July 2008 | Volume 27 / Number 2
CRM, BPO & Teleservices
The Devil's CRM Deal: Patronize the Patron
By David Sims,
This is the great dilemma: At what point does brand recognition, established from the quality of the product, overtake the quality, and the dynamic switch from "Hey, we need to make it better because of our brand" to "Our brand will sell the product, because nobody can tell the difference anyway."
Witness the following reviews of Monmouth:
"They really know the stuff here, so not only will they help you choose what's right for you, but they'll grind the beans, or leave them as nature intended, and even ask you what you're using them for, because different grinds, affect different methods of coffee-making."
"There's a long and complex menu setting out the coffees by region, and giving an explanation of the flavor, much like a wine list…"
"… you have a selection of coffee which you pick from the beans set out in front of you (rather than in unseen packets at Starbucks, for example)."
We're not saying such knowledgeable coffee pros as who run Monmouth are trying to bamboozle the schlump who doesn't know arabica from robustica, we're saying at this point in the process, Monmouth is in the tricky position of having rightfully earned a reputation as the coffee connoisseur's hangout, with the result being that, as reviewers note, "It's always rammed in here," "…a queue of people snaking out into the road from this fabulous coffee shop," "If you are very lucky, you might get a place at the big table."
What this means is the guy who actually knows his coffee, and comes to Monmouth for the quality, is left cooling his heels while 38 trendsters who couldn't blind taste test today's and last week's coffee with any degree of accuracy hog the tables. This reporter hereby urges Monmouth not to grab the goose in one hand and the axe in the other and cash in on their reputation. Not at least until I get there first.
This is a more common CRM problem than you might imagine. At what point does the brand overtake the product? And when it does, how long is the brand quality maintained? For a grisly example look at Harley-Davidson, which built their brand the old-fashioned way until AMC thought they could pocket the profits off that. They failed, since they gambled that they didn't have to maintain Harley-Davidson quality since, as they saw it, people who didn't know handlebars from carburetors would buy Harley-Davidsons for the name alone, and not be able to tell the difference between what they had between their legs from a Honda.
Same thing happened when Ford acquired Jaguar. Here was a car rightly revered for its quality, Ford figured okay, we have dentists in Burbank who can't change a spark plug plunking down serious money for Jaguars on name quality alone. Ford figures, "…right, we buy the brand, cut costs but keep the price high and pocket the change." Ford does not own Jaguar any more, but the car's reputation has yet to recover.
L.L. Bean used to be where you stopped off to pick up a few more things on your way up north for a hunting, fishing or camping trip, as one perceptive commentator has said, and treated their customers like solid gold — their famous no-questions-asked return policy, not charging shipping or handling and the astounding quality of their clothing, boots and gear. Now, of course, it's a place where busloads of Japanese tourists ask if this gingham tea cozy comes in pink.
This reporter's not a sportsman, but I haven't heard anybody raving about the quality of Bean's fly rods or moccasins recently.
This is one of the thorniest problems in CRM, faced not only by AMC, Ford, and Bean but others like Starbucks, Halston, or Carlos Santana when they decided to fudge the quality to lower costs to expand the brand: Why go through all that extra time, expense and work to maintain quality when they'll buy lesser products for the same, or higher, prices? Isn't it all about the bottom line anyway?
In one sense it's hard to call them wrong, isn't it? Each one of the companies mentioned above increased profits when they made their deals with the devil and decided to coast on their reputation. CRM is after all pushed as a way to increase profits, and if you want profits, there are few surer ways to profit than to have a brand name people will pay more for just because of the name, slapped onto a product which costs as much to make as its low-price imitators.
Side note: This reporter lives in Istanbul, and knows for a fact that a good 60, 75 percent of the pasta, marble, olive oil and clothes you Americans pay premium prices for because its "Italian olive oil" or "Italian marble" is actually produced in Turkey, rebranded in Italy and sent over. See the power of branding? Would you pay the same price for "Mama Turkoglu's Spaghetti" as you would for "Mama Rigantoni's?"
You do attract more customers that way. You get the sort of person who'll stand beside an AMC Harley and sound like Peter Fonda and Dennis Hopper. Who'll listen to any of the pedestrian albums Carlos Santana tossed off after Woodstock and wax nauseous about the "shimmering, astounding brilliance" of the product. Who'll sip Monmouth's coffee and act as if they're tasting fine French reserve wine.
It's a CRM deal with the devil, and one thing you can say about deals with the devil, there's always a short-term payoff. The long term's not so great, but when's the last time anybody running a business issuing quarterly reports cared about that?
– David Sims is contributing editor, Customer Interaction Solutions magazine.