Consumer engagement and more on trust

March 26, 2006


Aloha from the Boomerang Team~

The article below by Peppers and Rogers really hits the nail on the head as far as one of our industry's new buzz-expressions, "consumer engagement". The follow-up article on the lack of companies adopting trust initiatives with their customers strikes us as a significant head's up for Hawaii marketers and advertisers.

To us, trust and consumer engagement go hand in hand, not quite like the chicken and the egg, but close. Really close.

New technology applications: personalized urls and web to print technology

In our last e-newsletter, we promised to let you know about new technology applications that we're introducing to Hawaii that are cutting edge and terrifically effective.

To introduce personalized urls to you as a marketing tool, you received our 'soft launch' Year of the Dog campaign. A follow-up campaign will be on its way to you soon, including notification of who won the ipod! We'll share the back-end reporting of this tool, which shortens the traditional reporting of direct marketing results from months to days. You can now adapt your one to one marketing to newly clarified segments quickly and achieve greater loyalty and R.O.I. with personalized urls.

If you haven't heard, we're Hawaii's local provider of Web to Print Technology, enabling companies to streamline the process of ordering standard templated products. Through a secure web portal, authorized users can work with templates online to personalize items such as business cards or any number of products; see a PDF proof; get an estimate to approve and place their order - all online, 24/7. Service, training and of course printing, is all done locally, with speedy delivery times.

To your success,

Matt Heim and Lora Williams

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CUSTOMER ENGAGEMENT MUST ACTUALLY INVOLVE CUSTOMERS
By Don Peppers and Martha Rogers, Ph.D.

In 15 years of writing books on one-to-one marketing and managing customer value we've seen a lot of strategies and buzzwords come and go. The latest one to appear on the scene: "consumer engagement."

In an effort to quell disagreement among marketing professionals regarding just what consumer engagement really is, the Advertising Research Foundation recently took action. In presentations leading up to the organization's convention last week, the ARF said that consumers should be considered "engaged" with a brand or a marketer as the result of just the right combination of media, creative message, and brand appeal. The official definition, delivered at the ARF convention, was even more watered down. It said: "Engagement is turning on a prospect to a brand idea enhanced by the surrounding context."

Huh? Sorry, but as important as brand strength is, this definition of engagement begs credibility, because it omits any mention of interaction, which is the essential ingredient of any kind of true engagement. To borrow from Gertrude Stein's famous description of Oakland, the trouble with ARF's new definition of consumer engagement is that there simply is no "engagement" there.

Engagement implies that a person is somehow actually involved with a brand or product, and not just in a state of affection for it, or even adoration. You may worship Natalie Portman, but unless the two of you are engaged in something, your wife has no cause for concern.

It seems to us that any sensible definition of consumer engagement must imply some overt action on the part of a customer. Such an action may in fact be stimulated by great brand messaging, creative advertising, or the right choice of media, but it won't necessarily be. As a rule, customers do not engage with a brand or a message. They do engage with employees, products, services, Web sites, and other interactive channels.

-- Better than nothing --
It's great that the ARF is trying to create some order out of terminological chaos. And we certainly don't mean to sell consumer engagement short as an idea for marketers who want to strengthen and deepen their relationships with customers. We applaud the ad industry's "new" emphasis on customer relationships, which has huge potential (and welcome to the 21st Century!).

But ask yourself this: If P&G runs a series of Pampers ads on iVillage.com that 50,000 customers click on in order to provide personal information, how much should P&G pay for that "ad" series? Are these 50,000 customers creating more value per customer for P&G than the 800,000 customers who saw the ad but didn't click through? That extra value-per-customer could be thought of as the true reward for consumer engagement. Now if P&G runs TV commercials for Pampers on "Oprah" that do not have a measurable "engagement" mechanism or metric, how much cheaper should this type of "passive" advertising be?

-- A better definition --
Here's a definition of engagement that we think is more helpful. Engagement is a series of customized informational and financial transactions that 1) occur over time and 2) increase both the customer value to the company and the value of the company to the customer. It is not limited to any department, ad campaign, or agency. It needs to be built into everything your company does and everything every employee does. Rather than funneling engagement into brand, creative, and media, engagement should be part of operations, marketing, and overall customer experience. That's how you accomplish profitable and sustainable relationships.

Consumer engagement is nothing new to successful companies with great customer reputations. But ask someone who works at Royal Bank of Canada, or BMW, or Starbucks if they would use a new creative campaign or branding approach to "engage" their customers. They'll almost certainly tell you that their customers engage with them not because of their advertising, but because of the service interactions they have with them, or maybe as a result of the individualized treatment. And while communication is an essential element in this treatment, it is the consumer's own communication and feedback to the marketer that is the primary indication of genuine consumer engagement.


CUSTOMER TRUST SLIPS, PROFITS TO FOLLOW
By Elizabeth Glagowski, Managing Editor

Consumers are losing faith in many of the companies they deal with, and companies aren't doing much to stop it, says a new report from Datamonitor.

In the report, "Building and Profiting from Consumer Trust," 86 percent of the 3,200 U.S. and European consumers surveyed said that they have become more distrustful of corporations within the past five years. The report also shows that companies are aware of this drop, with 64 percent of the 153 industry leaders surveyed agreeing that consumer trust in brands has decreased in the last two years.

Why is the customer relationship breaking down? Datamonitor's Daniel Bone, author of the report, points to three main reasons. First, companies aren't as transparent to consumers as they should be, and consumers are taking notice. "Consumers are seeking information like never before and it's only now that manufacturers are beginning to wake up to it," he says.

Second, firms are complacent when they should be proactive about winning customer trust and loyalty. "Many companies assume that consumers will be loyal to their brand over the long term," he says.

Third, it all ties back to the customer experience. "The more positive experiences a consumer has with the brand, the more trustworthy he or she is likely to become," he says. When consumers see efficiency gains or other corporate moves that may jeopardize the value of the customer experience, the trust factor is affected.

-- Building blocks --
The numbers show that companies in general aren't very concerned about building long-term, trust-based customer relationships. However, some companies are thinking strategically about trust, and it's proving to be a competitive advantage, says Bone. In the survey, 85 percent of respondents said that "word of mouth recommendations from friends, family or colleagues are typically more trustworthy than any corporate generated content." As a result, more marketers are adding word-of- mouth initiatives to their marketing budgets every quarter.

Also, socially responsible companies are considered more trustworthy, the report finds. Seventy-three percent of consumers say that a good track record in business ethics is influential in (re)gaining consumer trust. "Aligning with a cause is a significant strategy for companies to attract consumers and gain a long-term, sustainable competitive advantage based on heightened trust," the report states.

As an example, Bone mentions natural supermarket chain Whole Foods in the U.S. and Canada. In January, Whole Foods announced it will purchase renewable energy credits from wind farms to offset 100 percent of the electricity it uses in all of its stores, distribution centers, and offices. Revenue at the 180-store chain rose to $1.67 billion in 2005, up from $1.37 billion, driven in part by a 13 percent increase in sales from stores open at least a year.

-- Long-term benefits --
The warm fuzzy feeling you can give customers is nice, but there are more tangible benefits to consumer trust, Bone says. Trust can be tracked to financial impact, in much the same way good brand-building can. "Brands are rooted in the trust that consumers place in them," he says. "After all, the ultimate goal of marketing is to generate an intense bond between the consumer and the brand, with trust being a fundamental factor in achieving this."

Also, trusting consumers are willing to forgive mistakes, Bone adds. "Accrued trust allows consumers to develop personal brand relationships, making them more forgiving to a brand's shortcomings." In the U.K., there was outrage in 2004 when consumers found out that Coca-Cola's Dasani bottled water was essentially tap water. However, there has been minimal damage to Coke's brand equity because it has a long-term, trustworthy heritage, Bone says.

Companies with a heritage have an advantage over newer firms, Bone admits, but any firm that takes steps to build trust with consumers has the potential to make a long-term impact. It's a strategy worth paying attention to.