Proximity and Engagement

Depending on the segments and the channels, customer relationships may range from personal one-to-one connections to completely disintermediated arms-length interactions. Working with entrepreneurs and students, I have found that emphasizing two specific characteristics of customer relationships appears to be the most helpful. Those characteristics are proximity and engagement.

Proximity refers to how close or direct the relationship is, though not necessarily geographically. High proximity relationships require that someone from your organization be available and connected to the customers at all times. That does not necessarily mean that employees will be involved in every transaction; it means that if a customer wants information and communication, it is directly available. Consulting businesses are one example of extremely high proximity relationships. Clients expect the consulting firm, and specific consultants, to be available as needed. Similarly, many interactions on specialty-arts online retailer Etsy are also high proximity, because customers often expect to interact directly with the artisan. Low proximity relationships require little or no direct connection. An Amazon customer buying running shoes does not expect to interact with Nike. At most, the consumer might interact with Amazon or a third-party reseller.

Engagement refers broadly to the level of interaction and contribution to the relationship. Low engagement relationships required little participation beyond the exchange of goods for value. Purchasing petrol is an excellent example; the consumer likely has little or no emotional stake or interest in interaction with the petrol station owner, much less the oil & gas conglomerate that supplies the petrol. High engagement relationships require the participants to pay attention, express opinions, and contribute to the transaction. Again, Etsy is often a good example; customers will often provide details or choices for specific hand-made products. Some high-end web design services are high engagement, requiring the site owner to participate in an extensive process to tailor the resulting site to the unique organizational goals. High engagement relationships can turn up in somewhat unlikely places. Grocery shopping might appear to be low engagement, but customers at stores like Waitrose and Whole Foods, and especially local specialty food stores, will often describe a significant emotional commitment as well as attention and contribution. High engagement customer relationships can add significant value to the business model. Most Waitrose stores give green tokens to customers at checkout; customers then use the tokens to “vote” for a charity to receive a contribution for that month.

 

The figure shows the different customer relationship types based on low-high proximity and engagement. No quadrant is always inherently better than any other. At the same time, there is likely limited benefit from being stuck in the middle. If engagement is valuable, then (cost-permitting) increasing engagement should improve customer relationships. The Waitrose example highlights this: there are almost no recurring costs associated with the vote-token system, but every trip to the store reinforces the shared connection the consumer feels about building community.

By contrast, some customer relationships must be driven by efficiency and cost. In these situations, it is important to think carefully about the proximity requirement. Some transactions are very simple or have low error correction costs. Proximity is generally unimportant, because customers can either be relatively sure of getting the right product or the cost of fixing a mistake is minimal. If an office administrator found one page of colored paper in a ream of white copy paper, she would likely show it to colleagues as an oddity; it would not be likely to change her purchasing habits. On the other hand, many businesses rely on value-added resellers for purchases of IT equipment, precisely because software and hardware problems can be difficult and costly to solve. Companies cannot wait through a process that requires returning faulty computers or bug-prone software to the original producers. This is a case of essential complexity. Customers may not be emotionally engaged with products; they may not require customization or even contribute significantly to purchasing specifications, but the error correction cost can be very high.

What about the “Simple Enthusiasm” quadrant? Most online retailers incorporate rating systems and commentary mechanisms. While these serve an important feedback and oversight role, they also encourage enthusiasm in low-proximity relationships. Not convinced?

Check out the Amazon reviews for the JL421 Badonkadonk Land Cruiser/Tank. Yes, that is the transport vehicle from the Star Wars movie. No, it is not a real product, yet hundreds of people have written (often hilarious) reviews just to be part of the joke. Why has Amazon allowed that listing to stay active for over a decade? Because it is a near-zero cost way of encouraging enthusiasm for Amazon itself.