Guest Blogger David Bakken: How Far Can You Stretch a Customer Relationship?

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Customer Engagement
Customer Experience
There's no question that there is a lot of "value" locked up in most customer databases, but there are costs associated with extracting that value. It's likely that in this case the retailer failed to factor in the cost of lost good will that might result from offering customers something totally unrelated to their core value proposition.

We got an interesting piece of mail recently. The return "address" was just the logo of an upscale catalog retailer of women's clothing. "Check Enclosed" was printed prominently above our address. Opening the mailer revealed a check for $10. On the back, a lot of text above the endorsement line informed us that, by cashing the check, we were agreeing to a 30-day trial of a roadside assistance service, and that a $15.99 monthly fee would be automatically charged to the credit card that the retailer had on file unless we cancelled before the end of the trial period.

Elsewhere in the mailer, we read "_____ values your relationship and from time to time will introduce you to valuable services. So ___ asked an unaffiliated company, ____, to offer you discount and savings services." Based on a description of this "valuable" roadside assistance service, it offers much less than AAA at a much higher price. A quick Web search on the provider of these services turned up a number of complaints. In some cases, the complainants claimed that their credit cards had been charged even though they did not cash the check.
There's no question that there is a lot of "value" locked up in most customer databases, but there are costs associated with extracting that value. It's likely that in this case the retailer failed to factor in the cost of lost good will that might result from offering customers something totally unrelated to their core value proposition (which has something to do with offering fashionable clothes, not high-priced insurance policies). Throw in what is probably a perfectly legal but likely misleading marketing communication, and it seems to me that the potential long-term harm could outweigh whatever short-term economic gain the insurance company is providing.

If you're thinking about extracting some extra value from your customer database by entering into this type of arrangement, my advice is "first, do no harm." Beyond that, you'll be better off looking for ways to increase the return on the database that stay within your core value proposition--and protect the equity you've got in your brand name.

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David Bakken is author of The Customer Knowledge Advantage blog.

EXPERT OPINION
EXPERT OPINION