PALO ALTO, Calif. (January 10, 2008) —Despite an increased focus on customer engagement, most B2B technology companies continue to fall far short of meeting customer expectations and commitments, according to the results of a major research initiative by the Chief Marketing Officers (CMO) Council. Most technology vendors badly overestimate their effectiveness in addressing customer needs, while a majority of customers feel ignored and trapped in vendor relationships that are marred by broken promises.
These are among the findings of Profitability from Customer Affinity, a new study that advocates major customer-centric changes in the way technology companies measure their marketing effectiveness. The study uncovers profound disconnects between vendors and customers and finds that IT companies risk serious customer alienation and lost business if they don’t realign their organizations around customer needs through improved co-innovation and cooperation. Some 99 percent of customers surveyed said they would either scale back or terminate relationships with vendors who fail to build customer trust. Meanwhile, less than seven percent of customers believe their vendors are extremely well-aligned with their needs.
The study was conducted by the CMO Council, a global peer networking and thought leadership organization of more than 3,000 top marketing executives. The study is based on surveys and interviews with more than 1,000 leading B2B technology buyers, IT marketing and customer relationship executives and their channel partners.
The report coincides with the CMO Council’s release of the first annual Customer Affinity Index, led this year by top scorer Network Appliance, followed by Juniper Networks, InterSystems, and Polycom. The index was developed in conjunction with Dr. V. Kumar, professor and executive director of the ING Center for Financial Services at the University of Connecticut, and Dr. Girish Ramani, assistant professor of Marketing at Drexel University’s LeBow College of Business.
Profitability from Customer Affinity argues for a new measure of marketing performance, called customer affinity, which incorporates critical elements of the customer lifecycle experience. The survey’s findings indicate that customer affinity—not brand awareness—is the most accurate predictor of customers’ purchasing intentions and decisions. In fact, customers say that brand awareness and existing relationships—often thought to be leading factors in purchasing decisions—have little bearing on their decision to do business with a vendor or channel partner. Customer decisions are influenced by competence, quality service and support, and a sense of true commitment from vendors. Yet vendors continue to direct budget toward initiatives that are ineffective at building customer affinity, the study argues.
“Marketing has a critical responsibility to define and build customer-centric businesses,” said Donovan Neale-May, executive director of the CMO Council. “Based on the findings of this study, we have a long way to go. To be more successful, marketers should adopt new performance measurements, like Customer Affinity, that are actually tied to the customer experience. We believe traditional brand metrics, taken by themselves, may actually reinforce ineffective behavior and practices.”
Among key findings of the new study:
- Fifty-six percent of vendors perceive themselves as being extremely customer-centric, but only 12% of customers agree. An overwhelming majority of vendors—85%—are convinced that they are getting better at responding to customer needs, but 45% of customers disagree.
- More than half of customers surveyed described their relationships with vendors as “dependent and captive,” “struggling for common ground,” or “combative and adversarial.” When asked to describe their relationships with the channel, 45% of customers surveyed evaluated their channel relationships similarly.
- More than 30% of customer respondents said they would terminate relationships with companies that fail to gain their trust; 62% would scale back existing engagements, while 7% would no longer consider the vendor for future business.
- Co-innovation with customers is vital to building customer affinity. Nearly six out of 10 customers say co-innovation is extremely or very important, with another 30% agreeing that it is at least somewhat important. Customer responses indicated that collaborative, two-way conversations—followed by continuous improvement—build customer affinity.
- Vendors seem to understand that channel partners truly are partners in their success, and that going to market effectively with the channel is critical to maximizing their value to customers. Yet only 8% of vendor marketing respondents said they do an extremely good job of teaming with the channel to build stronger customer affinity.
The survey results highlight the challenge marketers face in driving organizational and cultural changes to focus the business around customers. Customers want vendors to rethink the structure of how they embrace, interact with and respond to customers. Cultivating higher customer affinity will lead to better business performance and higher profitability—if companies will pay close attention to the qualities and factors that customers care about.
The need to build customer affinity is further bolstered by recent industry research indicating that relationships between vendors and the Channel are shifting. The research from CMP Channel indicates that fifty percent of Solution Providers rate current levels of vendor relationships as 'less than positive'. According to CMP’s research, the top three most important program elements Solution Providers evaluate when considering a vendor for a strategic partnership include: product quality/reliability; technology relevance to the customer base; and relative profit potential.
“Marketers need to understand that all of the relationships, between vendor, channel and end customers, are changing and require nurturing. The relationships that exist today may not exist tomorrow,” said Anne Marie Miller, Corporate SVP Sales for CMP Technology. “At CMP, our entire suite of services and marketing solutions are designed to help marketers improve the connection and interconnection between vendor and channel, channel and end user, and vendor and IT buyer. Vendors have the opportunity to build programs that involve the customer in co-innovation, demonstrate customer centricity, and understand and enhance customer interactions.”
For the complete CMO Council report, and a complete listing of the Customer Affinity Index, please visit the CMO Council website at www.cmocouncil.org.
About CMO Council
The CMO Council is dedicated to high-level knowledge exchange, thought leadership and personal relationship building among senior marketing and brand decision-makers across a wide-range of global industries. Approximately 2,300 top marketing executives are represented on the CMO Council worldwide, accounting for well over $50 billion in aggregated annual revenues. Visit the CMO Council website to find out about the initiatives geared to address executive marketers’ challenges at www.cmocouncil.org.