Customers interact with your firm in more ways than ever before. You recognize that each of these encounters is an opportunity to influence the customer, so you spend time and resources tracking, journey mapping, and capturing their every touchpoint. Yet determining which of these events will pass unnoticed and which will dramatically impact your relationship with that customer is challenging. How can a single encounter turn a once beloved customer into a brand terrorist? What sort of event transforms a low value customer into a brand advocate? Through a series of studies spanning multiple industries (banking, hospitality, B2B/manufacturing), our research team examined more than 5,000 encounters with customers to identify what made some events forgettable and others really critical, or what we call transformational relationship events (TREs).
What we found was that people form two distinct types of expectations regarding any encounter, product and relational. This distinction turns out to be vital, because breaking a relational expectation has a vastly different impact on the customer than breaking a product expectation. Product expectations are what you are probably focusing on right now (e.g. service satisfaction, product quality). They are what the customer expects to get from you in exchange for what they give (money, time) – the core aspects of your exchange. However, people are naturally inclined to form relational expectations in any social encounter (i.e. an interaction with your firm). These expectations are less focused on the transaction and are framed more in terms like friendship, trust, interpersonal sharing, and solidarity. Breaking these relational expectations triggers intense social emotions (betrayal, gratitude) that cause customers to redefine the entire relationship and change its future course. Compared to feeling disappointed (as when your service is simply slow), betrayal sparks a much more visceral reaction (and desire for retaliation, distance, etc.); on the positive side, gratitude is similarly more intense than general satisfaction.
We also found, and what makes this more challenging, is that relational expectations evolve as the customer repeatedly interacts with you. Early on, a customer’s relational expectations range from very negative to very positive because they are uncertain of your intentions. With each positive encounter, they learn more about you, their relational expectations increase and become more narrowly defined. This had two relevant repercussions on the customers we studied. First, customers who were early in their relationship development were more likely to experience dramatic positive change in response to a generous act from the firm versus customers for whom the relationship was more fully developed. Second, although we observed that strong relationships insulated the firm from bad customer responses to product failures, in the face of a relational failure, these same strong relationships amplified the effects (highlighting a potential risk to strong relationships). Thus, large violations (either positive or negative) of relational rather than product expectations sparked dramatic change in the customer’s relationship with the firm, B2B and B2C. Knowing this can help you improve your relationship marketing strategies.
- Find the ideal window for transforming customers.
A typical loyalty program will provide its best rewards to the most “loyal” customers. However, we find that this might not be money well spent. Instead, our research suggests that generous acts are significantly more impactful early in the customer’s relationship when their expectations are still pliable. This window of opportunity suggests that customers have an onboarding stage where your interactions with them can evoke more gratitude and more thoughts about their role in the relationship (relational sensemaking), dramatically impacting the future trajectory of their relationship with you.
However, we offer a word of caution. In our research, events that were considered “too good to be true” prompted suspicion. Thus, it is key to calibrate relationship marketing initiatives to identify the ideal window in which they exceed the customer’s expectations, but do not go so far as to trigger undesired responses. Further, while research identifies “pleasant surprise” as a desirable outcome of relationship-building efforts, our research suggests that the type of surprise (e.g., product versus relational) is critical to the longevity of its effects. Thus, first impressions can have a lasting impact—so going out of your way on that first encounter or sending a heartfelt thank you early on can be worth the investment.
- Change the way you segment your customers.
Like most firms, you are probably segmenting your customers on static descriptors such as demographics, psychographics or firm size. However, TREs produce customers with unique emotional and psychological connections to you who will likely respond to marketing initiatives differently than customers whose relationships evolved incrementally.
By collecting customer feedback over time (even using current satisfaction metrics), you can identify these highly active customers based on the degree of change in their ratings. Marketing strategies that depend on customer implementation (e.g., referral programs, pass-along coupons, user-generated content) may be effectively targeted at customers with dramatic positive changes in their ratings (indicating a recent positive TRE). For flatter trajectories, customers’ potential value could be assessed to identify candidates for a spontaneous experiential reward that could induce a positive TRE. Steep negative trajectories could be a sign of a recent negative TRE that requires careful action to mitigate damage and potential brand terrorism.
- Run a new kind of customer health check-up.
You are probably running product and service quality checks regularly with your customer, which are great sources of insight. However, our research suggests that you must also understand how the customer views you from a relationship standpoint. In our study, we offer a metric for capturing these relational expectations that can compliment current metrics used in customer health checkups. The key to these measures is to ensure alignment between the way you view your relationship with a customer and the way they view their relationship with you; misalignments can be the root of negative TREs.
The research paper Transformational Relational Events featured in the post was co-authored by Colleen M. Harmeling, Florida State University, Robert W. Palmatier, University of Washington, Mark B. Houston, Texas A&M University, Mark J. Arnold, St. Louis University, Stephen A. Samaha, California State University Northridge. It is available on the Journal of Marketing website.