Brand Relationship Management is not simply a single idea or process. Rather, it is a completely new approach to brand management that extends traditional revenue management into the realm of customer-centric revenue management, and then across both product and customer lifecycles. The successful brands of the Third Millennium must rethink their strategies and processes and ultimately enhance the value of their relationships with customers.
In a fiercely competitive and dynamic global marketplace, brands more than ever are facing new challenges and threats to their expansion and even survival. As markets become more and more commoditized, brand managers struggle to create differentiated value for consumers and ultimately for shareholders. The penalty for failing to create this differentiated value has been both harsh and immediate. In some markets, generic or distributor house brands have captured an 80 percent share of sales volumes.
Rising Customer Expectations
Customer expectations have risen steadily over the last three decades. Customers continue to become more sophisticated and more interested in innovative products and customized services. At the same time, they are becoming more unpredictable in their tastes and needs. Customers continue to expect and demand more "value" from brands. Without this perceived value, they are unwilling to pay a premium price. Customers who receive exceptional service from one supplier (regardless of industry) will tend to be dissatisfied with lower levels of service from other suppliers. Examples of brands that successfully deliver extra value and service include:
o Dell, with individually specified computers delivered to customers in two days.
o Toyota, with individually specified cars delivered to customers in 10 days.
o Standard Life Bank, which guarantees mortgage acceptance within nine minutes.
Heightened competition has given customers tremendous freedom of choice — a freedom they have been increasingly willing to exercise.
Brand Relationship Management Is the Next Evolution of Brand Management
Earlier decades of brand management focused on generating trial and high share of requirements (i.e., the product's market share for a specific consumer). This concept was known as brand loyalty. If a brand had a high share of requirements, then its brand equity was high. It is important to recognize that high share of requirements (often mistaken for loyalty) is transient. If the sole focus of a brand is on high share of requirements, the brand is highly vulnerable.
The relationship a brand develops with its customers clearly represents great value. Figure illustrates the effect of the Brand Relationship Program on the perception, attitude and declared behavior of 4,000 consumers towards their regular dairy brands. The survey has revealed that even consumers showing a high share of requirements could enhance their already very positive perception of that brand through an effective brand relationship program. Consider that 74 percent of consumers felt such a program represented a good means of gathering objective and reliable information about the brand.
It is important to recognize that "real" loyalty is a more complex concept than share of requirements. Both preference and attitudes must be factored in.
Not all customers of a brand are likely to develop a relationship with that brand. Research conducted by majors across different product categories has shown that a certain level of affinity with a brand is required before a customer may be willing to enter an intimate relationship with that specific brand. And the level of affinity a consumer is likely to develop is highly correlated to category involvement and brand sensitivity.
Amazon.com is an example of a company that has increased its affinity with each customer by providing greater, value-added services. Amazon introduced sophisticated information technology (i.e., collaborative filtering) to expand its service offerings to include CDs, DVDs and other lower ticket consumer durables. The company is now adding auction services and broadening its scope. Amazon understands that its relationship to the customer is critical in developing its brand.
Brand Relationship Management: Linking the Brand and the Customer Together
The relationship between a customer and a brand is an exchange relationship. Consumers enter into a relationship on the basis of expected equity and the desire to increase the predictability of exchange outcomes .The length and strength of the customer relationship is a result of the relative value the customer perceives in the brand; in other words, the implied utility associated with the product features, the tangible value of these features, and the intangible value the consumer assigns to the brand name. The utility is a function of the capacity of the brand to consistently deliver an experience in alignment with the customer's expected equity. Consequently, it reflects the convergences of the customer's perceptions and expectations.
Brand Relationship Management's Journey
BRM is a journey, not a destination. It requires a long-term focus to create and manage a relationship with the customer in which the joint exchange is profitable to both the customer and the firm. The steps to manage this journey are outlined below:
Step 1: Actionable Insight
Provide in-depth actionable insight of customer preferences, behaviors and value drivers, and continuously capture, maintain, and apply this insight across the entire customer relationship cycle.
o Identify the key value drivers that contribute to brand preference.
o Measure the utility that consumers attach to the brand.
Analyze the customer's buying patterns and identify the factors that influence brand switching
o Analyze the way actual choices reflect consumer preferences and situational constraints.
o Develop predictive scoring engines.
o Develop for each customer a market response profile, measuring the propensity to respond to various marketing stimuli (e.g., TV, direct mail).
Step 2: Actionable Segments
Group target customers into actionable segments based on profitability, usage characteristics, and/or common needs.
Step 3: Value Propositions
Define offers and corresponding value propositions that meet the identified needs. Reconcile the value of the customer to the value of the brand, and understand tradeoffs in revenue management versus customer relationship management.
Step 4: Develop a Relationship
Develop a relationship with the customer. Create mechanisms that can generate positive interactions between the customer and the firm. These mechanisms should strive for customer satisfaction, loyalty growth, consumer demand increase and lifetime customer ownership.
Step 5: Measure the ROI
Measure the ROI of the implementation of a BRM strategy:
o Define the economic framework.
o Develop a spending allocation model based upon the Life Time Value of a customer.
o Elaborate upon different investment scenarios (based on internal and external resources).
The successful brands of the Third Millennium are working hard to rethink their strategies and processes to enhance the value of their relationships with their customers and, therefore, become the brand of preference. These brands are striving to develop brand loyalty by targeting customers who:
o Perceive the differentiating and discriminating added value of the brand.
o Make their choices by preference.
o Are ready to reward the brand for providing unique value to them by paying a premium and/or by investing time in the relationship.
Some industries display incredible ingenuity to give their brands the definitive ownership of the relationship with their customers. Consider domestic appliance brands that are developing on-line-controlled appliances a washing machine's wash cycles can now be downloaded from the Internet and a digital cooker can receive instructions by mobile phone. What does it mean for a food brand when the freezer has online links with supermarkets and automatically places orders when food supplies run out? In the next few years, BRM will become a discipline driving fundamental change at leading organizations. Developing a long-term relationship with customers is not only a question of marketing, but it is also a question of vision, strategy, major process change and technology. It is a question of business transformation that will be the key to stability in an increasingly dynamic market.
Relationship brands are working hard to understand smaller and smaller groups of customers in greater detail and, with the help of technology, will soon make the "market of one" concept a reality.