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Value-based marketing is the future
September 22, 2020
STOCKHOLM


Do we, as consumers, see every new purchase only as a new transaction and nothing else? As a marketer, you want to see transactions between your company and your customers as a relationship to develop and nurture. You want customers to come back, make more purchases, and recommend you to others.

As in all relationships, a lot has happened over time in the relationship between a company and its customers. It is not only because of the supply and the demand changes but also because we mature and look at the relationship differently. We who belong to a bit older generation have seen our local retailer slowly but surely replaced by anonymous shopping malls and now giant international e-commerce, where the relationship is probably just a transaction.

The 90s, the first digital generation, have been raised on transactions and usually have no relation to the company they trade from. In a relationship-based economy, the company name stood for something we could relate to. It was easy to build a long-term perspective, either through a good relationship or through customer memberships or bonus systems. In a transaction economy where the quarterly result is the most important thing, the customer is forgotten. The company sees the transaction as a relationship, and let’s be honest which customer wants a transaction-based relationship?

The view of customer relationships must change

Historically, we have segmented customers in target groups according to how they consume a product or a service. Preferably in some form of maturation phase, "early adopters,” "followers,” etc. have a relationship to the product, service, or brand. Maybe it's time to weigh up how they make their decisions and see differences based on their experiences. There is, of course, inertia in a system of consumers of different ages with different histories. Consumers have comparatively not had an opportunity to change at the same rate as companies and all the trends in companies’ role in society. Many industries are undergoing tremendous changes. Some will probably disappear in a few years, while new ones will emerge.

"What happens to the companies that give their consumers something to relate to other than the transaction?" Joey Gabra, VP of Business Development at Advedro:” In the future, an app might recommend what we should buy based on our needs. It would entirely, or it will partially change the role of marketing in consumption. Before that, however, most companies would need to re-evaluate their view of customer relationships and how they want their customers to see them."

The difference in the rate of change between customer behaviour and company behaviour can be the key to it being difficult to interpret both what caused the changes and what it will look like in the future. It is easy to say that digitalization is the reason for a shift in customer behavior. Digitization made the change possible, but the reason is elsewhere. I see that the companies ran a change process completely without involving their partners, the customers. Unsurprisingly, it is the companies that are most surprised by the development.

Relationship economics becomes transaction economics

The example of the country store is often used. The local store that served its customers naturally had an excellent knowledge of its customers and was much more relationship-oriented than any supermarket manager, or owner of an online store can ever be.

Insurance companies are initially a way of collectively sharing risk. The original business idea was to protect its customers from disaster. Today, the business idea is closer to building quarterly profits on its policyholders. There are many examples of this type of change and of course, it affects consumer behavior. Reactions and counter-reactions. When a customer is treated as a transaction, they will consider their consumption as a transaction.

Three critical factors in the change in customer relationships we see are:

  • - Corporate culture
  • - Trading places
  • - Digital generation

Together, the above points can be a "Tipping Point" that takes us into an increasingly transaction-based consumption. Inertia and what holds back or makes the change less clear is the slightly slower behavioral change of previous generations.

Today, many companies such as Google, Airbnb, Hotels.com, Über, and others live on collecting and presenting others’ services simply and attractively. They exist as a layer between the seller and a buyer. The interaction becomes no more than a transaction. The travel industry is an area where the change is both evident and well spread over all age groups. Virtually all travel purchases are now made online, which makes the travel industry a clear transaction-based model. The destination and length of stay and accommodation are often determined by where it is cheap to fly.

So now to the core question Relationship or Transaction? As a marketer of the airline or accommodation, can I at all defend any investment in relationship-building measures for such a large target group with such volatile behavior?

What happens if the company takes a stand?

The key to a change in our behavior is that we need to have something in common to relate to function as a group. We can work together with large groups of people even though we do not know them, as long as we relate to the same thing, have the same values, the same currency system, the same religion, the same corporate culture. Yes, and in fact, also as consumers to the same company. An example of a value-based company is Smiling, which sells Fairtrade-labelled nuts from the Gambia with the livestock "Good for you great for the farmer". The company sets the rules, and the consumer can choose how it relates to them. Assume that what has happened now is that we as consumers only relate to the marketing and sales we encounter, and it is transaction-based, like the example of the travel industry. How will our consumption be then?

What happens to the companies that give their consumers something else to relate to than the transaction? If they take a stand for value, I, as a consumer, can relate to it?

The future - value-based marketing

Let us assume that over a couple of decades, companies have gradually transformed a relationship-based economy into a more transaction-based economy. That consumers, a little more hesitantly approached an approach to the transaction economy the companies offered, simultaneously as the advertising said something else. Do we, as consumers, see every new purchase only as a new transaction and nothing else? We intuitively choose the transaction before the repurchase. We may be at a "Tipping Point" for an utterly transaction-based consumption.

In the long run, this could lead to us replacing our advertising perception with an algorithmic 'Personal Shopper'. Simultaneously, there is a challenge and a fantastic opportunity to provide the company with content that consumers can relate to. Where the choice is conscious and can be motivated by “I chose the company because…” Caring for its brand and its CSR policy gives consumers something to relate to. Build the company's identity as a value that is easy to connect to and trade-off. It can be to safeguard a genuine commitment and clarity in the CSR strategy, a culture around the company, its employees, and commitment. A promise that is valuable to the consumer. The deal can be a transaction, the reason a value!

Do you want customers; give them a positive value that they can relate to. If you want consumers, make the transaction as simple and affordable as possible.