He Who Is Always Right - How and When to Strengthen your Customers Relationships

Not all customers want a relationship. Of those who do, not all want the same depth of relationship. And even among those who seek deep, emotional relationships, different customers will respond to different facets of their interaction. Some customers might be thrilled if the sales person remembers their name, but others might desire an effusive, personalized relationship with the seller. How can a firm understand how its customers wish to relate and use this understanding to formulate its marketing strategy? Professor Prashant Malaviya and Sarah Spargo propose a framework that allows businesses first of all to understand the various ways customers might wish to relate with firms, and subsequently how these relationships can be deepened. In the process, companies can learn how to satisfy customers continually and sustain their loyalty by forging optimal relationships.

by Prashant Malaviya, Sarah Spargo
Last Updated: 23 Jul 2013

Forthcoming Financial Times Prentice-Hall Next Generation Business Book Series, editor Subir Chowdhury

Focusing on “customer relationships” has become the new mantra of business strategy. But before putting on their smiley faces and charging ahead to form relationships, firms would be well advised to pause (put on their poker faces) and ask themselves whether all their customers wish to have their hands held, their egos pampered, and their personalities analyzed. Probably not.

The real challenge for the firm is not that they ought to build relationships with customers, but that they should build relationships at the “right depth” with their customers.

In their forthcoming article, Prashant Malaviya, Associate Professor of Marketing at INSEAD and Dr Sarah Spargo, Research Associate at INSEAD and independent Relationship Psychology Consultant, advance their idea of a “Customer Relationship Pyramid.” This framework shows how a firm can develop customer relationships with varying degrees of depth, so as to maximize benefit for both the customer and the firm. The key to making it work lies in understanding the level of relationship that the customer desires.

The authors structure the depth of customer relationships, from the most transactional to the most intense, in their pyramid of six relationship levels. First, at the base, there is the most general type of interaction, for instance, when a customer seeks a product and then wishes to leave as quickly as possible. To capitalize on this “utility need,” a firm needs to provide a suitable environment. Simply put, if the organization wants to improve the number of “transactions,” it can increase the number of outlets, provide 24-hour service and add to the product range.

The second level of the relationship is meeting a “convenience need,” where the customer starts looking for a deeper intensity of association. A firm such as Autobytel, an online car buying facility, offers the customers many plusses, such as financing, insurance and delivery. This “full solution” approach simplifies the customer purchase process and gives him the convenience that he desires, or a one-stop shop.

The next level is “feeling at ease.” Here, the customer is open to a “pleasant shopping experience.” Bookstores such as Barnes and Noble provide the grounds for that kind of relationship with a living room-like environment, both spacious and hospitable. Southwest Airline employees wearing shorts and tee shirts not only look relaxed themselves, but also release tension for their passengers. However, the authors point out that in order to do this successfully, firms must also continue to meet the first two levels of needs previously discussed.

The fourth level, with increasing depth, is the “personal recognition need.” Those customers who have already demonstrated a high level of loyalty to the firm fall into this category, and now, they’re looking for reassurance and recognition. One firm addressing this kind of customer need is Amazon.com, the online retailer, as it uses personal recognition of customers on the website.

At the fifth level, the customer needs transcend to “self-expression.” By this stage, consumers want to feel honored for what they are and what they stand for, because their adoption of a brand is a personal statement. Cult brands such as Harley-Davidson strengthen this expression of self-image through a host of complementary products and lifestyle statements. Lastly, at the deepest level, there is a “co-creation need.” The customers feel they are, in a way, a part of the company, and they want to move in a common direction.

The article shows that these levels follow the simple concept of a customer relationship pyramid. In order to move to the next level, a firm has to perceive and satisfy all previous levels. This allows a firm to interact in a way that maximizes customer satisfaction and loyalty, continually.

INSEAD 2002

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