proprietary and valuable knowledge with/from their customers.

Rather, there is also a form of co-creation that is largely independent of markets, where individuals willingly come together to create and share self-generated information, knowledge and content independent of any mechanisms of market exchange. In The Wealth of Networks, Yochai Benkler explores the dimensions and potential of such non-market co-creation / collaboration in some depth.

Making the distinction between the two types of co-creation primarily depends on how we define a market… Put simply, a market is where there is some kind of economic mechanism or price for the value exchanged between two parties and where the value is proprietary, that is, it is produced and owned by one party who expects some value in return for its exchange.

But in a non-market context, there is no economic mechanism or price for exchange and no ownership of information or goods. In a co-creation sense, such environments are characterised by the collaborative creation and sharing of knowledge and information by individuals in decentralised communities. The “value” derived by individuals in such communities is not moderated by an economic price but by social factors, experiential elements, meaning, learning, attention and shared values. Importantly, the co-creation that occurs here is independent of any market mechanism or desire for ownership by any party. We can see these forms of co-creation in open source software, media, journalism, blogging, entertainment, gaming and other digital environments. e.g Wikipedia..

As Yochai Benkler argues, such self-organising communities pose a threat to established firms seeking to use tweaked old market approaches to bolster their brands, innovation efforts and levels of social engagement – mainly because there is a limit as to how far such firms can “own” channels of knowledge production and are able to manage engagement when they apply a market-based logic and its associated capabilities.

Paul van Blokland just drew my attention to a related essay by Michel Bouwens on peer2peer and human evolution which can be found (http://integralvisioning.org/article.php?story=p2ptheory1). In a comment to an earlier blog of mine on this subject, Paul provides excerpts from Michael Bouwens paper:

Markets do not function according to the criteria of collective intelligence and holoptism, but rather, in the form of insect-like swarming intelligence. Yes, there are autonomous agents in a distributed environment, but each individual only sees his own immediate benefit.

Markets are based on 'neutral' cooperation, and not on synergestic cooperation: no reciprocity is created.

Markets operate for the exchange value and profit, not directly for the use value.

Whereas P2P aims at full participation, markets only fulfill the needs of those with purchasing power.

Paul writes that the paper's overall conclusion is that p2p aims at participation while markets "which are proprietary, secret and restricted are opposed to this aim of participation."

Overseas call centres damage the brand: Update

Back in 2004, I wrote a blog entry on the back of some research published then in BrandRepublic magazine. It revealed that UK companies setting up overseas call centres are losing customers at a rate that actually negates the cost-saving of outsourcing abroad. The following extract described:

The current use of offshore call centres is damaging the brands of UK companies and hitting profits, according to a new survey.

Industry analysts ContactBabel says one in seven customers who used an offshore centre responded by changing supplier.

The report, "Finding the balance: the effect of offshore customer contact on profit and brand", claims that UK businesses are using the offshore call centre industry in a cost-obsessed and unimaginative way that is severely hurting their brands.

The report, which analysed a survey of 1,008 UK adults in February 2004, found that 14.2% of the UK public changed their supplier as a result of using an offshore contact centre.

Out of those who personally experienced offshore customer contact, 74% said they felt more negatively towards the company than before. UK telecoms and insurance companies experienced the greatest levels of offshore-related customer resentment, with Scottish consumers the most likely Britons to change supplier because of an offshore service.

The survey also found that those who experienced offshore contact were also four-and-a-half times more likely to change their supplier than customers who had no direct experience of offshoring.

ContactBabel said that a typical high street bank would save £9.26m a year in operating costs by replacing 1,000 UK agents with the same number in India. However, if only an extra 0.343% of customers defected in protest, the bank's revenues would be reduced by the same amount. Last year, 1.09% of UK banking customers changed banks as a direct result of customer service offshoring.

I wrote then that it seems that generally many businesses view their customer interactions as a COST TO BE REDUCED rather than as a potential investment in experience, dialogue and learning. By automating customer interactions or outsourcing them overseas for example, many companies are at risk of commoditising one of their most precious future innovation assets: the opportunity to learn from and create value with their customers. In most cases such cost-focused initiatives will fail to deliver lasting value. Why? Because organisations use them as quick-fixes instead of addressing their more deep-seated underlying problems - i.e. a lack of customer knowledge, a poor experience and a limited market orientation...

Well, it now seems that the trend to switching operations back from overseas operations could be accelerating. A couple of weeks ago, Powergen - a UK energy business - announced it was to close its Indian customer service operations. Their MD claimed that the cost savings in India were not compensation for loss of quality.  In 2005, Abbey Group did the same following customer complaints. Whats' more, some analysts are now arguing that Indian outfits are beginning to reach the limits of their competent capacity for customer service and that a growing crisis in quality and emerging security issues may entail a reconsideration by many firms of their overseas customer interface.

My view remains the same. All too often, the primary goal of investments in overseas contact centres and the customer interaction more broadly is to reduce cost , increase efficiencies and boost margins.  A more enlightened approach would be to earmark cost-savings made when switching overseas to invest in improving poorly performing elements of the customer experience together with the creation of new added-value services, such as those by First Direct - which have the added benefit of hardly costing anything! 

Back in 2004, I wrote a blog entry on the back of some research published then in BrandRepublic magazine. It revealed that UK companies setting up overseas call centres are losing customers at a rate that actually negates the cost-saving of outsourcing abroad. The following extract described:

The current use of offshore call centres is damaging the brands of UK companies and hitting profits, according to a new survey.

Industry analysts ContactBabel says one in seven customers who used an offshore centre responded by changing supplier.

The report, "Finding the balance: the effect of offshore customer contact on profit and brand", claims that UK businesses are using the offshore call centre industry in a cost-obsessed and unimaginative way that is severely hurting their brands.

The report, which analysed a survey of 1,008 UK adults in February 2004, found that 14.2% of the UK public changed their supplier as a result of using an offshore contact centre.

Out of those who personally experienced offshore customer contact, 74% said they felt more negatively towards the company than before. UK telecoms and insurance companies experienced the greatest levels of offshore-related customer resentment, with Scottish consumers the most likely Britons to change supplier because of an offshore service.

The survey also found that those who experienced offshore contact were also four-and-a-half times more likely to change their supplier than customers who had no direct experience of offshoring.

ContactBabel said that a typical high street bank would save £9.26m a year in operating costs by replacing 1,000 UK agents with the same number in India. However, if only an extra 0.343% of customers defected in protest, the bank's revenues would be reduced by the same amount. Last year, 1.09% of UK banking customers changed banks as a direct result of customer service offshoring.

I wrote then that it seems that generally many businesses view their customer interactions as a COST TO BE REDUCED rather than as a potential investment in experience, dialogue and learning. By automating customer interactions or outsourcing them overseas for example, many companies are at risk of commoditising one of their most precious future innovation assets: the opportunity to learn from and create value with their customers. In most cases such cost-focused initiatives will fail to deliver lasting value. Why? Because organisations use them as quick-fixes instead of addressing their more deep-seated underlying problems - i.e. a lack of customer knowledge, a poor experience and a limited market orientation...

Well, it now seems that the trend to switching operations back from overseas operations could be accelerating. A couple of weeks ago, Powergen - a UK energy business - announced it was to close its Indian customer service operations. Their MD claimed that the cost savings in India were not compensation for loss of quality.  In 2005, Abbey Group did the same following customer complaints. Whats' more, some analysts are now arguing that Indian outfits are beginning to reach the limits of their competent capacity for customer service and that a growing crisis in quality and emerging security issues may entail a reconsideration by many firms of their overseas customer interface.

My view remains the same. All too often, the primary goal of investments in overseas contact centres and the customer interaction more broadly is to reduce cost , increase efficiencies and boost margins.  A more enlightened approach would be to earmark cost-savings made when switching overseas to invest in improving poorly performing elements of the customer experience together with the creation of new added-value services, such as those by First Direct - which have the added benefit of hardly costing anything!