The Big Idea in a Nutshell
- Creating customers that tell good things about your products and services to others, i.e. your promoters, is an excellent business goal.
- An even better business goal is to help customers build an emotional connection or relationship with your products and services.
- This approach will facilitate the creation of customer lifetime value (CLV) which focuses on long-term customers satisfaction and commitment rather than short-term sales.
- The premise here is that people build relationships with brands, products, and services just like they build relationships with other people.
- Social Exchange Theory explains how personal relationships operate on the basis of costs and benefits.
- The theory is applicable in this case because it uses an “economic model of costs and benefits, much like the marketplace.” (Social Psychology, p.388).
Social Exchange Theory
“Social exchange theory states that how people feel (positively or negatively) about their relationships will depend on their perception of the rewards they receive from the relationship and their perception of the costs they incur, as well as their perception of what kind of relationship they deserve and the probability that they could have a better relationship with someone else. … We buy the best relationship we can get, one that gives us the most value for our emotional dollar.” (Social Psychology, p.388).
- In order to increase the number of loyal customers who influence other to become customers, we need to design the products and services in such a way as to facilitate a “relationship” between the customer and the product or service.
- These relationships involve perceptions of both benefits and costs.
- These relationships involve emotions that need to be understood and acknowledged.
- These relationships go though phases that have to be understood and managed.
- Long lasting relationships between customers and products and services increase customer lifetime value.