Chapter 3

Customer Relationships: Basic Building Blocks of IDIC

and Trust

Learning Objectives of the Chapter

To understand
Reasons for building relationships with customers
The meaning of IDIC as creating and managing relationships
Trust and trust equation
Myth of trust
How to be the customer’s trusted agent

In order for a firm to build customer value through managed relationships, the company
must engage in a four-step process we call IDIC, an acronym for identifying customers,
differentiating them, interacting with them, and customizing for them. IDIC process
represents the mechanics of a relationship, generating a customer’s trust is the objective of
that process.

We have seen that the customer relationship idea has many nuances. For instance, there
likely will be an emotional component to most successful customer relationships (at least in
consumer marketing), because you have an emotional attachment to a company does not
mean you have a relationship with that company. We can’t afford to dismiss entirely the
notion that non-emotional relationships between an enterprise and its customer do, in fact,
exist. For instance, you probably have no actual emotional connection with one or more
banks whose credit cards you carry in your wallet. But does that mean you have no
relationship with such a company, even though it communicates with you monthly, tracks
your purchases, and (at least in the best cases) proactively offers you a new card
configuration based on your own personal usage pattern? Yes, there might be an element of
emotion involved in this relationship, but must that always be the case? Your relationship
with a brand is analogous to your relationship with a movie star. You might love his
pictures, you might follow his activities avidly in the magazines, but will he even know who
you are? Mutual awareness of another party is a prerequisite to establishing a relationship
between two parties, whether we are talking about movie star and fan, or enterprise and
customer. A relationship is mutual, interactive, and iterative in nature, developing its own
richer and richer context over time. Finally, a successful relationship will lead each party to
trust the other. In fact, the more effective and successful the relationship is, from a business-
building standpoint, the more it will be characterized by a high level of trust.

Reasons for building relationships with customers;

1. Social networks have high impact on the flow and quality of information. As
opposed to a belief in impersonal and generic sources, customers prefer to rely on
peers and their perspectives.
2. Information within networks disseminates quickly and impacts word-of-mouth
referrals and recommendations.
3. Social networks of customers also carry the implication of trust as the information
becomes more personalized with experience and familiarity of the members of the
social network.

IDIC: FOUR IMPLEMENTATION TASKS FOR CREATING AND MANAGING

CUSTOMER RELATIONSHIPS

Setting up and managing individual customer relationships can be broken up into four
interrelated implementation tasks. These implementation tasks are based on the unique,
customer-specific and iterative character of such relationships.

1. Identify customers; An enterprise must be able to recognize a customer when he

comes back, in person, by phone, online, or wherever. Moreover, enterprises need to
“know” each customer in as much detail as possible—including the habits,
preferences, and other characteristics that make each customer unique.
2. Differentiate customers. Knowing how customers are different allows a company-
(1) to focus its resources on those customers, who will bring in the most value for
the enterprise, and
(2) to devise and implement customer-specific strategies designed to satisfy
individually different customer needs. Customers represent different levels of value
to the enterprise and they have different needs from the enterprise. The customer’s
 needs drive his behavior, and his behavior is what the enterprise observes in order to
estimate his value.
3. Interact with customers. Each successive interaction with a customer should take
place in the context of all previous interactions with that customer. A bank may ask
one question in each month’s electronic statement, and next month’s question may
depend on last month’s answer. A conversation with a customer should pick up
where the last one left off. And a company should never ask the same question twice.
4. Customize treatment. The enterprise should adapt some aspect of its behavior toward
a customer, based on that individual’s needs and value. To engage a customer in an
ongoing Learning Relationship, an enterprise needs to adapt its behavior to satisfy
the customer’s expressed needs.

This IDIC process implementation model can also be broken into two broad categories of
activities: insight and action. The enterprise conducts the first two tasks, identify and
differentiate, behind the scenes and out of the customer’s sight; they constitute insight. The
latter two tasks interact and customize, are customer-facing steps that require participation
on the part of the individual customer, constitute action.

HOW DOES TRUST CHARACTERIZE A LEARNING RELATIONSHIP?

The buyer and seller, in a relationship, must be willing to trust each other far beyond the
general reputation of the brand. The more “relationship like” any series of purchase
transactions is, the more that trust will become a central element in it.
A relationship of trust is one in which both parties feel “comfortable” continuing to interact
and deal with each other, whether during a purchase, an interaction, or a service transaction.
Trust rarely happens instantaneously.
The element of trust is an indispensable component of a healthy, growing relationship
between a company and its customer, but it is not an absolute requirement for any
relationship. A customer may remain in a relationship with a company either because he
desires the relationship or simply because he perceives no suitable alternative. The
customer’s own level of commitment to his relationship with a company will depend on the
extent to which the relationship derives from dedication, rather than from constraint. Trust-
based relationships foster dedication. Enterprises create trust-based customer relationships
through the actions of their employees and partners, company strategies, and policies.
THE TRUST EQUATION: GENERATING CUSTOMER TRUST

Building customer relationships is a powerful tool to identify high-loyalty-potential

customers as well as to fine-tune products and services to elicit loyalty. For one thing,
research generally suggests that high levels of customer satisfaction are only mildly
correlated with high levels of loyalty. Other data show that while satisfaction might not lead
to loyalty, dissatisfaction clearly leads to disloyalty. There are some data to suggest that
extremely high levels of customer satisfaction and loyalty are also examples of extremely
high trust. What all this suggests, in actuality, is that the presence or absence of trust is a
significant driver of economic profit.

High profits are said to derive from high customer retention rates because of efficiencies
such as increased familiarity with buying processes and customer-enterprise-shared
processes, or from price insensitivity and referrals. The steps required to generate a
customer’s trust aren’t necessarily simple. In fact, with all the emphasis on process, a
number of businesses have focused more on the activities required, rather than the desired
outcome. As a result, several myths about trust ought to be exposed at the outset:

Myth 1. Intimate customer relationships require time and proximity.

Fact: Intimacy is the one trust factor that can be immediate; it can be conveyed by a tone of
voice, by attentive listening, or by a sense of being understood. It is also not dependent on
proximity; consider Internet chat rooms; consider conversations between seatmates on
transcontinental plane flights.

Myth 2. Trust takes time.

Fact: Only one component of trust requires the repetition of experiences that is reliability.
Other components of trust are not necessarily time-bound at all: credibility, reliability, and
an assessment of the other’s of self orientation.

Myth 3. More customized contact is better.

Fact: If I am passed from one customer service agent to another, and the second agent
knows my name and transaction history, I am pleased. If a cold-call direct marketer knows
my name and transaction history, I am not pleased. Context and intent are everything.
Myth 4. People trust companies.
Fact: Reliability is the only trust component that people associate with enterprises.
Credibility, and especially intimacy and self-orientation, are traits associated almost entirely
with individual persons, not organizations.

Myth 5. People like to be asked their opinion.

Fact: People like to be listened to, which is not the same thing as being asked. When was the
last time you filled out an in-room hotel service questionnaire?

Trust is a genuine buzzword; nearly everyone uses it. The meaning of it can be captured in a
simple model - call the trust equation.
Trust = (C + R + I)/S
where:
C = credibility. Credibility has to do with words; “I can trust what he says about. . . .” Other
related terms include believability and truthfulness.

R = reliability. Reliability has to do with actions; “I can trust that he’ll do. . . .” Other related
terms include predictability and familiarity.

I = intimacy. Intimacy has to do with perceived safety; “I can trust talking with him about. . .
.” Security and integrity are related to intimacy.

S = self-orientation. Self-orientation has to do with focus; “I can trust that he’s focused on
me. . . .” A low level of self-orientation on the part of the enterprise enhances the customer’s
trust, while a high level of self orientation destroys trust.

The first two components— credibility and reliability—operate mainly in the rational realm.
The second two—intimacy and self-orientation—are largely non-rational (not the same as
irrational). The power of the fourth component—self-orientation—is greater than the other
three, as evidenced by its solo position in the denominator.
A customer who perceives lack of credibility may sense empty words. If the customer senses
low levels of reliability, he may say the offer is “flaky.” If the customer senses low levels of
intimacy, he may view the enterprise as technical, or full of technicians. All these are
destructive of trust, of course. But none so much as being perceived as having high levels of
self-orientation, for that goes to motive—high self-orientation is equated with insincerity, a
lack of caring, and deviousness.
High trust leads to higher sales. To generate trust, the enterprise must address all four
components of it in the customer’s mind—credibility, reliability, intimacy, and self-
orientation (i.e., the self-orientation of the seller).

BECOMING THE CUSTOMER’S TRUSTED AGENT

We know that the more a customer does trust an enterprise, the more the customer is likely
to want to continue in a relationship with it. In such a relationship, the customer perceives
the enterprise to be his trusted agent, making recommendations and giving advice that
furthers the customer’s interest, even when it occasionally conflicts with the enterprise’s
self-interest, at least in the short term. Earning the customer’s trust is one of the earliest goals
in any enterprise’s effort to build a long-term relationship. Only in a relationship of trust can
information pass back and forth freely between buyer and seller. Moreover, in a world of
increasingly commodity like products and services, a relationship founded on trust can
provide a genuinely sustainable competitive edge. Trust is the currency of all commerce.

Many professional (doctors, lawyers, psychologists, and financial planners) relationships are
based on the concept of the trusted agent. They must learn a lot about a customer before they
can make their individualized recommendations because one of the hallmarks of any
profession—that the client’s interest will be paramount. Becoming a trusted agent involves
more than simple policy decisions on a company’s part, no matter how revolutionary those
policies might be. A deep, cultural change in attitude at most firms will also be required. A
trusted agent’s role is to improve the customer’s ability to make choices, to manage his life
or business. A trusted agent will recommend product-service combinations based on a
customer’s individual needs, irrespective of the level of
profit that will be made on any particular transaction, and nearly irrespective of the
companies that might participate in the product-service delivery.

The focus of every twentieth-century business was its product and inventory. In the twenty-
first century, a company’s products may be important, but a company can still exist without
any products at all. Now, the company must have customers to thrive.
A trusted agent will recommend product-service combinations based on a customer’s
individual needs, irrespective of the level of profit that will be made on any particular
transaction, and nearly irrespective of the companies that might participate in the product-
service delivery.
Relationships, to be effective, must be built on trust, but the problem is that most enterprises
view their businesses and their enabling technologies through the “wrong end of the
telescope.” If an enterprise starts by asking how it can use interactivity, databases, and
personalization to sell its customers more products, then failure is almost inevitable. This
view of the issue is highly self-oriented and simply cannot build a significant level of
customer trust. Without trust, customer relationships will not take root, and the company, in
the end, will find it impossible to achieve its business goals. The right question to ask,
instead, is how can the enterprise use interactivity, databases, and personalization
technologies to add value for its customers, by saving them time or money, or creating a
better fitting or more appropriate product?

RELATIONSHIPS REQUIRE INFORMATION, BUT INFORMATION COMES

ONLY WITH TRUST
Customers will ultimately have to decide how much information they are willing to share
about themselves with an enterprise. The future of a customer-strategy business world
depends on gaining the customer’s trust; relationships don’t exist without it. Without trust,
customers will not give an enterprise the information it needs in order to serve that customer
better. Without trust, customers will not give an enterprise the information it needs in order
to serve that customer better. Lose customer trust and everything is lost. If a customer
wasn’t sure that his insurance company was not sharing his vital information with other
companies, would he even think about filling out all those forms? If a customer does not
trust his bank, would he give it every single iota of financial information about his business
to qualify for a loan?
Fred Newell wrote that as marketers develop more and more information about the
lives and lifestyles of customers, the privacy issue heats up around the world. “Privacy
issues will have to be examined from fresh perspectives if we are to continue the
delicate balance between the marketer’s need for information and the consumer’s
desire to control that information.

Once customers feel assured that their data are safe with the company, the next logical step
is to make it comfortable for them to share more and more information.
At every step of the collaboration, enterprises need to concentrate on gathering the
information useful to them. To build the necessary trust for customers to do that, enterprises
often need to offer their customers something of value in return for the information. Many
offer direct, cash oriented benefits such as discounts, coupons, or promotions, and automatic
personalization tools on the Web. A customer is more likely to stay loyal if he has taken the
time to personalize a Web site himself, and the enterprise acts on the information given.
Once the flow of information begins between the customer and the enterprise, it is vital for
the enterprise to enable the customer to feel he controls his information. The enterprise
should enable the customer to use the information to save him time and money and deliver
value. All of this will fulfill the customer’s expectations of trust and earn his lifetime loyalty.

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Chapter’s Sample Questions
1. Mention the reasons for building relationships with customers.
2. Define the IDIC as implementation tasks for creating and managing customer
relationships.
3. What do you mean trust? If you are asked to generate customer trust, how will you
do it? Justify your answer.
4. Discuss the trust equation with example. How will you be a customers’ trusted
agent? Explain.
5. “Relationships require information, but information comes only with trust.” Do you
agree or disagree with this statement? Justify your answer.