Read an Excerpt
Why is this simple term--trusted agent--so loaded with meaning? Because, as a company tries to strike up one-to-one relationships with its individual customers, it soon realizes that the single most powerful position in any customer's mind is a position of trust. For that reason, earning the customer's trust almost always becomes one of the earliest goals in any effort to build a long-term relationship with a customer.
Only in a relationship of trust can information pass back and forth freely between buyer and seller. And, in a world of increasingly commodity-like products and services, a relationship founded on trust is the only genuinely sustainable competitive edge. Without trust, you're back to square one--competing on price.
Trust is the currency of all commerce.
Take a moment to consider the Internet. Suddenly you have the capability to network your intelligence with the intelligence of every other human being on the planet with access to a PC and a modem. As the novelty of this phenomenon wears off, the reality will set in: The only networking you'll really want to do is with the people and organizations with which you already have some sort of relationship. And the more trusting that relationship is, the more likely it is that you will be willing to share and exchange your knowledge.
On the other side of this relationship--on the enterprise's side--becoming a trusted agent is usually not an easy thing to accomplish. A trusted agent is one that can be relied upon to make the customer's interests paramount, to speak on the customer's behalf in all its dealings. As a policy, this is a heretical undertaking at most companies, and flies in the face of product-centered principles of marketing and competition. If you and I have no relationship prior to the purchase, and we have no relationship following it, then our entire interaction is centered on a single, solitary transaction. And our interests are diametrically opposed. I want to buy the most product at the lowest price from you, and you want to sell me the least product at the highest price.
In a transaction-based, product-centric business model, buyer and seller are adversaries, no matter how much the seller may try not to act the part. In this kind of business model, practically the only assurance a customer has that she can trust the product and service being sold to her is the general reputation of the brand itself.
But in a 1-to-1 marketing model the purchase transaction exists within the context of previous transactions and more that will follow. Moreover, the buyer and seller collaborate, with the buyer interacting to specify the product, and the seller responding with some change in behavior appropriate for that buyer. In the CRM business model, in other words, the buyer and seller must be willing to trust each other far beyond the general reputation of the brand.
Translating a "trusted agent" philosophy into commercial reality involves more than simple policy decisions on the enterprise's part, no matter how revolutionary those policies might be. Becoming a trusted agent for your customer requires a deep, cultural change in attitude at most firms.
But at the most basic level, a genuinely trusted agent must be able to remember an individual customer from transaction to transaction, division to division, across the length and breadth of the enterprise. Customer relationships, in other words, must be integrated into every aspect of the business process, so as to harmonize products and services throughout the organization. Without integration, the left hand won't know what the right hand is doing.
It's easy to see that if one division sells aircraft engines and the other sells aircraft engine maintenance contracts, then it makes sense that they should work together--even if tradition dictates otherwise. But the same logic applies in a variety of other situations, some obvious and some not so obvious. One business unit might sell copiers while a sister unit sells toner cartridges and another sister unit sells copier paper. Or one division might sell postage meters while another sells automated mailroom services. Or one sells home mortgages, while another sells credit cards, and yet another sells savings accounts.
Integrating the way an individual customer is treated throughout the enterprise is essential to creating a relationship with that customer and represents the very first, most basic step toward earning her trust. What integration amounts to, as a concept, is simply ensuring that the way the firm behaves toward a particular customer appears "rational" to her. Rationality is achieved when all parts of your enterprise coordinate their activities with respect to this particular customer, based on what she has told you about herself and her needs, and what other things you already know about her.
Such coordination is going to be costly and difficult. But to create a position as a trusted agent in the mind of your customer, you have to develop empathy for the customer. You have to coordinate your activities with respect to that customer, to be able to put yourself in the place of the customer, to take a customer view. And it might be expensive to put the necessary systems into place. But, as one UK consultant put it, if you think empathy is going to be expensive, then you should try apathy.
The central message being brought to you by the pioneers and visionaries in this book is not that creating relationships with customers is difficult and costly. We already know that. The message from these pioneers is that failing to create such relationships might actually prove to be fatal.
Company: First USA
Pioneer: Richard Vague, CEO
Lesson: You don't win the race by being the best but by staying the best. If you have a great customer acquisition engine, then the next step should be to invent a great customer retention engine.
Richard Vague didn't learn much about customer relationships on his first job. He was a busboy at Denny's in Houston. You can't really fault him for not paying more attention to the people who came into the restaurant to gobble down a quick meal, since his main objective was to avoid breaking dishes on the way back to the kitchen. If your job involves carrying heavy loads of food-encrusted plates, bowls, cups, saucers and silverware all day long, one of the first things you learn is to avoid distractions, and in that context customers are a distraction. Vague's next job, however, was working behind the counter at a local dry cleaner. That's where his perspective on customers began to change. "I really got to like them and prided myself on knowing their names. I got to know them so well that I could have their cleaning out and ready for them before they made it through the front door."
Vague hadn't planned on becoming a banker. But when he was twenty and putting himself through college, he ran out of money and had to find work. A local bank hired him as an account analysis clerk. "I've stayed in the business ever since," he says, smiling. These days, however, Vague earns his daily bread as Chairman and CEO of First USA, the nation's largest and most innovative issuer of Visa, MasterCard and private label credit cards. But he relates the story of his dry cleaning days with a boyish enthusiasm that remains undimmed by the passage of years. Listening to Vague makes it easier to understand why First USA launched At Your Request, a remarkably ambitious service program that "acts as your personal assistant, concierge, researcher and travel agent, all in one."
Melding his personal experiences with a growing belief in the idea of 1to1 marketing, Vague envisioned First USA developing highly personalized relationships with its customers. He wants his bank to become a "trusted agent" for customers, in the process generating an involvement on each customer's part that would make it hard to simply walk away when other cards beckon with lower APRs, as they always will.
At Your Request works like this: After you've been a credit card customer in good standing for at least a year, First USA sends you an invitation to sign up for the service. You fill out a Preference Profile that asks for the names and birthdays of everyone in your immediate family. You are also asked to specify hobbies, favorite magazines, sports and cultural pursuits. At Your Request includes a reminder service called Just-in-Time. You are asked to list anniversaries, special events and important dates, such as an appointment with your doctor or your car's next oil change. Finally you are asked when and how you'd like to be notified of an upcoming event--you can choose between e-mail or fax.
At Your Request customers can contact the service via telephone, e-mail or the World Wide Web. Staffed by about 50 advisers and researchers, the service offers three broad areas of help--financial, travel/entertainment and general information/gift/reminder. "We help people locate everything from antique telescopes to flintlock rifles. If you need a reservation at a restaurant or you need to send flowers, we can do that for you. One time we got a call from a customer who was getting married in Switzerland and needed a rabbi. We found one. Another time we had a customer who was living next door to a house that had been condemned and was going to ruin. We were able to get the house sold at a sheriff's auction. Now it's all fixed up and our customer's property is worth a whole lot more. Basically, we'll try to do anything we can to help you."
Customers are required to use their First USA credit cards if the inquiry results in a purchase. Fewer than half of the calls to At Your Request, however, result in a purchase. Most are purely requests for information. "For example, if you're relocating and need information about your new neighborhood, we'll send you a list of schools or whatever you need to feel comfortable." In a sense, says Vague, At Your Request is a search engine that's custom-built around the needs of First USA's customers. "You couldn't dream of doing this if it weren't for the Internet, which has dramatically lowered the cost of obtaining information. I'd say the cost of information--if it isn't approaching zero--is a lot closer to zero than it ever was before."
Vague says the return on At Your Request can't be measured exclusively in terms of credit card activity. "It occurred to us that playing the role of concierge would do two things. First of all, it would augment our knowledge of the customer. If somebody calls up and says, "What's the best deal on a kayak?' that tells us a lot about him. If someone calls to plan a vacation with her family, we will learn--while answering her questions--valuable information about that family. If we know, for example, there is a ten-year-old in the family, when that child turns fifteen and a half we're going to send the parents information about the best deals on new driver insurance. Second, our being genuinely helpful would create a feeling of trust in the customer's mind. So the customer wouldn't just see us as a big institution coming at them to sell something. We found when we did occasionally market something to them, such as a new financial planning service matched to their needs, we got a significantly higher response rate--which is pretty amazing. In our business, a 1 percent response rate is considered huge."
If Vague has his way, the response rate will climb far higher. In his mind, the separation between credit card issuers and "the spending habits of consumers" is purely artificial, an arbitrary barrier that inhibits lenders and consumers from working together. "Over the long haul, the only game is to become a trusted agent of the customer," says Vague. Active Role
Balancing the company's own, commercial interests against the need to provide objective, impartial advice to customers was another issue that First USA wrestled with when implementing the At Your Request service. The economics of the program depend partly on commissions from vendors. If a customer books a trip to Hawaii through At Your Request, for instance, First USA will earn a commission on the air tickets and hotel stay. And this applies to merchandise sales, too. First USA has made arrangements with a number of vendors to ensure that when its customers are recommended to them, the bank receives a commission on the sale.
But suppose a customer requests information on, say, the best CD player for her living room. Should First USA only show her CD players from companies with whom it has made a sales arrangement? It's clearly in the bank's interest to promote those deals, but what's the right way to balance this commercial interest against the bank's other objective--serving as a trusted agent for its customers' own best interests?
The solution First USA arrived at is actually pretty simple. When a customer makes a request for such information, the service lists for her a variety of products, referencing some impartial third party whenever possible--perhaps Consumer Reports, or maybe a different magazine. For example, "These are the top five CD players, according to . . ." Underneath this listing, however, the bank also shows the particular CD players manufactured by companies with which it has made sales arrangements, and offers the customer a special deal if she chooses to buy one of these products.
Clearly, in order for Vague to push his bank's role as a trusted agent his company must take an active role in helping customers satisfy their varied needs. So, First USA developed a proprietary software system that enables it to extract a wider range of data from each credit card transaction. Gathering genuinely useful data from MasterCard and Visa transactions has always been difficult, but First USA is heading toward solving the problem. With the transactional data in hand, First USA uses it to create a highly accurate, rank-ordered description of an individual customer's actual preferences. The data are displayed as an indexed ratio of spending, so various categories of purchases can be compared reliably and consistently.
"Essentially, you're voting with your credit card on what is most and least interesting to you," Vague says. "Soon we'll have a system that has so much data that we'll be able to look at the aggregate and determine by sheer weight of numbers the spending preferences across our whole customer base. Then I can take one of those preferences to a merchant, get the best deal ever and start offering that deal to my customers. And the really great thing is that it's a perpetually refreshing loop, because new purchase information is coming in every day. And we've built the system to selectively forget some things. For example, if you bought a new set of golf clubs, we would "remember" that information for quite a while, because you're not likely to buy another set of clubs for another four or five years. If you've bought toys for your kids, it only makes sense for us to "remember" that information for a year or so."
In a very real way, Vague is allowing the aggregate individualized behavior of the bank's customer base to drive marketing decisions. Instead of relying solely on top-down, management-driven policies and strategies, First USA is placing its trust in closely monitored "customer-created" programs to go where no modern bank has gone before--right back to the ancient beginnings, when banks existed to serve their customers.
"Technology, which has been accused of impersonalizing relationships over the last thirty or forty years, is now returning us to a point where interactions with our customers are highly personalized," says Vague. Technology-enabled programs such as At Your Request help the company assemble an accurate and up-to-date picture of an individual customer's real and perceived needs. Credit bureau information, financial data provided by the customer and the bank's own highly detailed records of credit card transactions allow First USA to calculate an individual customer's potential value to the bank with uncanny precision. First USA calculates both the actual and projected profitability of its customer base quarterly, enabling it to stay on course as it moves ahead to achieve the one-to-one vision. Access to this wide range of up-to-date information empowers the bank to view its customers as long-term partners engaged in a continuously unfolding series of mutually beneficial relationships.
"It's very much a trailblazing activity," says Vague, mindful of the danger, but thrilled to play the role of a technology-empowered explorer. "Although we're the biggest in the industry, we are still always looking for an edge--some way of doing something different or better for the customer."
Reflecting on the past, Vague notes that one of his boyhood heroes was Miles Davis, the magically talented and mercurial jazz trumpeter. "He was very innovative. But he also hired very, very strong players to be in his band, guys who were as good or better than he was. That's important if you're going to succeed."