On Marketing Technology, Castles, And Moats

Over the weekend, an experience with Apple prompted me to think about marketing technology’s role in creating economic moats. According to Warren Buffet:

In days of old, a castle was protected by the moat that circled it. The wider the moat, the more easily a castle could be defended, as a wide moat made it very difficult for enemies to approach. A narrow moat did not offer much protection and allowed enemies easy access to the castle. To Buffett, the castle is the business and the moat is the competitive advantage the company has. He wants his managers to continually increase the size of the moats around their castles.

The moat around Bodlam Castle, a medieval castle built in 1385.

Apple’s retail presence is both a revenue engine and a cornerstone of its customer experience strategy. Retail pulls in average revenue of $10.8 million per store for Q3, 2011, generating the highest retail sales per square foot of all US retailers. Importantly, the stores guarantee the company a beachhead from which the company can educate consumers and resolve problems directly. For the quarter, 73.7 million people visited Apple stores.

In my case, I scheduled a visit on apple.com with my local Apple store after the home button on my iPhone stopped responding. Within half an hour, I left the store with a new phone. No one quibbled, or even asked, about my warranty or purchase records. Later in the day, the company emailed a survey to ask about my experience. Apple’s cross-channel (online and in-store) experience clearly differentiates it from manufacturers that leave customers’ problems to a confusing chain of channel sales, service providers, and warranty servicers. Firms that take the latter approach should note that customers who experience fast problem-resolution are more loyal than those who never experience a problem in the first place.

Not every business can field a retail presence like Apple, but all can use modern cross-channel CRM techniques to deliver a customer experience similar to Apple’s. As Brad Terrell, VP and general manager of Digital Media at Netezza, recently told me, “My customer base has a common thread: a scarcity of appropriate human resources in the context of solving problems. Where they excel is in recognizing that they can create competitive advantage from customer exhaust, i.e., from data.”

CI professionals – with their experience and access to data, analytics, and marketing technology – can play a critical role in delivering competitive advantage. CI pros should start with next-generation techniques, including:

  • Implementing multiple customer recognition techniques. With customers initiating inbound interactions over online, social, and mobile channels, CI pros need to ramp up their use of cookies, social identities, and mobile numbers as complementary methods for recognizing customers. Beware: While most recognize this need, they have to recognize that cutting through organizational silos is essential to its enactment. Fifty percent cite organizational design as the key factor in limiting a comprehensive customer view.
  • Using inbound actions to trigger outbound response. My iPhone’s flakey home button triggered my visit to apple.com, but Apple used the website to respond in-store and afterwards through email. Tying the inbound visit to an email allows Apple to appear more responsive to my problem, but it also gained the ability to recognize me again in the future through email and its website. As preference for social and mobile evolve, Apple can leverage its current investment to create interactions with customers over these emerging channels.
  • Building cross-channel dialog. The email that followed my in-store visit prompted me to complete an online survey. The survey extends the overall experience but also gives Apple the opportunity to gain additional intelligence through a channel that allows me time to respond. Apple could have further increased the opportunity for engagement by using my interaction and purchase history to provide additional educational materials or offers within the survey email.

Moats around economic castles can take a variety of forms. CI professionals should not leave moat-making to their peers in brand marketing. Companies that successfully use these techniques can leverage marketing technology to differentiate themselves and create competitive advantage.

I will present at Forrester's Consumer Forum in Chicago, October 27-28. I hope to see you there.

Comments

everyone is a competitor

Rob, we find that when it comes to customer engagements, consumers judge every interaction against the “best experience” – so on that regard, banks, insurance companies and telcos (for example) are being compared to Apple and Amazon. Most fall short. This ability to leverage CI across customer touchpoints and communications is a topic that excites most of our clients. Organizational silos can present challenges, but we’re seeing how enterprise-wide platforms that integrate customer analytics with communication engines go a long way to establishing the two-way dialogue consumers seek. Thank you for highlighting this topic!