As companies see increasing value in social media campaigns, it is becoming apparent that the transactional-centric models currently used for tracking and measuring marketing campaigns are not up to the social media challenge. With social media campaigns often focused on brand building and driving engagement, the tools used to measure the impact on sales and brand are ill-suited to accurately measuring the full impact and value of social media campaigns.
The buying or sales funnel that has served marketers well for many years no longer works in an environment now centered on two-way and unstructured communications. A new framework developed at Rubicon Consulting, Inc., building on ideas originally conceived by Harry Max, offers the relationship-centric LOVE model as a replacement–and enhancement–for the transaction-based buying funnel.
The LOVE model is designed to drive revolutionary change in organizations rather than evolutionary improvements to the buying funnel. The LOVE model framework should be considered a part of corporate strategy because it encourages a company to think differently in every aspect of what it does–sales & marketing, product development, support, and finance.
Why the buying funnel is old school
The old model for customer relationships–that is, the one still used by most companies today–is built around a buying funnel that progresses from awareness to consideration to purchase to loyalty. Fundamentally, this is an information model where companies provide the information and customers consume it.
This model worked for many years because in a one-way media environment companies’ dominant share-of-voice allowed them to control the information flow and messaging, directing customers through the linear steps of the classic funnel: awareness, consideration, purchase, and loyalty. TV, radio, newspapers, billboards, direct mail are all representative of the old media environment where the buying funnel was king.
The funnel is a favorite of marketers because it is linear, uni-directional, and transaction-centric. What this means is that there is a single, deterministic path that is built around discrete actions and responses. It is not hard to determine where any particular consumer is in the process, so tracking and metrics are straightforward and easy to calculate. Where many marketing activities are hard to measure, this one is easy.
The buying funnel isn’t a bad model. It is an ideal model for understanding how purchase decisions get made in an environment where companies control the information and consumers consume it. However, it depends on a media environment that is no longer dominant. Once the one-way media environment gave way to current communications technology and practices, the buying funnel was unable to keep up.
The two-way media technology that enables social media fundamentally changes the landscape. The buying funnel doesn’t work for social media because the funnel is about transactions and social media is about relationships.
- Relationships are not a thing, but rather a series of cascading interactions
- Emotions aren’t rational, so it is hard to create a deterministic model for relationships
- Relationships aren’t static, so you can’t just broadcast information at consumers.
At this point, it’s worth taking a moment to think what drove the buying funnel and why it worked only so long as the company controlled the message.
- Awareness. No one will consider or buy your product if they don’t know about it and what it does. The goal is very clear and the tactics are image-focused. With one-way media and control of the message, companies were able to craft carefully scripted awareness campaigns without worrying too much about what people actually thought.A favorite example is San Francisco Bay Area electronics retailer Video Only. Using conversational radio spots talking about specific savings, they left the listener with the impression that their prices were dramatically lower than at other retailers. However, they never provided enough information to double-check their claims–and most people wouldn’t bother in any case. They could do this because they controlled the message.
- Consideration. Having gained awareness–ideally via a beautifully executed and memorable, imaging-building campaign–the task shifts to getting potential buyers to consider a specific product for purchase. As products got more complex, the consideration phase often turned into an information dump of “feeds and speeds.” The company controls the information, deciding which features to highlight and which boxes on the comparison charts to check. A consumer’s true problem or interests are simply a hurdle for the marketer to overcome.
- Purchase. Having made the potential buyer aware of the offering, and having persuaded them to consider purchasing it, the focus shifts to moving consumers into the “bought” column. Having an actual consumer need to work with is a big plus, but hardly an insurmountable obstacle to the likes of the late Billy Mays. Tactics are driven in many cases by frequency of purchase. Thus, a used car salesman who never expects to do business with you again will use more aggressive and potentially alienating tactics than a service that needs you to renew every month.
In each step, the needs of the company dominate those of the consumer. While there is lots of information, it is all provided by the company who has little interest in helping consumers prioritize or define need-based criteria. FUD often sells. If the consumer feels like they are just a wallet to be pried open, that’s often a view shared by the company. The whole process is like the classic stereotype of the salesperson that won’t shut up. However, we know from experience that the best sales people do more listening than talking. But then, these salespeople often seem to be operating under a different model.
What this means is that if we want to think about customer-company relationships differently, we’ll need a new framework.
Defining a new framework
The buying funnel breaks down because it is built for a one-way media environment that is no longer dominant. The technology that spawned social media makes it easy for consumers to talk back–or to each other–via conversations that are beyond the control of the company. It is not a matter of companies allowing mass direct consumer-to-consumer communication since it’s not up to companies to decide.
To be useful, our new model needs to do three things:
- Help us understand the consumer-company relationship
- Focus on interactions not just transactions
- Follow relationships as they evolve over time as we need lots of non-transactional interactions in order to maintain engagement.
Using these criteria as a foundation, we can develop a relationship-centric framework that is quite different–and potentially much more useful–than the traditional buying funnel. The LOVE model is a five phase framework for describing relationships between consumers and companies. The phases are both descriptive and instructive.
The description of each phase below includes an example of a well-known company and how they leverage their understanding of customer relationships. While a company’s relationship with each consumer falls into a specific phase, the company can be at different relationship phases with different consumers. The examples used here are of companies that do a particularly good job at understanding specific types of relationships.
Romance — getting introduced
You can’t build a relationship with someone you don’t know, so the initial phase of the consumer – company relationship is Romance. Romance is about introductions and learning and trying things. People don’t want to think about big commitments when they are still trying to decide if they even want to get to know you better.
There are serious pitfalls in skipping the romance phase and moving too quickly from social to transactional interactions. Once the parties to a relationship define it in terms of an exchange it is very difficult to redefine it as something broader. A properly developed romance defines the long term relationship as something other than primarily a monetary exchange or a transaction. By contrast, the current buying funnel is a lot like asking for a kiss at the beginning of the first date.
Twitter and other social networking applications are good at letting people explore and set their own pace of discovery and use.
Power Struggle — maintaining interest
Where Romance is about generating interest and opening the door to exciting possibilities, the second phase, Power Struggle, is about spending time together and getting to know each other. In the world of commerce, this is about working to maintain the customer’s attention. The power struggle isn’t adversarial, but is a mutual effort to learn how both parties in the relationship are going to fit together. After all, there needs to be balance if a relationship is going to last for the long term.
If you don’t provide an engaging online experience that fulfills the customer’s need for credible information, you will struggle to keep people from clicking somewhere else. You lose the consumer’s attention and, with it, your ability to drive the relationship narrative.
Dell’s IdeaStorm allows Dell “to gauge which ideas are most important and most relevant to” by engaging the public in online discussion. Users are able to add articles, promote them, demote them and comment on them. By giving users the power to drive what is discussed, Dell maintains engagement while accomplishing its own goals of understanding what people care about and want to see.
Stability — finding balance
At the point where no major mis-match of status between the parties exists, a relationship enters the third phase, Stability. A stable relationship is one where you are providing a reasonable value proposition for filling latent customer needs. You have stability when both of the following are true:
- The consumer is willing to go through the process of sorting through the criteria for making a decision, and
- You are willing to transparently make available the information needed to satisfy the consumer’s criteria.
Amazon.com is a company that understands this extremely well. The Amazon site is a virtual cornucopia of information on all manner of consumer products. Amazon provides an enormous quantity and variety of information with the implicit expectation that, if and when the consumer makes a purchase decision, Amazon id most likely to be the purchase vehicle. Not only are there user reviews, but the reviews gain additional credibility because users can comment on the reviewers.
Amazon benefits from a stable relationship because consumers have little reason to leave the Amazon site to gather additional information. Both parties feel their needs are being met in a balanced way. As a consumer, you are always free to leave the Amazon site, but why would you?
Commitment — discovering shared outcomes
Commitment comes when the relationship advances from stability to a shared outcome. While loyalty in a predominantly one-way, transactional exchange is fragile, commitment in a stable, bi-directional relationship is far more robust and makes you more likely to stay in relationship through the ups and downs the market inevitably deals you.
There are lots of ways of showing commitment. Preferred customer programs are one form of commitment, although many such programs are based on an explicit quid pro quo rather than true commitment.
McAfee has formed a strong bond of commitment with the hundreds of “McAfee Maniacs” that handle much of McAfee’s technical support via the Web. Some have posted thousands of responses in McAfee forums–as of this writing the top contributor has made more than 31,000 posts. Except for some modest peer recognition, the Maniacs are uncompensated, and yet the shared outcome of helping people navigate McAfee’s software motivates some amazing commitment.
Co-Creation — co-owning a vision
The final and ultimate phase is Co-Creation. At this level the relationship is about co-creating value and co-ownership of a common vision rather than merely sharing in the outcome. With this type of relationship, a customer is no longer merely making a purchase, but is supporting a preferred business. The benefits of co-creation are huge, and reach into every corner of a business and are reflected in both top line revenue and bottom line costs.
iRobot, makers of the Roomba robot vacuum cleaner, support an entire ecosystem of customers and partners. Many have hacked Roombas to add capabilities or create entirely new devices, in effect, turning the Roomba into a platform. By listening to its customers and recognizing them as trusted partners, iRobot is able to embrace a class of user that exceeds what we typically think of as a customer. As a result, the Roomba has become more than just a vacuum and its users are much more valuable to iRobot than merely customers on the other end of a monetary exchange.
Companies that can shift their worldview from thinking about customers as transactions to engaging with them in a vibrant, two-way relationship experience gains that range across the entire scope of business operations.
Putting the LOVE to work
Each of the five phases–Romance, Power Struggle, Stability, Commitment, and Co-Creation–represents a different flavor of relationship and a different way of thinking for most business leaders. Some consumers will want to align their interests with yours because it makes their lives easier, such as frequent customers who want the sales process to run smoother. The motivation of other consumers may be less direct, perhaps visionary customers who see a better way or an interesting combination of products or services. The Co-Creation process manifests itself in four distinct types of value:
- New products and services are the most visible way you can engage with and learn from your customers. A genuine dialog with customers always makes the development process better, but in many cases it also makes it simpler as feature sets can better validated and it is easier to identify low value add components.
- Process improvements are an area where many customers have strong feelings, but few companies bother to ask. Still far fewer take the view that customers should be empowered to help design the processes. The trick is aligning interests in a deep and holistic way.
- New ways to message and market become apparent as soon as you start engaging with customers in a genuine dialog. They’ll help you sell their bosses and they teach you how to market more effectively to their neighbors. If your new product name is an undesirable slang term in a foreign language, they’ll tell you rather than letting you blast it to the world.
- Business co-creation is the Holy Grail of relationship. It happens when your customers are emotionally invested in the success of your business. They make referrals to friends, family, and colleagues because it creates intrinsic joy for them. Having a customer who wants you to be successful is much more powerful than a customer you’ve bought with a loyalty program. It is important to remember that co-creators may exist in forms and places that are invisible to companies. You need to support these advocates, even when you don’t know exactly who they are.
Experiencing the LOVE
The LOVE model is extremely versatile in that it is applicable to any online relationship, not just for traditional customer acquisition and purchase. Likewise, the benefits of the LOVE model framework extend far beyond social media and other marketing campaigns. The range of potential benefits is highlighted in the three examples below: customer support, product design, and thought leadership.
Customer support. Viewed through the lens of the LOVE model, customer support changes from a deterministic, cost-based activity designed to incur the minimum cost in solving customer problems, to a relationship-building opportunity. This doesn’t necessarily mean higher costs; in the long run it almost certainly means lower costs for support. Using the LOVE model framework one is able to design support processes that lead to improved outcomes for both the customer and your company. Because customers seeking support may be at different stages in the LOVE model, companies are forced to embrace the concept of the non-linear, one-size-doesn’t-fit-all relationship.
Product design. Thinking about customers as partners and equals shakes up the product design process at many companies. Welcoming input from customers doesn’t have to mean “feature bloat” or lead to products designed for a small minority of vocal customers. The fundamental change inspired by the LOVE model is in the way your company thinks about customers, not the way feature requests are incorporated into the final design. When you think about customers as part of a bi-directional relationship of equals, you treat customers the way you like to be treated. The resulting dialog not only encourages customers to engage in future developments, but provides a way to build and strengthen your relationship with them. Your goal is to get them emotionally invested in your company, and to get this you have to become emotionally invested in their situations.
Thought leadership. The co-creation that results from getting customers emotionally invested in your company’s success is especially valuable in building and maintaining thought leadership. In a transactional model, each product or announcement must be re-sold to customers and even the bonds with loyal customers quickly degrade if they are not continually refreshed with new exchanges. By contrast, the LOVE model focuses on building relationships that are not transactionally based, so the bonds between you and your customers are much more enduring. Transactional-based relationships are always one mis-step away from disaster, so relationships that can endure the occasional hiccup provide enormous value. Because the customer shares your vision, there are strong emotional reasons for trying to see the best in any given situation and to work through the occasional hiccup.
The value of aligning interests with your customers’ to make your business success a shared goal draws customers closer to your company in ways that a transactional outlook simply cannot. Embracing the LOVE model framework embarks an organization on a journey of discovery. Like a good marriage, the better you know your customers or the targets of your campaigns, the more you’ll learn about them and what they can teach you about how to improve your business and competitiveness, from products to processes to messaging.
Finding the LOVE
Understanding the five phases of the LOVE model gives you a framework to develop broadly beneficial relationships with the people who are most critical to the success of your business. The LOVE model helps you to understand how to move your best customers from merely transacting into the role of business advocate.
The LOVE model framework is predicated on honest and genuine relationships between consumers and companies. Each party maintains their own interests and motivations, but by establishing an enduring, balanced, and committed relationship to a shared vision, each party is able to partake of the fruits of business co-creation. In other words, the benefits don’t come free and you’ll have to actually listen and align your interests with your customers. If you want to find LOVE, you have to show LOVE.
The LOVE model requires you to shift how you think about consumers. Marketing is no longer a broadcaster, but rather a partner in an enduring two-way relationship where both parties are co-creating new forms of value. This new way of thinking cuts across the organization and impacts every interaction your company has. One of the things you can’t expect is that everyone is going to travel directly from point A to point B. LOVE is neither deterministic nor linear so you have to plan for a range of outcomes.
Learn as much as you can about your consumers–notice I didn’t limit it to customers–and how they relate to your company. Stop trying to bribe and manipulate people to get them to do what you want. This is transactional behavior. Do whatever it takes to be open to new forms of value. We are used to talking about technological innovation. The LOVE model helps you to become attuned to other forms of innovation. For a lot of executives, this is an eye-opening experience.
You should be able to develop some customers into advocates that genuinely want your business to be successful. Think about that and how such customers can benefit your business. Often these important advocates are not directly visible, but you still need to understand that they are there and figure out how to work toward co-creation with them.
Although the buying funnel is the domain of marketing, the new approach embodied in the LOVE model requires a change in strategic thinking up and down management and across the entire organization. Companies that want to find the LOVE also have to show the LOVE by moving their thinking away from the old transactional view of customer interactions and toward understanding and investing in customer relationships focused on co-creation and new forms of value.
Measuring the LOVE
A challenge for replacing an easy-to-measure framework such as the buying funnel is defining appropriate replacement metrics. For the buying funnel, the key metric was conversion–how many of the people you touched completed a purchase. Add a cost component to the conversion rate and you get return on investment. Add repeat purchases and you get lifetime value.
In the case of the LOVE model, the impact on your business reaches well beyond product revenue, so the metrics need to as well. The better you understand the full range of effects on your company, the better you are equipped to select from a number of well-established metrics to measure your results. The specific metrics will vary with the types of relationships and the programs employed and include: time to market, new product success, support costs, new customer acquisition cost, and, of course, revenue.
A few examples may help. While the benefits of a program like the McAfee Maniacs is many faceted, the big one is lower costs. Likewise, Dell’s IdeaStorm seeks to affect the speed and quality of product decisions, so metrics should focus there. Amazon is a poster child for the LOVE model because their approach pays dividends in so many areas and they track a variety of metrics.
As companies gradually realize the wide ranging impact of establishing and maintaining healthy and vibrant relationships with consumers, the types and numbers of metrics we see used will grow. In most cases, the metrics will be existing measures that take on increased value as awareness grows of the many direct and derivative impacts that flow from adopting the LOVE model framework.
(This post was originally co-authored with my Rubicon team, in 2009.)