LEARNING RELATIONSHIPS - HOW TO KEEP YOUR CUSTOMERS FOREVER, AND INCREASE YOUR MARGINS, TOO

By Don Peppers and Martha Rogers
Excerpted from Enterprise One to One*

Think of your life as a consumer. There must be a retail establishment somewhere—maybe a deli, or a CD store—where you really like to shop, because someone there always seems to know exactly what you want. So now visualize going into this store and having them screw something up, with the result that leaves you feeling a little angry. If it were any other store, you think to yourself, you'd take your business elsewhere. But the reason you don't go elsewhere is it would be too much trouble, right? You'd have to teach someone at another store everything about your personal tastes that the person at this store has already learned.

The basic strategy behind creating a learning relationship is to put yourself on the other side of the equation:

Give your customer the opportunity to teach you what he wants. Remember it, give it back to him, and keep his business forever.

Barista Brava's learning relationship

Look at how Barista Brava -an up and coming Starbucks competitor—creates a learning relationship with its customers. Barista's service people work in teams of two or three and do everything. They take a customer's order, prepare it, and serve it to the customer. The Barista customer enters the establishment and chooses whether to enter the line for drip coffee or espresso. This is Barista's sole concession to the kind of division of labor that dominates most manufacturing models.

Each team is lead by a barista (Italian for "bartender") who watches the line to see which customers are coming in to the store. Like a maitre d' at a fine restaurant, part of the barista's job is to remember his customers on sight, so when a customer gets to the head of the line, her coffee is already prepared just the way she has always ordered it.

Advantages of the learning relationship

The reason customization is such a powerful competitive strategy is partly-but only partly-due to the customer's increased satisfaction with a better-tailored product. The enterprise will not necessarily realize a sustainable advantage just from the fact that a customer can get a product tailored perfectly to his own specifications. That is, once the technology is adopted by everyone and a number of competitors offer customization, then a customer will be able to get satisfaction anywhere, so the competitors are once again reduced to commodity margins.

What gives customization its real strength is that it allows a firm to create a learning relationship with a customer. It is this learning relationship that will keep a customer in the franchise even after the competition has adopted a one-to-one approach.

When the enterprise gains new knowledge of an individual customer's own specifications or needs, two activities are taking place: the firm is learning, and the customer is teaching. What creates genuine loyalty is the interaction of both these activities. The customer's effort to teach an enterprise, when the reward for that effort is a more individually satisfactory product or service, is what makes a customer loyal. The customer is, through his own effort, increasing the value of the enterprise, to him.

Suppose a Starbucks and a Barista Brava were next door to each other, with no appreciable difference in the quality or price of their products. In one store, regular customers have to re-specify their drink every day, while in the other they do not. In the Starbucks outlet, the re-specification process is not only a little time-consuming, but it always entails some risk that the server will not understand the order correctly that day. No such wasted time or risk is involved at Barista Brava. For the Starbucks customer, it is just as easy to order coffee at Barista Brava tomorrow, while for the Barista customer, it is much more difficult to order coffee at Starbucks tomorrow. Which outlet's customers will be more loyal?

Remembering the customer's needs

Not all customizing firms have learned to remember the way their customers specify the product, and for them it is easy to believe that customization is not much of a loyalty builder at all, but simply one more expensive product enhancement. For instance, Burger King promoted itself for years as a "Have it your way" hamburger chain, but relatively few people take advantage of this service even today, precisely because Burger King doesn't remember how any particular customer wanted it the last time. It's always more trouble to specify what your way is than to simply say "I'll have a number three."

But it's not difficult at all to imagine how Burger King's business would function if it were to allow customers to identify themselves with membership cards or PIN codes. This would enable the company to remember what "your way" is, for each customer. Customers could even specify different kinds of meals for themselves. If Burger King had such a capability, it could soon hear a customer come to the counter and announce " I'll have my number three, please."

Convenience is the key

Learning relationships have little to do with creating a fondness on the part of your customer for your product or brand. Rather, we are simply talking about convenience. What we are suggesting is that by remembering customer preferences and tastes, and by always picking up in a customer dialogue where you left off with this particular customer the last time, you can in fact create a "barrier of inconvenience"—a reason for that customer never to want to deal with your competitor again, provided only that you continue to deliver product and service quality at a fair price.

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