News

The 'Four Rs’ of Customer Relations

12/19/2009 2:00 AM Eastern

When James Barnes wrote about switching from the “4 Ps” to the “4 Rs” in his 2000 book Secrets of Customer Relationship Management: It’s All About How You Make Them Feel, he might as well have written a marketing handbook for today’s communications industry.

Since deregulation, successful communications firms have had to transcend product, promotion, placement and pricing for the masses to focus on relationship, referral, retention and recovery — a transformation demanding that an unprecedented amount of customer information be shaped into a single, comprehensive customer view. Campaigns have to cross marketing channels to make contact based on the knowledge of how customers have behaved, how they are likely to respond and what they are worth.

Non-targeted products don’t provide a competitive advantage in the long run; new products or services entering the market doom it to commoditization. Similarly, progressive pricing and promotions provide a short-term boost, but inevitably prove unprofitable. Placing more stores in better locations hasn’t delivered long-term, gross customer additions. Communication companies have quickly realized that stores have become service centers rather than sales centers; customers, at a minimum, require consultative selling.

Strategies based on the 4Ps don’t automatically fail. In fact, when they are deployed in a targeted manner, they yield significant long-term value. Understanding customers in terms of both their value and requirements can create a fairly balanced treatment that is profitable for the company while producing an advantaged offer.

But it is the 4Rs that provide a powerful framework for lasting strategies that can succeed against the market forces facing communications organizations.

Relationship: Establishing a relationship with a given customer demands an historical, present and future view of profitability and requirements, making every interaction a fair and balanced negotiation. Although IT advances have made raw information available to interactions, the information to make a profitable decision is not available. In fact, when only raw information is available, the interaction often concludes in a decision that is unfairly biased toward the customer. A perfect example is the save desk: Incented to retain customers at any cost, they consequently keep customers who exhibit deep skills in negotiation or are simply highly emotional.

Referrals: As the communications industry has become more saturated, there has been a search for methods to stimulate the market, and referrals have proven effective. New, profitable customers are predominantly competitors’ customers, not masses of new entrants. Family or business account plans have been effective to a certain degree, but strategies such as leveraging or even deploying social networks have hardly been exploited.

Retention: Retention and recovery programs still remain to be fully exploited, or sometimes even explored. Retention was amongst the first long-term 4R strategies to be adopted, with many companies installing extensive customer lifecycle-management programs. The program typically starts with a welcome call educating customers about their new product or service and ends with a contract extension. However, without the right enterprise marketing management capabilities, these lifecycle management programs become very complex and difficult to execute.

Recovery: Communications companies know more about the behavior and requirements of recently departed customers than their competitors and need to leverage those insights into campaigns that win them back. In a saturated market, timing is essential and recovering a former customer is the best acquisition channel.

Growing in today’s communications industry requires a balance. Product development, progressive pricing, placement of stores and targeted customer promotions need to be based on fair and balanced customer relationships, referrals from customers, retaining desirable subscribers and recovering profitable ones.

Juggling the 4 Rs requires a single customer view that can power targeted, multichannel marketing campaigns — an iterative process that should teach communications marketers how to segment and predict based on customers’ evolving profiles and needs across all channels, one customer at a time.

September