Let's Stick Together!

Sector findings:
IFAs and Insurers
Consumers are much more interested in establishing and maintaining a relationship with their IFA than they are with their policy underwriter. Our respondents ranked IFAs as the business type with which consumers are most eager to engage. This strongly suggests that insurers are relinquishing too much control to the intermediary and not grasping the opportunity to develop fruitful relationships of their own. The role of the broker is essentially that of an introducer, yet, many underwriters (wrongly) perceive this introductory role to be synonymous with marketing. It is not. Marketing and relationship building requires ongoing dialogue and nurturing. And while the IFA will undoubtedly maintain customer communications, they do so for their own commercial interests - which is no guarantee of continued custom for any single insurer.

Car manufacturers and dealerships
Consumers view car manufacturers and car dealerships very differently to the way they regard IFAs and underwriters. IFAs and dealerships are both intermediaries and both close the sale with the consumer, yet our research indicates that the public is much more interested in engaging with the car marque itself than the dealership. Perhaps this is purely because cars are status-giving, often aspirational purchases that can help the owner project their desired image. But, despite the natural desire of the consumer to favour the brand over the sales outlet, dealerships are missing a trick in allowing this tendency to perpetuate. Dealerships have a golden opportunity to exploit their sales role to create a bond with the customer at the point of sale and foster that relationship over time in order to take advantage of the highly profitable after-market sector. The car marques themselves have been less tardy in recognising the value of the aftermarket sector and have been busily buying up service networks.

It is also interesting to compare and contrast car marques with fashion retailers. In both cases, purchase decisions are often emotionally driven. Yet automotive brands score below fashion. Given that car purchase is so infrequent (yet of such high value), then surely it is all the more important for car manufacturers to invest in nurturing the customer and fostering a real relationship.

Utility
The current focus for utilities companies has been getting their infrastructure and distribution network up to scratch in the years following de-regulation. The core product is very much price-driven, margins are low and switching rates remain high and stable, with net switching rates pegged at 39% for gas and electricity . These factors have done little to encourage the energy market to invest in customer development initiatives. But recent research from watchdog Ofgem into the competition in the energy market , should make energy suppliers consider their competitive position not just in price terms. Although cost is still the principal motivating factor in the decision to switch supplier, consumers make their choice on a combination of factors, including service, brand and which suppliers actively approach them for their business. This suggest that, although the utility sector does not inspire great affection in consumers, the opportunity nevertheless exists for enlightened businesses to develop their brand and stem attrition through superior service provision and ongoing marketing communications.

Moreover, if their long-term brand extension ambitions are to be realised, energy companies will not be able to delay the business of fostering relationships. One cost-effective means of establishing regular dialogue with their customers is to harness the power of communicating via quarterly bills. Research from Group 1 Software last year demonstrated adverts printed on bills attract more consumer attention than many other forms of advertising. And since, the marketing messages are piggybacking an existing customer communication channel, the costs are virtually nil.

Fashion Retailers and Leisure Venues
Fashion retailers and leisure venues are fortunate in that consumers have an emotional attachment to their brands. Both tend to inspire positive feelings. In fashion retail, factors such as point-of-sale merchandising, wrapping and service levels are simple methods of inspiring brand loyalty and laying the foundations for building customer relationships. On a more proactive front, capturing customer details for direct marketing purposes at the point-of-sale is a valuable means of establishing dialogue, with preview evenings, extra sale discounts and instore events all helping to capitalise on consumers' inherent empathy with fashion brands.

Supermarkets
Supermarkets scored just under average, with and index score of 98. Given that supermarkets play such an essential role in everyday life, with consumers shopping so frequently, it is surprising that this sector did not perform any better. Grocery multiples have branched out into numerous non-food areas recently such as financial services, telecoms and clothes, and as such one would have expected this colonisation of new markets to have strengthened the bond further. Supermarkets have also invested heavily in customer loyalty programmes over the last few years and recent figures from the Direct Mail Information show that the retail sector is one of the principal senders of direct mail (9.6% of all direct mail in 2004). Despite offering essential services, having frequent (face-to-face) contact with customers and having a wealth of customer information at their fingertips, supermarkets have still not succeeded in engaging successfully with customers. For a sector which has become increasingly volatile, facing a real danger of mass customer defection, it will be imperative for supermarkets to exploit the enormous asset they have in their customer data to forge fruitful, mutually beneficial relationships with their customers.

Fixed telecoms and mobile telecoms
Operating in a highly commoditised cut-throat market, fixed telecoms companies have been expending most effort on stemming high levels of customer attrition. New legislation has opened up the market to non-traditional players with powerful, strong brands - unwelcome additional pressure on what was already a highly competitive industry. Telcos must take pains to focus attention not just on stemming attrition but on developing the existing customer base. Rigorous analysis of the customer database will be critical to segmenting customers into value bands so that marketing effort can be directed at nurturing the most valuable and potentially valuable customer groups while unprofitable customers are allowed to churn, sparing precious marketing resources. To date, telcos have neglected to cultivate long-term relationships with customers, probably because the core product was so commoditised and attrition so high. Now that the telco product portfolio looks set to expand, with a whole raft of services (such as PC-TV) appearing on the market, it would be most unwise to overlook the crucial business of relationship building

On the other hand, the mobile market enjoys strong natural interest from the consumer. Mobiles, although almost universally now considered essential, have also managed to exploit consumer obsession with mobile technology and brand image - particularly within the youth market. With reports that 3G services are now reaching a tipping point, with subscriptions expected to double this year, the whole market is enriching with a variety of content services (sports scores, news updates, horoscopes, weather, travel, soap series updates, etc). This will provide further fuel for developing commercially profitable customer relationships, and help to stem defection rates through service quality and loyalty rewards.

Banks
It is interesting to observe that whilst consumers are keen to strike up and maintain relationships with their banks, banks are extricating themselves from relationships with their customers. The move away from the branch culture towards self-service has escalated rapidly over the last few years, with banks taking every available opportunity to push consumers to internet, automated telephone and centralised contact centre banking. The lower cost of servicing customers through these channels has been too great a temptation, yet reliance on remote communication media means that banks now risk alienating customers at worst or missing valuable cross-selling opportunities at best. Either scenario equates to a massive potential wasted revenue loss or opportunity over the course of a customer's lifetime.

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