Call centres, CRM and cows: why modern service marketing is not like cattle farming

Technology creates pressures on marketers as well as the tools to relieve them. Reports, communications, planning, analysis and market research are all both more effective and more efficient with IT. Yet while technology should be giving us more time we seem to have less.

New digitised skills with segmentation and customer insights should bring us closer to customers and yet customers feel more alienated.

This is particularly perverse for service businesses such as catering or travel, which must be close to customers by the nature of their provision.

To stay sane, service marketers strive to be more professional and make quicker decisions. Technology and rational frameworks have developed to help make decisions and, perhaps more importantly, persuade the rest of the organisation to let marketing get on with the job. Budgets are exposed to greater pressure to prove net financial returns and advertising gets more copy-testing before it is approved.

Magic metrics such as Fred Reichheld's 'Net Promoter Score' or Don Peppers and Martha Rogers' 'Return on Customer' are plausible and seem to meet the need for accountability. Unfortunately, they are wrong and dangerous in the sense that they undermine marketing.

Exposing the shortcomings of these metrics is not the aim of this article, but a paragraph and a few references to guide the inquisitive will be included at the end.

No, my thesis is deeper. Service marketers are searching, knowingly or not, for a comprehensive metaphor to help them operate in this new world in which 'cold' technology and 'warm' service are so mutually dependent. Such a metaphor needs to lead to tools that are modern, rational, scientific and measurably productive. Because of their enthusiasm for technology to help them in this pursuit, let's call these seekers after efficiency 'techno-marketers', because they are trying to use small engines to drive big ones.

A call centre is a good example. It looks like a good idea to mechanise customer service with scripts and phone technology as costs can undoubtedly be reduced. Unfortunately, treating your own staff like battery hens means that they will treat customers like battery hens.

THE CATTLE MANAGEMENT APPROACH

If we examine these managerial attitudes more closely we can see that the underlying metaphor turns out to be cattle farming. Let us look briefly at five examples of the cattle management approach to marketing before providing a better metaphor. The examples are 'customers are assets', 'maximising customer lifetime value' (CLV), 'managing customers', 'minimising the costs of customer upkeep' (for example, call centres) and 'customer rustling'.

CUSTOMERS ARE ASSETS

The idea that customers are assets of the business is pervasive amongst practitioners and academics who should know better (e.g.

Lehmann and Reibstein 2006). Certainly cash comes from customers and if one takes the net present value of future cash flows, one has some idea of the value of the customer base. But the expectation of future income is not the same as owning the means of producing that income.

An 'asset', whether tangible or intangible, is something separable from the business, which is owned by the company and can be sold.

Accountants are clear about how they use their language, and any dictionary will provide a similar definition. I am a customer of Tesco but I am certainly not owned by Tesco. Footballers are not owned by their clubs; their contracts are assets even though a club's ability to sell the contract has now been circumscribed. A contributor to the confusion has been David Aaker's (1991) introduction of brand equity (or the marketing asset by whatever name). A brand, or brand equity, is definitely an asset. They are separable, owned by companies and bought and sold. But what exactly is 'brand equity'? How can I measure it? Brand equity is mostly, albeit not exclusively, in the heads of customers. Tricky that. Tesco can own what is in my head about Tesco, but it cannot own me. For some of us, such distinctions are just too difficult. It is much easier to adopt the cattle farmer metaphor: customers are the key productive part of the enterprise, and therefore its most valuable assets. No longer is the customer king; customers are cows.

MAXIMISING CUSTOMER LIFETIME VALUE (CLV)

It is a short step from there to the recognition that an efficient practice would be to assess customers according to their yield during their projected lifetime, discounted to allow for delayed cash receipts. Scientific marketing demands decisive action: focus on the most valuable customers and discard those with negative shareholder value.

CLV and its near neighbour, customer equity, both assess the long-term value of customers either individually or by segment. Accordingly, these techniques have become central for techno-marketing departments. Unfortunately, they require heroic assumptions about the future, notably over customer fickleness. Competitors will devise means of customer seduction we have not yet seen, still less quantified – see 'Customer rustling', below.

CLV seems so apt and attractive because marketers are unconsciously using the cattle metaphor. Cows cannot use independent judgement about which farmer they will favour. Customers can. Customer equity uses much the same method: net cash flows from customers are estimated over time, discounted to the present moment and, hey presto, you have the value of the customer asset. (Some technologists factor in risk, which makes the answer more plausible if no more realistic.)

MANAGING CUSTOMERS

Around 1990, two really big ideas raised the marketing game. Brand equity has been briefly mentioned above and the other was relationship marketing. These are companion concepts because they shifted marketing from thinking about a series of independent transactions (sales) to a continuous consumer–brand relationship where sales come early in the process, and experience of company contact and product consumption fuels repeat business, perhaps through the whole lifetime of the customer.

Whether one can have a 'relationship' with an inanimate, intangible object like a brand depends on what you mean by relationship, but one certainly forms a judgement of a company on the basis of one's experience of dealing with it and consuming its products. The company's asset that derives from those experiences is brand equity and skilled management of customer relationships should enhance that brand equity, and therefore future net cash flow. Intelligent customer relationship management (CRM) is good for customers and good for business.

Then the scientific marketers took charge and things went south. UK retail banks appointed 'relationship managers' who were irrelevant to one's business with the bank, knew nothing about it, changed too often to gain any experience and, perhaps fortunately, were in meetings if you were foolish enough to call them. My two favourite personal examples (from Barclays) were a mailing inviting me to phone my new relationship manager on her direct line. When, out of curiosity, I did so, the person answering the phone had never heard of her or me.

The second was a cordial invitation to contact yet another new relationship manager a year after I terminated all my business with Barclays.

Yes, it is unfair to pick on Barclays. It was merely symptomatic of a widespread change and Barclays was only the third worst UK bank in the Sunday Times comparison (12 August 2007). The problem is not so much poor implementation, although that is an issue too, as a lack of understanding of marketing. The language changed from CRM, or managing relationships, to managing customers. The new language was much more attractive as marketers were no longer dealing with wishy-washy ideas like relationships, but would directly control how customers did business with them. More macho and more techno.

I am happy for Tesco to worry about its relationship with me and to seek to improve it. On the other hand, I do not wish to be managed by Tesco. That runs against everything marketing means. Consumers need to consider themselves in charge with the marketers simply aiming to increase their satisfaction. Cattle, by contrast, cannot be expected to do that for themselves: they have to be managed.

MINIMISING THE COSTS OF CUSTOMER UP-KEEP

Cattle provide milk and therefore cash flow (good) but they also require feeding, housing and attention (not so good). The techno-marketer therefore seeks to maximise net cash flow by increasing the yield and minimising the costs of upkeep. Good websites, like easyJet, for example, offer the best of both worlds. They are cheap to maintain but also convenient for customers.

Booking one's flight on a website can be a pleasant experience, certainly more pleasant than most call centres. When call centres became widely used in the 1990s, they attracted considerable hostility. Being kept 40 minutes on the line while regularly told how important the call is to, let's say, British Gas, is infuriating. Technical devices can reduce the aggravation, such as logging the call and calling back, estimating how long one will have to wait, suggesting a better time to call, or just the number of one's place in the queue.

But very few large companies use them because they cost money and conflict with the main objective of keeping costs down.

Call centres are part of 'operations' and nothing to with marketing. How crazy is that? Customer communications not part of marketing?

What is the point of advertising and other marketing communications if the customer's actual experience of communication is dire and many of these call centres, especially those in the sub-continent, are dire indeed.

When you do get through with some minor query about the product, you are hit with irrelevant requirements of the Data Protection Act.

Checking private information indeed requires due security, but if you simply want to know when a flight arrives, you should not have to provide your mother's maiden name.

These functions are unlikely to be the responsibility of the marketing department, but they are part of the company's marketing to its customers. The techies have taken over.

CUSTOMER RUSTLING

Farmers are conventional people. They mostly do things the same way and gradually develop new cattle management techniques on the basis of discussions with like-minded farmers at markets and in pubs. In many consumer markets the same practice prevails. Take national airlines, for example: BA, Air France and Lufthansa provided a similar service at similar prices. Their senior executives may have hobnobbed more than the competition authorities liked but it was an orderly market and customers were contented enough.

Then Freddie Laker introduced low-cost fares from the UK to Florida and BOAC (as BA was then) was seriously offended. This was customer rustling outside the established rules of cattle farming and had to be stopped by fair means or foul. Whether Laker's collapse was due to his own errors or whether it was due to the dastardly actions of the established competition is open to speculation. It was a long time ago and many of his followers – Virgin Atlantic, South-West, easyJet and Ryanair, for example – have been very successful.

In time the established operators learn from the newcomers, sharpen their marketing and cut their costs – for example, by dispensing with paper tickets. That is how markets should work and we should all be pleased about it. My point, though, is the delay before the established players react positively. Their first instinct is that these upstarts are stealing 'our' customers.

A more recent example is the UK cider market. Was it outrage that Magners 'broke the rules' that explains why Bulmers (Scottish and Newcastle) took so long to respond to customer rustling by its own Irish colleagues?

A BETTER METAPHOR

When David Ogilvy (1963) was similarly riled by the techno-marketers of his day, he pointed out 'the consumer isn't a moron, she is your wife'. We should go further: consumers aren't cattle, they are us. The five examples described above illustrate the approach of techno-marketers,

and we can all find other examples. If consumers are going to react more favourably to modern marketing then we have to treat them exactly as we ourselves would like to be treated.

Analysing successful new brands, from Cobra beer to Ultimo bras, shows one consistent pattern. The entrepreneurs were not trying to satisfy customers; they were satisfying their own personal needs. They were solving their own problems and, having done so, then wondered if other people might feel the way they do.

So let us just focus on pleasing ourselves and convince our colleagues by results, not flawed science. The techniques for feeling your marketing like the consumer does are quite simple: live the consumer's life. Phone your own call centre at a peak time. Buy your products in the supermarket, not from the company store. Buy and use your competitor's products. Try complaining about your product experience.

CONCLUSIONS

Technology provides the modern marketer with a multitude of techniques for data gathering, analysis, planning, implementation and performance measurement. As techniques they are greatly to be welcomed. At the same time, they keep marketers in their offices and far away from consumers. This is especially ironic for service marketers as the nature of that business requires closer identification with the customer's point of view. Techno-marketing provides the illusion of control and leads to the subconscious business philosophy that marketers are cattle farmers. Customers are assets to be milked and to be managed according to their lifetime value. Smart marketers do not follow trends; they create new ones. They start by recognising that customers are not cattle, they are us. So service marketers should transcend technology and rediscover empathy by living the customer's life and experiencing their own services.

Further Reading on Fashionable Fallacies Those seeking a single index of marketing performance, (i.e. a 'silver metric') should read Ambler and Roberts (2006) who show why all silver metrics are flawed, especially return on investment (ROI), CLV/customer equity and return on customer (ROC). You can also see Peppers and Rogers' (2006) defence of their method and the rejoinder (2006).

Fred Reichheld's (2003) promotion of the Net Promoter Score as 'the one number you need to know' is reviewed by Keiningham et al.

(2007) using a similar, but independently gathered, database. They found no corroboration of Reichheld's claims. Neil Morgan, who was similarly sceptical, tried to obtain Reichheld's database from him, as is conventional in academia, but was unsuccessful. This is consistent with his previous claims for customer loyalty and retention marketing, which were not corroborated by independent researchers, e.g. East, Hammond and Gendall (2006).

REFERENCES

Aaker, David A. (1991) Managing Brand Equity. New York, NY: Free Press.

Ambler, Tim & John Roberts (2006) Beware the Silver Metric: Marketing Performance Measurement Has to Be Multidimensional, Marketing Science Institute, Report #06&113 (and rejoinder #06&115), October.

East, Robert, Kathy Hammond, and Philip Gendall (2006), 'Fact and Fallacy in Retention Marketing,' Journal of Marketing Management, 22, 1, 2, pp. 5–23.

Keiningham, Timothy L., Bruce Cooil, Tor Wallin Andreassen & Lerzan Aksoy (2007) 'A Longitudinal Examination of Net Promoter and Firm Revenue Growth,' Journal of Marketing, 71 (July), pp. 39–51.

Lehmann, Donald R. & David J. Reibstein (2006) Marketing Metrics and Financial Performance, Marketing Science Institute Monograph.

Ogilvy, David (1963) Confessions of an Advertising Man, Atheneum.

Peppers, Don, & Martha Rogers (2006) 'Response to Ambler and Roberts' 'Beware the Silver Metric”, Marketing Science Institute, Report #06&114, October.

Reichheld, Frederick F. (2003), 'The One Number You Need to Grow,' Harvard Business Review, 81 (December), pp. 46–54.