The Risks of Customer Intimacy

In the past several years, marketers have become enthusiastic about the possibility of establishing personal relationships with their customers. They long for the return to an idealized past, when most transactions were conducted face to face and were closed with a simple handshake. Hoping to recreate this type of customer intimacy — and to capture the loyalty that helped cement many a deal in bygone days — giant firms today talk about engaging customers in dialogue, or having “conversations” with them. To some extent, such thinking is reasonable. Broadcast advertising and take-it-or-leave-it selling propositions — the hallmarks of mass marketing — are losing their power, while technology is making it easier for even very large companies to listen effectively to their customers, to target ever smaller segments and to tailor their offerings.

But let’s face it: Communicating through a Web site with an online retailer is not the same thing as talking with the attentive owner of a local store. Nor is a phone conversation with an unseen customer service rep half a world away conducive to building loyalty, even if “Joe” or “Maria” is on the line trying to explain why your printer won’t print or your cable TV bill this month is larger than your mortgage.

Does that mean companies should give up on “conversing” with the people who buy their products? No, but they do have to beware of deluding themselves about what new technologies can actually deliver. Too much intimacy with too many people can have its downside — that’s as true for organizations as it is for individuals, and thoughtful discretion is important for both. Companies should also avoid hogging the conversation like a clueless guest at a cocktail party. To make customer relationships more fruitful, they should instead endeavor to create “polylogues” by bringing other parties into the conversation — including other customers, business partners, employees and sometimes even competitors.

For at least six reasons, companies should be wary of seeking one-on-one customer relationships that can disappoint both sides:

Without obvious benefits, a relationship is just a hassle.

To some extent, consumers welcome and even seek out relationships with companies. They may have an affinity for an automobile brand or electronics firm or clothing boutique, and may spend a fair amount of time browsing on company Web sites or chatting with friendly salespeople. They may also be willing to disclose some degree of personal information in return for the chance to have those conversations. Yet, at the same time, companies can cross the line, often unwittingly, by asking their customers for too much information. For example, a constant barrage of customer surveys from the same company, even if they are from different divisions, can leave people disenchanted. Whether they are confronted by regular mail, over the phone or through an online plea, few people want to take the time to help a company repeatedly with its marketing research. Similarly, people often bristle when asked for their ZIP code or phone number — as happens at a number of major retailers’ checkout counters, even when the customer is paying cash. The desire for peace at the end of the day outweighs these customers’ need for a “conversation” in the form of an unsolicited call.

Customers want a balance of power.

In most relationships, too much power on one side is at a minimum destabilizing and frequently destructive. Yet companies often seek information from customers that will swing the balance of power in their direction. Businesses often demand home phone numbers as a prerequisite to the completion of a transaction, but how often do they provide a manager’s number to call in the event of a problem? While the company often ends up with the customer’s home and work numbers (and may ask for a cell-phone number and e-mail address, as well), the customer gets a toll-free number that will lead to phone trees, long waits and an opportunity to once again give out Social Security number, mother’s maiden name and so on. Another misuse of power occurs when companies try to take advantage of the basic human need for reciprocity in relationships. This applies socially — people who have had dinner at a friend’s house are expected to return the favor — and in customer relationships, too. Consider, for example, a direct-mail charitable appeal that includes an assortment of greeting cards or return-address labels while at the same time asking for a donation. Although such tactics can be effective, many people resent being given something for “free” because of the subtle but recognizable expectation that they are bound to return the favor.

Dialogue can lead to unreasonable demands.

While technology is making it cheaper for companies to solicit feedback and advice from customers, not every company has a lot to gain from hearing every customer’s opinion. One of the great advantages of increased interaction between sellers and potential buyers is the opportunity it presents to customize offerings. But when customization cannot be done profitably, soliciting greater feedback may imply a promise to change that the company cannot keep. Customizing toothpaste for individual customers, for example, is possible, but probably not economical. So a toothpaste maker stands to gain as much from a statistically significant sample of customer preferences as it does from expensive listening technologies that can test and capture each customer’s preferences.

Talk isn’t always cheap.

Conversation can become expensive when customers are uninterested in dialogue, especially when they don’t have much to say. The customer’s level of “involvement” in a purchase will dramatically affect his or her willingness to talk with a company, as well as the richness of the discussion. Involvement is usually a function of the product’s price, the complexity of the purchase and the customer’s affinity for the product, so it tends to be quite low for everyday purchases. Yet some companies spend millions in failed attempts to engage low-involvement customers in deep conversations. The online pet-supply stores of the dot-com era are an easy target — among their many mistakes was the assumption that customers would frequently return to a Web site to chat about dog food. Some of the champions of mobile commerce are similarly overoptimistic about how people will use their portable cellular devices to respond to companies’ blandishments.

Some customers will exploit the conversation in unexpected ways.

In addition to the costs that come with greater dialogue, there are other pitfalls for companies to avoid. Attempts to use conversations to customize products can lead not only to isolated requests for cardamom-flavored tooth-paste but also to real trouble. Consider Nike iD, a Web-based offering that allows customers to order shoes with personal messages emblazoned on them. This offering exposed the company to the risk that customers would request messages that might embarrass Nike Inc. And indeed, when one customer decided to order shoes that made a political statement about the company, Nike found itself involved in a national conversation it would have preferred to avoid. Caveat venditor.

Competitors may be listening.

It can be risky for a company to discuss its products with customers in an open and uncontrolled way. After all, competitors may be lurking, and they are seeking to poach customers and ideas whenever possible. Technologies that enable conversations with customers are also enabling competitors to monitor some of these interactions without having to make expensive investments themselves. In addition to saving money, competitors may also be able to deduce product innovations that are in the works. For example, BuzzMetrics, based in New York City, has developed technology that systematically analyzes conversations on message boards and community Web sites, allowing companies to understand what people are saying about their own products and their competitors’ products (as well as competitors’ replies). Although we live in an era that values openness and transparency, managers must always keep in mind that cutthroat competition will never go away.

Talk Among Yourselves

Given these potential problems stemming from companies’ attempts to “get to know” their customers, what should be done? Should companies dramatically scale back their efforts?

A radical retrenchment would make little sense. Successful marketers rightly value one-to-one conversations with their customers, and the feeling is often mutual. After all, many questions, problems and transactions really can be handled easily via a Web site or call center, thanks to companies’ ability to store, organize and retrieve data. But companies can improve the nature and benefits of their customer conversations by being more open-minded about them.

A complementary approach to one-on-one conversations, or dialogues, is to bring others into the picture and establish many-sided interactions, or polylogues. A polylogue is a sequence of monologues and dialogues occurring between three or more parties. Like dialogues, they are enabled by communications and database technologies that allow companies to have global connections with their customers, suppliers and distributors.

By initiating polylogues, a company recognizes that before making a purchase, customers don’t just discuss products and brands with their sellers but also with friends, salespeople, competing sellers and trusted advisers, often relying on “buzz” to inform their preferences. Companies can engage in, and even manage, these multifaceted conversations and, in the process, avoid the pitfalls of one-on-one customer communication.

One of the best ways polylogues add value to customer conversations is by involving new or existing business partners; two or more companies can provide more complete solutions to customer problems than one acting alone can offer. Someone who buys a new computer from a big-box retailer, for example, may find it convenient to sign up for high-speed Internet access and free installation at the same location. The best marketers make their partners perfectly at home in these kinds of conversations, partly by sharing information about customers but especially by tightly integrating operations. For example, Safelite AutoGlass is so completely integrated with Liberty Mutual Insurance Co. that when the customer calls Liberty Mutual with an auto glass claim, Safelite answers the phone. Although a few customers might not appreciate the forced connection, most welcome the chance to get their glass replaced as quickly and simply as possible. In this well-designed polylogue, all three parties emerge as winners.

Such close ties can smooth the interactions in many cases, but even arm’s-length, for-pay relationships with partners can be turned into effective polylogues. Credit-card banker Capital One, for example, has figured out a unique way to help companies avoid several of the risks associated with customer intimacy. During customer-initiated contacts, Capital One uses sophisticated database and analytic technologies to assess a customer’s degree of interest in hearing about new offerings. The company has achieved such success that it now sells this ability to judge the level of real-time customer involvement to other companies interested in choosing just the right moment to make their pitch. This process helps ensure that companies are not wasting their money on low-involvement customers; it also means that those who are contacted are likely to be pleased rather than annoyed when they receive a call or mailing or have their call transferred.

Another way companies are creating effective polylogues is by bringing in neutral participants. These contributors can mitigate problems stemming from one-to-one relationships by playing the role of honest broker. For example, the many retailers and wholesalers whose products are sold on Amazon.com implicitly agree to allow their wares to be reviewed by any visitor to the site who cares to undertake the effort. The existence of the reviews shifts some of the power in the relationship back to the consumer while at the same time driving higher sales — for superior goods, at least. Similarly, the honest broker as “innomediary” can help reduce the problem of unreasonable customer demands. Auto manufacturers can set up and monitor customer communities on Edmunds.com, for example, to determine what kinds of innovations are most likely to pay off. (See M. Sawhney et al., “The Power of Innomediation,” MIT Sloan Management Review 44, no. 2 [winter 2003]: 77–82.)

Competitors may seem an odd choice to invite to a customer conversation. But consider how Lexus turned the problem of “listening competitors” on its head. Most automakers simply invite potential customers to test-drive their cars at a dealership. But when Lexus introduced its new IS 300 sport sedan, it set up test tracks in major cities and invited journalists and potential customers to test the vehicle head-to-head against the two leading competitors’ cars. By bringing competitors into the conversation, Lexus risked suffering by comparison. The company deemed it an acceptable risk, however, because it conveyed the confidence and openness necessary to win sales in a polylogue. This strategy is likely to be particularly valuable for companies that are introducing innovative products and need to “prove it” to a skeptical public in a crowded market.

In the end, a company’s closest business partners are its employees, making the management of their participation and performance in conversations critical. In an age when an employee’s ill-advised comments to a rightfully aggrieved customer have the potential to make the evening news, companies must educate their employees on the role they play in conversational marketing. Already, technology is helping companies reduce the likelihood that their customers will defect because of one bad experience with a service rep. For example, NICE Systems Ltd., an Israeli company, uses advanced content analytics to create software that measures fluctuations in a caller’s voice and recognizes certain words, such as “cancel” and the names of competitors. As the heat in the conversation goes up, the call is routed to someone who is more likely to be able to solve the problem or please the customer. But preventing people from blowing their stacks, while a welcome goal, is just playing defense in an age when so much more is becoming possible.

The complexity involved in managing polylogues — the number of participants, the risks both to sales and to the brand, the difficulty of calculating a return on investment — suggests that the attention of the chief marketing officer is required if they are to be successful. But the investment of time must be made, because when companies mismanage conversations, they suffer. Poorly handled conversations bore, annoy and offend, causing mistrust to grow. In short, they do the opposite of what is intended, destroying the very intimacy that companies hope to attain.

Good customer conversations, on the other hand, pay dividends. They allow companies and their representatives to make better recommendations, which in turn lead to increased sales —whether on a showroom floor, in a supermarket aisle or through an online recommendation engine. They also enhance a company’s ability to make the innovative product or service improvements that customers want. Companies that find the right balance in their conversations and realize that their interactions must be many-sided may not find intimacy with their customers, but they will build enduring relationships.