Associate Director Optima Partners
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Can Marketing-as-a-Service help rebuild consumer trust?

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28th Jul 2014
Associate Director Optima Partners
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Talk to most marketers and you get the impression that they know what makes their customers tick. They have piles of marketing research to prove it. But do they really? The recent fast.MAP Marketing Gap Tracker looked at the differences between what marketers think and what customer think. Surprise, surprise - it found that marketers don’t really know how their customers think at all.

One of the Tracker’s key findings was the importance of customer trust. The annual Edelman Trust Barometer looks at how much customers trust businesses across a range of factors. The most recent Barometer made for pretty sad reading. It highlighted that customer trust in companies of all types has fallen significantly over the past few years to the point where only 44% of customers now trust businesses. Although most companies are aware they must do something to bridge the trust gap, they typically look for prophylactic trust 'sticking plasters' rather than try to repair the underlying reasons why their businesses unintentionally destroy trust. Trust is one of those things that follows a hysteresis curve; it takes a long time to build but can be destroyed in a very short time by stupid, short-term or immoral behaviour.

How data-driven marketing destroyed customer trust

As far back as 1994, Morgan & Hunt wrote about the importance of developing trust in customers. They showed that trust was necessary to develop working relationships with customers. Seth Godin understood this very well when he wrote his excellent book on Permission Marketing. Unfortunately, feeding the quarterly product P&L beast meant that the majority of marketers opted for data-driven targeting for short-term sales, even at the cost of potentially more profitable future loyalty.

This short-term approach inevitably resulted in the erosion of trust and the growth of what Liljander & Roos called spurious relationships. They estimate that as few as 5% of customers have true relationships with companies and then usually through someone they know personally. This can have very expensive consequences; it should come as no surprise that mobile telcos typically spend over 70% of their marketing acquisition budget on replacing customers that churned to competitors the previous year. Inger Roos has shown that customers are more often pushed because of critical service failures than jump because of better offers. Mobile telco marketers are as unhappy about this as customers are, but few of them are willing to risk not making their net adds targets by switching budget from acquisition to retention marketing or heaven forbid, to customer service. And when they do it is much more likely to be through an innovative co-created mobile telco startup like giffgaff than an incumbent like its parent telco Telefonica O2.

More of the same failed marketing will not rebuild trust

Despite all of this, I see a lot of companies actively looking at how they rebuild trust with their customers. Not for its own sake, but as a driver of customer engagement. Faced with the proliferation in channels, an explosion in modular content and the fragmentation of customer segments, marketers have been at a loss as to how to respond. As a pair of Economist Intelligence Unit studies on Beyond Loyalty: Meeting the Challenge of Customer Engagement (Part 1 and Part 2) suggests, managers believe that developing stronger customer engagement will increase revenues, increase customer loyalty and thus, increase profits.

Unsurprisingly, this has got marketers rather excited. Unfortunately, their response has typically been a more finely-grained version of their current data-driven targeting approach. For example, Marketing Week's Programmatic Buying Essential Guide suggests that up to 75% of all display ads will be bought programmatically by 2017. And this in-spite of the fact that 69% of customers find highly personalised ads 'creepy', 47% want more control over the ads that are displayed to them and 38% use ad blockers to block them entirely. Companies will ultimately be the losers in this war of attrition between pushy marketers and uninterested customers.

Building engagement through Marketing-as-a-Service

There is some hope however. Aimia, (the operator of multi-sided loyalty programmes such as Nectar and AirMiles, and frequent flyer programmes such as Air Canada's Aeroplan) described in a recent white paper on The Four Futures: The Digital Loyalty Survey how it is focusing on a two-pronged strategy based on a combination of emotional engagement with customers and customer control over their own data. This is an interesting approach, but one fraught with potential problems, not least customers’ lack of interest in taking on an onerous and non-value- adding activity like managing their own data.

Perhaps part of the solution is providing 'Marketing-as-a-Service' to support customers' making contextual decisions, as Alan Mitchell suggested in a recent Ctrl-Shift post on Flourishing in a Personal Information Services Environment. This would have the added advantage of turning marketing into a service that enables customers to co-create more value (see my recent post on How Contextual Marketing Turns Marketing into a Service).

Ultimately, this may lead to a full-scale ‘MeCommerce’ multi-sided platform that facilitates customers' life event management, either provided by brands themselves (through a platform solution like MyWave) or by an external intermediary. But this is hard to pull off. As a recent article by Andrei Hagiu on Strategic Decisions for Multi-sided Platforms points out, building a winning platform is very difficult, particularly if the platform is run by an external intermediary rather than a trusted brand. And as another article on Mastering the Intermediaries suggests, Cos are starting to fight back against external intermediaries.

What do customers really want?

Through a combination of stupidity, short-termism and immorality marketers have managed to destroy customers' trust. Rebuilding that trust is an important driver of improved engagement. Many marketers see engagement as the key to increasing revenues, customer loyalty and thus, profits.

Unfortunately, many marketers are responding with more of the same data-driven marketing that destroyed customer trust in the first place. Helping customers make decisions through Marketing-as-a-Service would be a better approach to building engagement. This might pave the way for a MeCommerce platform enabling customers to remove the hassle from managing their key life events. At the end of the day, it will be customers that decide whether MeCommerce thrives, or whether it dies on the vine. Ladies and Gentlemen, place your bets. 

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Dr. Graham Hill
By Dr. Graham Hill
28th Jul 2014 11:58

David Brunnen at Groupe-Intellex has a great post on Keep it Under Your Hat: Your Internet is Changing. In it he points out that the development of the Internet-of-Things, real-time big-data and decision support systems is pushing the Internet towards becoming an ‘Internet-of-Decisions.

The contextual marketing described in my earlier post on ‘How Contextual Marketing Turns Marketing into a Service’ is how company’s control their response to the Internet-of-Decisions. Marketing-as-a-Service is how customer’s control their response, even where the tools are provided by the company.

Both are inextricably linked to recent developments in the Personal Information Economy described in Ctrl Shift’s recent report on Personal Information Management Systems: An Analysis of an Emerging Market.

Perhaps we really are entering the age of the Internet-of-Decisions.

What do you think? Post a response and get the conversation going.

GrahamHill
@grahamhill

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Dr. Graham Hill
By Dr. Graham Hill
28th Jul 2014 12:08

Mike Riddel, the Founder of social rewards system HomeTownPlus posted an interesting comment...

Quote

"I’m no expert in either the personal information economy or in marketing, but i do know what makes people tick having spent three tough years developing a town reward scheme in Wigan, England.

HAT, and other volunteered personal information propositions are all grand plans that lack one thing – a cause.

It’s so hard to get people to trust you, if they don’t know you. That’s the trouble with being a start-up – nobody knows who you are and nobody trusts you because they don’t know you.

On the other hand, people don’t trust existing organisations much either so the advantage of being a start-up is that you’ve a clean slate to begin with. No history, just an empty road stretching into the distance.

VPI and VRM models all depend on critical mass to get themselves going – without sufficient numbers the engines don’t run properly and sooner rather than later, the start-up runs out of gas.

So an innovative business model is required to attract people in sufficient numbers to begin to leverage the data (for the good of your customer community). That is tough in itself as most of the good ideas have been snaffled up already – as funders and venture capitalists know full well.

But if you passionately believe in making the world a better place and that the way to do that is to use business means to achieve your aims, then focus on the dividend that is produced when all parties work together.

“It’s all in the divi”.

As in dividend.

Unless there’s a dividend or reward, then why would anyone want to listen to what it is you have to sell them?

What’s missing from most of the VRM / VPI propositions is a cause. We the people want someone to stand up and represent the little people in a way that’s fair to everyone.

We the people want to work with those that won’t rip us off.

We know that big businesses will rip us off – it’s in their nature to do so, and we know that governments won’t or can’t protect us from it happening.

What we the people want to know is: who can we trust that we can do business with? We want an answer to that question.

I don’t trust big business and i don’t trust politicians. I do trust people like me.

And that’s the place to begin any movement or propagate any cause.

Unless you can get deep down in community and feel the pain, understand the issues and earn the right, whatever you come up with is going to be top-down rather than bottom up.

There ain’t no shortcut to learning the ropes on this one – the trick is to get the divi right for everyone – for the investors, for the punters, for the organisations and for yourself.

it’s all in the divi. Of course passion plays a big part in motivating people to believe, but professionalism is critical when it comes to making it pay for those that deserve the divi.

We all want a system that is fairer, don’t we? One that links your contribution to your entitlement so that there can be no excuses.

If there’s only so much resource in the world then we need to find a better way of managing it so it doesn’t run out before our kids need to use it. We need a rewards system that incentivises everyone to play their part and it needs to pay out from day-one. If it doesn’t, I’m afraid i think you’re toast."

Unquote

Is Mike right? Should marketing expand its remit beyond building the traditional company - customer relationship to include building relationships with other stakeholders? What Michael Porter refers to as Creating Shared Value.

What do you think? Post a response and get the conversation going.

Graham Hill

@grahamhill

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Mike Boysen
By Mike Boysen
28th Jul 2014 12:33

Graham,

A lot to digest this early in the morning. However, I'm certain we will see history repeat itself: the top echelon (5-10%) companies will move the ball forward and the rest will abuse a platform they don't understand - or want to understand. As you stated, it's possibly not the marketers' faults since they are measured by those above (short term results oriented) and therefore make promises the downstream stakeholders can rarely keep. But I'm not giving them a complete pass.

As long as companies control the platform, these relative numbers won't change. Marketing as a Service (whatever that ends up really looking like) could give us the chance to see some difference. The limits of that difference will be in the hands of people and their willingness to participate. It will have to have a natural "pull" because the people aren't going to listen to the marketers ;)

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Dr. Graham Hill
By Dr. Graham Hill
30th Jul 2014 20:32

Hi Mike

Thanks for your thoughtful comment. You raise a number of interesting points.

According to Lanson’s research on the most trusted companies, Marks & Spencer, John Lewis and Tesco are the most trusted companies in the UK. Building customer trust is a slow and laborious process. According to Edelman it requires companies to continuously engage with customers, behave with integrity, offer high-quality products, have a societal purpose, and operate efficiently and effectively; roughly in that order of importance. In a nutshell, trust is a consequence of the kind of good business practices that create value for customers, that all companies should aspire to.

In my experience most companies, and central and local government too, have little real idea of what their customers value. This is largely because they never bother to find out. Instead, they rely on superficial market research that tells them what customers say, but not what they are trying to do and where they need help. Finding out isn’t rocket science. Over ten years ago Christensen & Ulwick described how customers have largely unchanging jobs-to-be-done. Through a process of ethnographic design research a company can easily identify its customers’ jobs and the decision journeys they use to do them, and through qualitative validation they can find out how important each job is for customers and how satisfied they are with the tools they currently have to do them.

Armed with an understanding of customer jobs, their importance and customers’ satisfaction, a company can use these insights to target innovation specifically at the most important jobs that require the most improvement. The so-called ‘sweet-spot of innovation’.

Sometimes this requires improvements to the company’s products. Dutch retail bank ABN Amro used design research to identify that customers wanted more relational support to help them get more value out of its products. The Bank invested heavily in a developing a range of Contextual Banking services that allow customers to be always connected, that are fast and easy to use, that are personal to each customer and that continuously learn about how to better support the customer. This is Marketing-as-a-Service at its best.

Sometimes this requires the company to reinvent itself. Mobile telco Telefonica O2 set up its MVNO subsidiary GiffGaff after it asked  customers what they wanted most in a mobile telco. GiffGaff was co-created together with its to-be customers. They also provide practically all of its marketing, its customer service and are a continuous source of suggestions for new products, services and experiences. It should come as no surprise that GiffGaff easily has the highest customer satisfaction rating, over 81%, of any UK mobile telco.

Sometimes this provides the opportunity for a new company to disrupt the market. The failure of energy companies to offer easy to understand (and thus compare) energy tariffs provided the impetus for Michael Lewis to set up the CheapEnergyClub. It provides customers with an easy to use energy switching service. Customers simply say for what saving they are willing to switch; CheapEnergy club continuously monitors at all the different tariffs, emails the customer when their desired saving can be achieved and helps the customer switch to the new tariff. This model has been so successful that Lewis is discussing setting up the same model for the broken personal current account market too.

Three different examples, all based on the simple idea that if you know what customers’ most underserved jobs are, you have the foundation for innovating new products, new business models or even, to disrupt existing business models.

Customer trust is difficult to develop. But if you find out what HomeTownPlus’ customers really value most, maybe it can become the next Marks & Spencer, John Lewis or Tesco in the social rewards platform industry.

Graham Hill

@grahamhill

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Dr. Graham Hill
By Dr. Graham Hill
30th Jul 2014 22:21

Hi Mike B

Thanks for your comment.

Marketing is currently going through some monumental changes. The growth in digital and in particular, mobile technologies, the evolution of the always-on customer and the recognition that there is more to the customer experience than just the touchpoints leading up to the point-of-sale has sounded the death knell for campaign marketing.

One of the key developments is the growing recognition of the importance of digital customer engagement. As Brodie et al suggest, engagement is developed when customers both co-create value during interactions with a company, its staff and its products, and have a degree of control over how the interactions are carried out. The more value co-creation and the more customer control, the more engagement. And the more engagement the more customer loyalty, revenue and all other things being equal, profit for the company.

Building digital engagement in always-on customers is a case of working out how to create more value for customers during each interaction with the company and giving them more control over how the interactions are carried out. Traditional campaign marketing fares rather badly, scoring poorly on value creation for the customer and on customer control. With their focus on the company, its products and the point-of-sale, campaign marketing has become increasingly ineffective over time. Direct marketing response rates as low as 1.5% and email marketing rates as low as 0.1% may still work for companies, but they don’t work anything like as well for customers and their days are numbered.

In contrast to campaign marketing, Marketing-as-a-Service scores much more highly on value creation for the customer and a little better on customer control. With its focus on customers, interactions and the customer experience, companies like ABN Amro with its Contextual Banking has shown how Marketing-as-a-Service interactions that allow customers to be always connected, that are fast and easy to use, that are personal to each customer and that continuously learn how to better support the customer produce better results than campaign marketing. And creates the kind of engagement that builds a portfolio of customers that will stay with the Bank through thick and thin.

Campaign marketing is dead. Long live Marketing-as-a-Service.

Graham Hill

@grahamhill

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