Not so long ago, its products dictated a company’s marketing strategy. To illustrate, the Green and Blue Widget Company would have marketed its widgets to customers in the hope they’d buy them. Then, in the 1970s, a revolution occurred. Somebody decided to make products the customer wanted.
But what is customer-led marketing? In a broad sense it’s a guiding philosophy, whereby a ‘known customer’ is placed at the heart of every decision a company takes. The principle of a known customer is crucial, as Chris Lindsay, general manager Broadband, VoIP and Software Services Propositions, BT Business, explains: ‘By this we mean a type of customer you regard as valued. The key to customer-led marketing is deciding who this type of customer is, then focusing all your activity around them.’
Consumer influence on business growth
The main concern of customer-led marketing is focused around what your valued customer has to say about your company and, more importantly, what your valued customer has to say to potential customers about your company. Dr Paul Marsden, who recently left Enterprise LSE, the commercial arm of the London School of Economics, to join marketing consultancy Brand Genetics, underlines this point when he says, ‘It’s a concept that focuses on achieving increased growth by putting the voice of your customer at the centre of business decisions. ‘It’s all about how likely your customer is to recommend you to a friend; that’s the acid test everything has to improve recommendability.’
But there is more to understanding the influence of this form of marketing than just recommendation, be that word-of-mouth advocacy or viral marketing (where customers are encouraged to pass on a company’s ads to colleagues, friends and family). You need to take into account those dissatisfied customer voices. ‘One way to measure “recommendability” is through the Net Promoter Score (NPS),’ says Marsden. It’s the ‘one number you need to grow’, according to the Harvard Business Review. Marsden explains, ‘At the LSE we wanted to find out what factor most influenced business growth with a view to developing a metric to measure it. We tested everything from innovation to loyalty and CRM but none of them correlated to performance. When NPS and the idea of recommendability first came to our attention we initially set out to falsify the “magic number”, but we ended up validating it.’
To calculate your NPS take the percentage of ‘promoters’ (customers who are highly likely to recommend your company or its products), and subtract the percentage of detractors (those who are less likely to recommend). The resulting figure, which is linked to growth, can be used to gauge performance, establish accountability and prioritise investment.
The influence of social networks
So how do you find out what your customers are saying? The solution lies in the social networks available through the internet which are made even easier to access with the speeds increasingly available with broadband. Internet-based social networking, conducted through formal websites, began in 1995 with Classmates.com. Now, 11 years on, we’ve seen News Corporation pay over £300 million for Myspace.com, and ITV buy Friends Reunited for £120 million. There are also 60 million blogs on the internet, each with the capacity for interactive commentary, plus various internet based forums devised to provide commentary on specific market sectors, such as the restaurant review forum Toptable.co.uk.
Harnessing the power of the internet
Marketers have also tapped into the viral marketing phenomenon, sometimes to great effect.
Companies such as Starbucks, Agent Provocateur and Burger King have all used viral marketing to good effect while the marketers behind the American Express interactive billboard campaign came unstuck when, posing as consumers, they tried to generate interest via a series of blogs.
An astute blogger investigated the email address of one of the marketers and uncovered his association with the agency behind the campaign. For months, entering the agency’s name and ‘American Express’ into Google would reveal damning criticism. Marsden says: ‘Another related danger of customer-led marketing is allowing customers to make your ads.’ He cites the example of Carlsberg which, during the 2006 World Cup, generated an image of 11 women in wet football shirts, lining up for kick-off. The image could be edited and passed around, but the campaign seriously backfired when someone added very uncomplimentary remarks on the taste of the beer.
Despite the dangers, clever use of the internet still drives customer-led marketing. Dan Wilson, community manager, BT Tradespace, says: ‘The central concept is the fact that business is about conversations. As the internet has given consumers a greater voice, marketing has become a two-way street. The conversation around a transaction is what makes it special, and by engaging your customers, you stand a greater chance of ensuring their return.
‘It’s the engaged customers who do the marketing for you. They’ll send people to your website, sing your praises and take the conversation that you started far beyond people you thought you could ever reach. For that to happen, you have to start the conversation.’