Wednesday, 23 September 2009

New Article for Medicat Magazine


You’ve been inundated with ways that marketing can help sustainability, not least by your humble columnist here. But have you stopped to think about how sustainability could transform your marketing for the better too?

Most marketers I have ever come across think it is their job to be recruiting new customers. It may say in their targets that they need to increase brand share, profitability and so on. But what they have in their minds when they see these tasks is getting customers in through the door. What other reason would you use advertising media for after all? If you wanted only to reach your existing customer you could advertise on pack, in branch or through a beautifully designed newsletter or something like that.

For the customer the experience is rather like being married to someone who is out every night chatting up other women. Or seeing a friend at a party, but she keeps looking over your shoulder to see if there is somebody more important or interesting there? Anyway you get my point – it’s slightly annoying apart from anything else?

When you scratch the surface of most markets you find that, conversely most of the money is made through loyal customers.

UK banks have recently woken up to this fact and started charging cheaper rates to existing customers. They have said publicly that this is because known customers are a better credit risk. Even the ones who do get into credit problems tend to pay off their bank first and companies they have no other relationships with last. But that is not the whole story. I interviewed some bank marketing directors for a report a few years ago. One of them told me that they had calculated that 90% of their profit came from the 6% of their customers who bought 2 or more products from them. Firstly the 6% is incredibly low, it’s almost like the customer is ruling out existing providers because they sensed they would get ripped off if they didn’t shop around. Secondly it should put an incredibly high value on loyalty. Every 1% they could add to the "2+ products club" would create huge financial returns. Plus the benefits of more predictable, less price-war dependent income streams.

The bad news for the banks is that people think of them as ‘all the same’. You know why? Because they are in fact all the same. At the height of the housing boom there were mortgages available from over 8000 providers. And only a couple of these (like Virgin’s “Offset” mortage product) were anty different to any other, except on price.

There is one exception though; the Co-operative Bank. They are a past client of mine so I’m not in a perfect position to judge. But that goes for five other banks and it’s not like I buy lots of financial products from those too. But I buy two or three products off the Co-operative every year – travel insurance, car insurance, the sorts of things where I could shop around for the best price but instead I go to the Co-op. Why? As their advertising campaign says they are “Good with money”. Specifically they have really tough sustainability standards, which they apply to all their investments and other commercial relationships. They do lots inside their own company, for instance with renewable energy and staff volunteering. And they do lots for the ‘sector’ too – for instance as a writer I rely on their annual reports into the UK Ethical Consumer.

I’m not sure if they sent me a letter asking me to donate to their company I would. They are still a bank, still have shareholders and so on. But I am very happy to buy things off them at an okay price, rather than shop around for whoever is the absolute cheapest. It affects how I expect to be treated by them too – if I ever have an insurance claim to be settled. Anyway my experience so far is that their people are pretty nice on the phone. Working with them as a client I found quite a few people had gone to work for them for similar sorts of reasons – "okay it’s a job in a bank, but at least they are doing some good too". The Co-operative Bank has been doing really well commercially during the banking crises of the last year. They have stood out as one company people could trust, on all sorts of levels. And in classic brand terms they are simply differentiated. All the other banks are ‘blue’ and they are ‘green’.

There was a ton of other stuff I wanted to do with them as my client to make loyalty (not recruitment) their key marketing objective. Like customer-help-customer schemes. And promotions where you club together with others in your local community to do something good for the area. But once you’ve decided to be about sustainability you have lots of such options, and not just in the traditional ‘green consumer’ niche either.

The moral of this little story? When you look at sustainability through the old marketing lens of projecting an image to attract new customers it looks either weak, or like a recipe for greenwash. But the more you look at sustainability through a customer loyalty lens, the more sense it makes for your business. As well as saving some of what’s left of this fragile planet for our grandchildren, which is of course worth giving a thought to too!


Andrew Smart said...

I tend to agree with a lot of that. Makes sense in a sector were a lot of the products are generic. But we all know the growth of ethical consumerism means that a green/ethical standpoint will become less of a differentiator as more companies see the opportunity in acting more responsibly. Will this alter how loyal customers are or will they then seek out the greenest option? It would be great if we reached a situation were the big players are trying to out-green each other - A bit like we've seen happen in the UK supermarket sector I suppose and potentially the car industry, as it stands right now.

John Grant said...

Hi Andrew, I dont think it's an opportunity to get people to be more loyal because you are green (agreed thats a pretty shallow differentiator). I reckon the main opportunity is to create loyalty schemes and mechanics; like the everlasting laptop where you just upgrade the parts. If that makes sense? Mostly i've noticed if you make the objective 'loyalty and repeat business' its much easier to come up with great sustainability-and-marketing concepts.

Andrew Smart said...

Oh, I see. Sustaining relationships in the same way Interface Floors do? (I know, probably the most overused example but in this case it fits I think) Or my fashion idea - remember that? I still haven't managed to find a multi-billionaire uncle who's willing to finance that one yet.

Nicola Thomas said...

Looking after your loyal customers to me is a no-brainer - look after the golden goose and all that. Yet I find it hard to compare the Co-operative to the 'others' in this manner because they sell food for instance. This extends their relationship with their customers, and surely adds to the opportunity to cross-sell?

There again, it's late and it's been a while since I read your blog and was just checking in to see all is well in the world of John Grant!

paul macfarlane said...

Loyalty puts a wonderful demand on the entire customer experience cycle. Most marketers have no idea what to when a customer slides out of the "get" phase into "maintain" or worse, products where you come and food and pay as you go wireless.
Loyalty means deep enthusiasm and as you have often pointed out a deeper sense of personalization, connection with a thing or a company for any number of reasons. Right now I'm trying to get a client to see this and they keep saying "yes, eventually...right now we have to make sales." How funny.

Nice one JG

Caroline Wilson said...

I now avoid any ad (insurance, car breakdown etc) that says it's for new customers only.
What 'new customers only' means is the company only cares about getting you, not keeping you, and the after care will be poor.

I like the way the Co op is finally being a bit bolder about what it's good at - it might not be sexy or cutting edge - but it won't rip you off and no one else in the supply chain gets ripped off either.

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