Interact with Your Customers

Once you have identified your customers and differentiated them by their value to your company, your next step, say Peppers and Rogers, is to interact with your customers to learn more about their needs, interests, and priorities. Your major objective in this step is to initiate an ongoing dialogue with your customers through all communication channels available to you including

• Promotional offers.
• Collections/invoices.
• Web-site contacts.
• Complaint handling.
• Orders/purchases.
• Customer inquiries.
• Direct sales calls.
• E-mail.
• Faxes.
• Telephone calls (inbound and outbound).

In respect to these and other opportunities you might have to interact with your customer, Peppers and Rogers say you should ask yourself whether your employees are taking advantage of these exchanges to learn more about the customer and his/her particular needs, engage the customer in a dialogue, and use the experience and understanding acquired from the exchanges to develop a stronger and more long-lasting relationship with the customer. They add that during all of these exchanges, you should keep three things in mind:
1.The interaction should be accomplished in a way that minimizes the customer’s inconvenience.
2. The exchange should result in some outcome that has real benefit to the customer.
3. The results of the exchange should influence your company’s specific behavior toward that customer in the future.
Seth Godin adds that you should seek the customer’s permission before attempting to start such a dialogue. In the past, says Godin, when mass marketers communicated with customers or potential customers, they engaged in what could be called “interruption marketing.” They interrupted what the customer was doing—“Now a word from our sponsor”— and asked them to take some action—“Buy Super-Duper Dog Food.” In contrast, CRM insists that you stop interrupting and start asking permission. Godin uses an analogy of getting married to explain the difference:

The Interruption Marketer buys an extremely expensive suit. New shoes.
Fashionable accessories.Then,working with the best database and marketing
strategists, selects the demographically ideal singles bar.
Walking into the singles bar, the Interruption Marketer marches up to
the nearest person and proposes marriage. If turned down, the Interruption
Marketer repeats this process on every person in the bar.
If the Interruption Marketer comes up empty-handed after spending the
entire evening proposing, it is obvious that the blame should be placed on
the suit and the shoes.The tailor is fired.The strategy expert who picked
the bar is fired.And the Interruption Marketer tries again at a different singles
bar.
If this sounds familiar, it should. It’s the way most large marketers look at
the world.They hire an agency They build fancy ads.They “research” the
ideal place to run the ads.They interrupt people and hope that one in a
hundred will go ahead and buy something.Then, when they fail, they fire
their agency! The other way to get married is a lot more fun, a lot more rational,
and a lot more successful. It’s called dating.
A Permission Marketer goes on a date. If it goes well, the two of them
go on another date.And then another. Until, after ten or twelve dates, both
sides can really communicate with each other about their needs and desires.
After twenty dates they meet each other’s families. Finally, after three
or four months of dating, the Permission Marketer proposes marriage.
Permission Marketing is just like dating. It turns strangers into friends
and friends into lifetime customers. Many of the rules of dating apply, and
so do many of the benefits.

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Differentiating Idea—Simplicity

Here is one more differentiating idea that Trout does not mention. It was suggested by Steven Cristol and Peter Sealey in their book Simplicity Marketing. What’s interesting here is that while Cristol and Sealey begin with the same observation that Trout made about the proliferation of choice, they come to some very different conclusions. Rather than seeing positioning as an answer to the consumers’ and brand builders’ problem with the tyranny of choice, they see positioning, at least as it has been traditionally done, as the cause of the problem. They write:

Like capitalism itself, contemporary marketing has been based on an unflagging
belief in giving customers more and more choices.The choice curve
ramped up in the post–World War II economy, when packaged goods manufacturers
set in motion a relentless juggernaut of product proliferation
and line extensions.The cumulative result of a half century of bombarding
customers with an overload of options is that their mental circuit breakers
are beginning to trip—in both the consumer and business worlds. In a
pressure-packed buying and selling environment, the line between choice
and overchoice has become increasingly fine.
By the early 1970s, marketers were already desperately hungry for
ways to ensure that their brands could stand out amidst the swelling
marketing noise created by more choices and more media pervasiveness.
It was then that the concept of positioning rippled through the
marketing world. Positioning focused on the importance of differen
tiating a product, service, or company from its competition. It brought
to the marketing planning process a new sense of focus on carving out
a proprietary space in the customer’s mind. During the three decades
since, sustained success has come to those brands with a unique,
relevant, and credible positioning consistently supported by aggressive
marketing.
But many such successes are now threatened by overchoice.A new imperative
for the positioning discipline has emerged: that marketers look for
ways to connect their brands to simplicity. The interaction of two forceful
tides—extreme choice proliferation and an exponentially increasing pace of
change—creates a combustible combination that at once brings customers
unprecedented opportunities and unprecedented anxiety . . . [In] the most
developed economies of the twenty-first century, the next generation of positioning
successes will belong to those brands that relieve customer stress. That
means simplifying customers’ lives or businesses in ways that are inextricably
tied to brand and product positioning. It means becoming the customer’s
partner in stress relief.
Brands that do this will be the customer’s heroes. Brands that don’t will
be nuisances.

If you want to position your brand as a relief from stress, say Cristol and Sealey, there are four ways you can do so—Replace, Repackage, Reposition, and Replenish.

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Choosing a Brand Name

Here is a list of what works and what doesn’t work when it comes to brand names according to Frank Delano, author of The Omnipowerful Brand.
What Works

• Beginning and ending the brand name with the same letter—Delano says that makes the name easy to remember. Examples include Nissan’s Altima car, Ortho chemicals, and Elle women’s magazine.
• Adding a vowel to the end of a word, transforming a common word into a proprietary trademark—An example is Lyrica, the name of a drug used to treat psychotropic conditions.
• 
  Ending a brand name with the letter “a”—Delano says the letter “a” makes the name sound friendly, like Humana.
• 
  Ending a brand name with the syllable “va,” particularly if the brand needs to have an international feel—Delano says “va” means “to go forward” in Latin-based languages. Some examples include IBM’s Aptiva PC and Polaroid’s Captiva instant camera. Delano cautions that you should be careful about the prefix or stem syllable that is linked with the “va” suffix. For example, Chevy Nova means “no go” in some languages.
• 
  Starting a brand name with the letters “ch”—Delano says brands beginning with the letters “ch” mirror such familiar words as church, charity, cheerfulness, and children, thus bringing to mind thoughts ofjoy, goodness, and fulfillment. An example is Cheerios.
• Ending the brand name with the vowel “o,” particularly if you want the brand to appeal to men—Words ending with the vowel “o” are more masculine sounding, according to Delano. One example is the name Terrano for Nissan’ s 4 x 4 sport utility vehicle.
• Beginning the brand name with the letters “Q” or “J”—These letters are supposed to convey the image that the brand is something special, for example Infiniti’s Q45 and J30 lines of cars.
• Beginning the brand name with the letters “se,” particularly if you want the brand to sound sexy—Delano says the letters “se” carry a sensual overtone as in the examples of Gillette’s Sensor razor and Secret deodorant.
• Incorporating the letter “z” in the name—Delano maintains that the letter “z” conveys the image of advanced technology, scientific breakthrough, or superior performance. An example is Zantac, the antiulcer drug.
• Using only one syllable and three or four letters—Shorter names like Fab and Tide detergents are easier to remember. However, adds Delano, a name with multiple syllables and nine or more letters, such as Primerica or Microsoft, can convey stature and importance.
• Combining two words—For example, FedEx is a better name than Federal Express.
• Using a name that sounds like the product’s generic name—Examples include Duracell for a battery cell and Ziploc for a plastic storage bag.

What Doesn’t Work

• Using a syllable in a brand name that can be spelled in more than one way—For example, sym can be spelled sim, cim, or cym.
  
• Ending the name with the letters ”is”—Delano notes that the names of most illnesses end with these letters. If you don’t want your product associated with such things as syphilis, gingivitis, halitosis, and so on, then don’t end the name with “is.”
• Names that sound like a curse word—Delano notes that the makers of a brand of jams and jellies faced this problem head on with an inventive ad campaign that went, “With a name like Smucker’s, it has to be good.” However, it is preferable to avoid this problem if possible.
• Names that try to be cute—Examples include names like Cow Chip Cookies or Dog Poo Shampoo.
• Overused words and symbols—Delano notes that names of over 1,600 banks in the United States begin with the words “First National” and another 584 start with the word “Farmers.”

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The Mating Dance: Searching for the Right Joint-Venture Partner

Embarking on a search for a joint-venture partner is a bit like the search for an appropriate spouse. You should carefully and thoroughly review prospective candidates and conduct extensive due diligence on the final few whom you are considering. Develop a list of key objectives and goals to be achieved by the joint venture or licensing relationship, and compare this list with those of your final candidates. Take the time to understand the corporate culture and decision-making process within each company. Consider some of the following issues: How does this fit with your own processes? What about each prospective partner’s previous experiences and track record with other joint-venture relationships? Why did these previous relationships succeed or fail?

In many cases, smaller companies looking for joint-venture partners wind up selecting a much larger Goliath that offers a wide range of financial and nonfinancial resources that will allow the smaller company to achieve its growth plans. The motivating factor under these circumstances for the larger company is to get access and distribution rights to new technologies, products, and services. In turn, the larger company offers access to pools of capital, research and development, personnel, distribution channels, and general contacts that the small company desperately needs.
But proceed carefully. Be sensitive to the politics, red tape, and different management practices that may be in place at a larger company but will be foreign to your company. Try to distinguish
between what is being promised and what will actually be delivered. If your primary motivating force is really only capital, consider exploring alternative (and perhaps less costly) sources of money. Ideally, the larger joint-venture partner will offer a lot more than money. If your primary motivating force is access to technical personnel, consider purchasing these resources separately rather than entering into a partnership in which you give up a certain measure of control. Also, consider whether strategic relationships or extended- payment terms with vendors and consultants can be arranged in lieu of the legal structure of a joint venture.

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Business-Format Franchising

Franchising can be viewed as an alternative growth strategy because the original founders of a company avoid dilution of their ownership and are no longer directly responsible for the financial investment needed to fuel growth and expansion. Instead, this financial responsibility is shifted to third-party franchisees and area developers who pay the franchisor for the right to use its trademarks and systems in exchange for initial franchise fees and royalties. Over time, this income stream can be a very valuable and lucrative asset around which an estate plan can be built.
Over the past three decades, franchising has emerged as a popular expansion strategy for a variety of product and service companies. Retail sales from franchised outlets make up about half of all retail sales in the United States (estimated at more than $1.5 trillion) and employ nearly 16 million people. (See sidebar.) You don’t have to have the ambition to become a national or multinational corporation to consider franchising, which can be an especially effective option for smaller businesses that cannot afford to finance internal growth. But franchising as a method of marketing and distributing products and services is appropriate only for certain kinds
of companies. A host of legal and business prerequisites must be satisfied before any company can seriously consider franchising as a method for rapid expansion.
Many companies prematurely choose franchising as a growth alternative or exit strategy, then haphazardly assemble and launch the franchising program. Other companies are urged to franchise by unqualified consultants or advisers who may be more interested in professional fees than in the long-term success of the franchising program. This has caused financial distress and failure for both the growing company and the franchisee, usually resulting in litigation.
Current and future members of the franchising community must be urged to take a responsible view toward the creation and development of their franchising programs.

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Values and the Concept of a Preferred Life Vision

One way to conceptualize a system of values is through the concept of a preferred life vision. Levi-Strauss points out that people are sensitive to contrasts in the human condition.5 Examples are seeking excitement versus being bored, being rich versus being poor, or being healthy versus being ill, and so on. People seek the life that captures the more preferred polar extreme. But, as all aspects of the good life cannot be pursued with equal vigor, the consumer’s value system reflects the particular weightings he or she attaches to various components of the preferred life vision. These weightings have some stability but can change with circumstances and cultural drift. Indiference to any contrast is equivalent to giving equal weighting to the polar extremes: a possibility that can be dismissed for all practical purposes. Rokeach spoke of both terminal and instrumental values, though this distinction has not caught on, presumably because values, as the concept is being used here, are usually viewed as terminal by definition. If we were to tie values to consumer buying, they might look like the following for many people:

• Preference for a less-pressured over a fast-paced lifestyle
• Preference for an environment less threatening to health over a more technologically driven way of life
• Preference for a more meaningful, simpler life over a more materialistic one
• Preference for more solidarity, face-to-face communication, and sense of sharing with others over mere luxurious isolation (bowling alone is not pleasurable)
• Preference for more to be preserved from the past than overthrown in the name of progress
• Preference for staying young-looking rather than old-looking

There is no complete homogeneity of values, consumer or otherwise, within a culture—simply a family resemblance. Consumers attach diferent weights to various values; hence psychographic segmentation, which is based on diferent values and lifestyles. Values difer among social classes and difer among people of diferent generations within the same class, depending how refined our categories of values are. Sharp diferences in values between generations have led to “generational marketing” and “cohort marketing” in segmentation. 6 While diferent generations are separated by about 25 years, cohorts are formed by common defining experiences in their history. As a consequence, cohort groups are assumed to be “value-bonded” by similar preferences. Thus the “postwar cohort” came of age between 1946 and 1963, experiencing a time of family togetherness, economic growth, and social tranquility. In spite of the Korean conflict, it was an experience of security and stability. Marketing campaigns to cohort members exploit nostalgia with symbols of the experiences behind the bonding. Such symbols can incite a good deal of nostalgic emotion.
Accepting that early emotional experiences are most involved in molding the consumer’s system of values, the question becomes: How influential are common cohort experiences in shaping values? Are they suficient to direct preferences? Values can be poor predictors of buying until or unless beliefs are taken into account. Consumers can have the same set of values but show diferent buying patterns because they have diferent sets of beliefs about the appropriate means for promoting their values. Values operate like goals for the individual, but the paths to goal attainment are many. Thus a consumer may place a high value on buying the “best tennis racquet money can buy,” but this depends on beliefs about the criteria that reflect “bestness,” while other beliefs about personal finances and buying opportunity will also play a role in what tennis racquet is bought.

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Convertible Options in Term Insurance

If you purchase a convertible policy, you are allowed to convert to a different type of policy — one that builds a cash value, such as whole life or universal life, sampling is the medical insurance, without having to pass another medical exam. Again, because your health is more likely to deteriorate as you age, this feature may be important if you think that you may want to keep buying life insurance later in life.

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Most people don’t continue to insure themselves after theyreach retirement age, usually because they no longer have anyone dependent upon them, but there are exceptions. For example, take a look at a family of four in which the father is 56, the mother is 43, and the two children are both under 10. The younger child won’t start college for another 15 years, and the parents want to make sure the children have sufficient money even if the father dies. These parents may want to keep insuring the father after he reaches the age of 70, the age at which his policy specifies that he can no longer renew his term insurance policy. To them, therefore, convertibility is an important option.

Another reason you may want to be able to convert your term insurance is if your family has a history of heart disease, cancer, or other serious illness. If your family history makes you more likely to become sick later in life, you may want to ensure that you don’t have to pass a medical exam later, even after term insurance is not available. Because buying life insurance is, basically, eliminating as much risk as possible, many people think that this provision is an important one.
A third reason to keep the convertible option has to do with the price of term policies versus cash-value policies. Term policies generally cost considerably less than other types of life insurance because the others also build value while paying for the insurance. Convertibility may be important to you if you’re on a limited budget but want a cash-value policy. You know that you can convert later, when you have greater financial strength.

Keeping the option to convert means that your policy will likely cost you more.

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The Economics of Your Life : Your uninsured medical costs

Uninsured medical costs are one of the biggest potential drains on a family budget. Including uninsured medical costs in your family budget is crucial because health insurance terms, benefits, and regulations change so quickly.
Moreover, because life insurance protection is related to your health, by definition you want to be certain that your survivors can pay for your medical costs should you die. So after completing the budget worksheet, add a flat amount at the bottom to pay for these unexpected and uninsured medical costs.
How much to add? Good question. The figure you decide on will vary depending on what kind of health insurance you have now. If you belong to an HMO, most of your medical expenses are covered. On the other hand, if you have a private plan in which you pay 20 percent of the costs, your portion is likely to be far greater. Only you can really estimate this amount. However, most experts say that you should always maintain approximately three months worth of living expenses available, so try adding that amount to the bottom of the worksheet as your emergency fund to cover these uninsured medical costs.

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The Economics of Your Life : Your cost of living

The economic value of your life is not only how much you will be earning but also the cost of living that is, how much you actually need to live on. More importantly, the cost of living you and your family have set up is really the amount of life insurance income protection you need to purchase especially because most people tend to spend a bit more than they bring in.
In addition, part of your living costs are more than likely going into some sort of savings — to pay college expenses when your children are old enough, to go toward your retirement, to cover a big vacation, and so on. You still want your survivors to be able to save for some of these items (college expenses, for example). But clearly, saving for your retirement isn’t something you have to be concerned about if you die.
The budget worksheet that follows can help you determine your cost of living. Note that most of your expenses increase over the years due to inflation, if nothing else. On the other hand, some expenses may decrease or be eliminated because they are no longer necessary. One of these, of course, is the life insurance premium. But some other examples of unnecessary costs are clothing, food, and other expenses for children who will eventually be out on their own and paying their own expenses.
Note also that this budget doesn’t include unusual expenses, either planned (such as college expenses or weddings, unless your budget includes saving for them) or unexpected (such as medical emergencies or funerals).
And note, finally, that the budget worksheet doesn’t include paying off any large debts which you’re currently paying over time. If you want your life insurance to pay off some or all of these debts, make sure that you increase the death benefit to cover these amounts so that your survivors no longer have to include the debt payments in their budgets.

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Organize Based on What’s Left After Taxes

Once you have filed important documents in your home so that they can be easily located, it is important to go one step further by organizing all your financial assets into a system based on the following four criteria:
1. Organizing an investment based on its risks.
2. Organizing based on the liquidity of the asset, that is, how easily can I sell this investment?
3. Organizing based on timing, i.e., when will it be wise to sell this investment?
4. Organizing based on valuation, or in other words, based on a dollar value.
In addition to these criteria, we have found the most successful way to get organized is based on a fifth and most critical criteria:

5. Organize based on the taxation of investments.

While each individual’s situation may vary according to risk, liquidity, timing, and so on, everyone’s situation is universal when it comes to taxation. All people are subject to tax. Unlike the other criteria, taxation does not vary greatly depending on your individual situation. Taxation is definable and absolute.
The taxes we pay are demanded of us before we do anything else. That’s why we teach our clients to organize their finances around what they get to keep after paying taxes. By doing so, it becomes easier to understand what you need to do to plan because you know what’s absolutely going to be left over. If you organize based on risk, for instance, you may never be quite sure what you have to work with because that risk will always vary. But taxes are sure. By organizing based on taxation, you can know either how to keep taxes to a minimum, thus keeping more of your wealth, or know how much money you will have left after paying taxes so you can feel free to work with the balance in order to create additional wealth.
Important documents should be organized in what we call “Tax Drawers.” Because there are only five ways you can be taxed, financial affairs should be organized based on the following five
dimensions of taxation:

• Drawer #1: Taxed—savings accounts, checking accounts, reserve funds, and so on.

• Drawer #2: Tax Free—municipal bonds, Roth IRAs, and so on.

• Drawer #3: Tax Deferred—401(k)s, IRAs, and so on.

• Drawer #4: Life Insurance—life insurance can be taxed in a variety of ways, and most often is not taxed until the benefit is received in cash while you are living. If you die, then the income is tax-free. How you receive the money determines whether it will be taxed or not.
• Drawer #5: Capital Gains—real estate, mutual funds, or stocks that appreciate in value. There will be a loss or gain depending on tax rules at the time.
  

Organizing your financial assets into these five “Tax Drawers” will help you find a lot of extra money you didn’t know you had. How is this possible?
1. It makes it easier for you to visualize your assets and in terms of what you get to keep for retirement.
2. It provides a basis for calculating and projecting the accumulation of your wealth.
3. It helps you understand the impact taxes have on your longterm savings.
The following example illustrates the importance of organizing into “Tax Drawers.”
Suppose you put all your money in a 401(k) program for retirement.
This money will grow because you will be able to defer paying taxes on it all those years you are working. However, when you begin withdrawing this money, 100 percent of it will be subject to income tax. If you organize your assets into five “Tax Drawers” and use a forecasting tool such as the Master Plan software you will be able to play “what if” scenarios with your money. “What if” you put this money into a tax-free municipal bond rather than a 401(k) or capital gains account? “What if” you took your money and put it into a Roth IRA, or “what if” you put it elsewhere? Of all the tools available to get and keep oneself organized financially, being able to project your debt, income, and assets over time is among the most valuable. Staying organized is a function of being able to sweep all financial elements (spending, borrowing, and saving) out to a future date and look at the results. By doing this, it is easy to play “what if” so that you can test how a financial decision made today will impact your future. Using organizational tools such as the Master Plan software can help you determine the best way to accumulate money so that you can maximize your assets. And because there are no future decisions, only decisions made today that affect the future, this knowledge allows you to make much better choices. You can make the necessary changes today and not get down the road and have to look back and say, “Oh, I wish I had known!”

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