CHAPTER 1 Evolution of Marketing and the Revolution of Customer Strategy

       No company can succeed without customers. If you don't have customers, you don't have a business. You have a hobby.

      —Don Peppers and Martha Rogers

      There can be no doubt that technological progress has irreversibly transformed the nature of business competition, giving customers much greater power, making them ever more knowledgeable, connecting them seamlessly to other customers, and raising their expectations and demands significantly with respect to the products and services they buy.

      New technologies also allow an enterprise to treat different customers differently, in contrast to the way business was done for virtually the entire twentieth century, when an enterprise would treat all its customers in basically the same way. Except for some high-end products and business-to-business (B2B) services, no enterprise could afford the time and expense required to pay attention to individual customers, one customer at a time. Instead, enterprises focused on the most common needs of their “average” customer, and then publicized their product benefits and attributes in the same way to everyone, in hopes of persuading some of these average customers to buy. But because of technology, enterprises can now do business in an entirely different way. Using computer databases, an enterprise can easily identify and remember its individual customers, one customer at a time, even if it has millions of them, paying close attention to the experience it provides to each customer and to its ongoing relationship with them. Using the internet, along with technologies such as Wi-Fi and smartphones, an enterprise can now interact directly with each of its individual customers and prospective customers, responding to inquiries, posing questions, and making different offers or suggestions to different customers.

      And now that enterprises can do these things, competition requires them to do so. The problem for today's enterprise is that the old marketing strategies and tactics, having been designed to attract as many average customers as possible for whatever product or service an enterprise was selling, don't help much when it comes to planning the best way to treat different customers differently. Instead, an enterprise needs a customer strategy, designed to meet different individual customers' different individual needs, and to maximize the amount of business an enterprise is able to do with each different customer.

      The goal of this book is not just to acquaint the reader with the techniques of managing customer experiences and relationships. The more ambitious goal of this book is to help the reader understand the essence of customer strategy and how to apply it to the task of managing a successful enterprise in the 21st century.

This relatively new task that enterprises are now taking on, treating different customers differently, goes by a number of different labels and buzzwords. Some refer to it as “customer centricity” or “customer engagement.” Others may refer to it as “customer management” or “customer focus.” But no matter what term is used, the central premise is that an enterprise should seek to engage its customers, one at a time, in long-lasting, mutually valuable relationships, based on trust.

      Moreover, to do this successfully, an enterprise must be able to see itself through a customer's own eyes. It must learn how to experience what each different customer experiences, and then take steps to ensure that this experience becomes better, easier, more convenient, and even more enjoyable for the customer, over the lifetime of that customer's relationship with the business. And businesses do this because their managers understand, intuitively, that when a customer has a better experience, the business will be creating more value, which means that the relationship with this customer now has a higher likelihood of increased profitability.

      The dynamics of the customer-enterprise relationship have changed dramatically over time. Customers have always been at the heart of an enterprise's long-term growth strategies, marketing and sales efforts, product development, labor and resource allocation, and overall profitability directives. Historically, enterprises have encouraged the active participation of a sampling of customers in the research and development of their products and services.

      But until recently, enterprises have been structured and managed around the products and services they create and sell. Driven by assembly-line technology, mass media, and mass distribution, which appeared at the beginning of the twentieth century, the Industrial Age was dominated by businesses that sought to mass-produce products and to gain a competitive advantage by manufacturing a product that was perceived by most customers as better than its closest competitor. Product innovation, therefore, was the important key to business success. To increase its overall market share, the twentieth-century enterprise would use mass marketing and mass advertising to reach the greatest number of potential customers.

As a result, most twentieth-century products and services eventually became highly commoditized. Branding emerged to offset this perception of being like all the other competitors; in fact, branding from its beginning was, in a way, an expensive substitute for relationships companies could not have with their newly blossomed masses of customers. Facilitated by lots and lots of mass-media advertising, brands have helped add value through familiarity, image, and trust. Historically, brands have played a critical role in helping customers distinguish what they deem to be the best products and services. A primary enterprise goal has been to improve brand awareness of products and services and to increase brand preference and brand loyalty among consumers. For many consumers, a brand name has traditionally testified to the trustworthiness or quality of a product or service. Today, though, more and more, customers say they value brands, but their opinions are based on their “relationship with the brand.” As a result, brand reputation is becoming one and the same with customers' experience with the brand, product, or company (including relationships).¹ Indeed, consumers are often content as long as they can buy one brand of a consumer packaged good that they know and respect.

      The two-way brand, or branded relationship, transforms itself based on the ongoing dialogue between the enterprise and the customer. The branded relationship is “aware” of the customer (giving new meaning to the term brand awareness).

For many years, enterprises depended on gaining the competitive advantage from the best brands. Brands have been untouchable, immutable, and inflexible parts of the twentieth-century mass-marketing era. But in the interactive era of the 21st century, firms are instead strategizing how to gain sustainable competitive advantage from the information they gather