Wharton Professor Talks Connected Strategy for Consumer Engagement

In recent years, the ways consumers and brands interact have changed dramatically. We order products from brands without ever once speaking to anyone who works there. We choose to follow brands on social media, essentially telling those brands that we would like them to market to us.
Now, a new book asks, “What if there were a way to turn occasional, sporadic transactions with customers into long-term, continuous relationships—while simultaneously driving dramatic improvements in operational efficiency?” The title of this book is Connected Strategy, and its authors, Nicolaj Siggelkow and Christian Terwiesch, both professors at the University of Pennsylvania’s Wharton School of Business, contend that these continuous relationships are possible.
To learn more about the book and these new consumer-brand relationships, Loyalty360 recently spoke with Terwiesch. He started off by discussing customer loyalty at a high level. He said, “If you think about customer loyalty, and sometimes I think of customer loyalty as ‘customers coming back,’ I think the problem is about connected strategy. It’s to use technology if customers aren’t coming back. But they actually never leave. We connect through technology, and we have these long-lasting customer relationships. The value proposition there is once you are in a relationship those are the things that are paying off in the long run, and that’s where you get the ROI.”
Terwiesch emphasized that connectedness is still not the norm. “The status quo in most businesses is still one that is a very episodic interaction between customer and firm,” he said. “The customer goes to the firm. The firm doesn’t know the customer ahead of time, and so they gather what we call a ‘request for service,’ and they try to react quickly to provide the best experience for the customer as possible, and then the two (customer and firm) are disconnected until the next episode of customer interaction.”
He noted that this traditional, episodic interaction resembles a feedback loop because it’s characterized by what he calls the four Rs: recognize, request, respond, repeat. The first R, recognize, implies that a customer has a need, but Terwiesch feels that recognition doesn’t help differentiate brands from competitors. “Oftentimes,” he lamented, “we as firms are waiting for the customer to articulate the need and knock at our door.”
Today’s mobile-ready environment offers brands the opportunity to treat their relationships with consumers as something more constant than the feedback look. Terwiesch said, “Through technology, we can do so much more. We can be so much more proactive and anticipate customer needs before the customer himself or herself knows that the need is there. Then we get a head start in seeing the request. We can respond much earlier, much faster, much more conveniently, and with a much higher degree of customization.”
He added, “Then, we’re going through those things, rather than thinking about every episode (each customer interaction as a new episode). It becomes more like a relationship in which we get to know each other better, in which we can get very knowledgeable at what the customer wants and find the thing that drives his or her willingness to pay.”
Terwiesch emphasized that brands must take a more critical view of engagement to better understand how they are interacting with consumers. He said, “I think it’s helpful to dissect a little more carefully what we actually mean when we say that we’re ‘engaging with a brand.’” He elaborated by saying that he thinks that the customer and brand engage over four phases.
The first, respond to desire, means that a customer becomes aware that he or she has a need. The second, curated offering, is the phase in which a customer knows what he or she needs but doesn’t know which options are available. Coached behavior is the third phase, in which the customer and the brand actually begin an engagement. Trust between both parties begins here.
Terwiesch characterized the third phase as the point of differentiation, saying “The consumer gives the firm the license not just to wait until the consumer takes an action, but the brand is actually nudging the consumer.”
The final phase, automated execution, is what Terwiesch says all brands should ultimately strive for. “It’s basically when the brand knows the consumer so well that they actually solve the problems for him or her before there’s even a request.”
In describing these phases, Terwiesch is trying to point out that generalized service is less and less successful. The basic feedback loop can’t be relied on anymore. He said, “It’s very helpful to think about these four different customer experiences, and these four pathways of consumer engaging with a brand, because each and every one of them will have their own new experiences, their own challenges, and their own need to come up with new technology.”

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