Aug 6, 2018

The hot topic at this year's DEFACTO X congress: the consequences of relentless innovation in business and society.

It's Up To The Customer.

Peering through the 23rd floor windows of the Emporio Hamburg, you see views across the Outer Alster Lake, over rooftops, past facades, down into the urban canyons, and out towards the towering harbor cranes.  The city's geometry is revealed only at this great height. But the mind wanders to a far more distant locale when Jan Möllendorf and Claus Schuster mention Austin. This Texas town is the topic of a travelogue Defacto X's two managing partners are presenting to an audience of some 230 people on the morning of May 16th 2018.

Actually, their report is less about the left-leaning capital of the right-wing US state and more about South by Southwest, a gathering that takes place in this liberal Lone Star town every spring. Called SXSW for short, this event is a music and film festival, conference and interactive media fair rolled into one. This melting-pot intersection provides better signposts than other events as to where the journey to digital change will – or more accurately, could – take us. These two speakers had little to report in the way of certainties. The two executives give a good account of "cool ideas" and "great impetus.” But amid the rush of intoxicating impressions, they often wondered what of all this would survive. As Schuster puts it, "As yet, no one knows what will prevail." 

Sometimes theoretical insights are a better guide than experience when it comes to putting things into perspective and pointing the way with a modicum of accuracy. This is Jens Cornelsen's job. The head of Defacto Research & Consulting is a perennial speaker at iCONSUMr meetings where he shares insights uncovered by his studies. Cornelsen drafts briefings to give guidance to marketeers inundated by constant innovation and a flood of buzz-phrases. Cornelsen says a product's success hinges on the best value proposition and everyday utility rather than the prospect of the most lucrative returns. And he adds that it’s the customer, and not the corporate decision-maker, who decides.

The essence of Defacto X's commitment to consumer centricity is distilled into those two statements. Even so, it is still a hard slog down in the trenches. Take, for example, Adidas: As a listed company striving for customer centricity but beholden to shareholder value, it rides on the horns of a dilemma. The executive board nonetheless aims to shift its priorities from short-term profits towards sustainable goals. Senior Director Stefan Bögle says a greater involvement of customers and consumers in the company is part of this: "We want to understand their needs and desires and let them help us shape products.” 

Bögle points out three steps that will be taken to this end: Firstly, there is the spirited dialog on social media. Secondly, geofences in shops will determine actual customer behavior. And finally, there will be customer feedback-driven bonus incentives for employees.

Antonius Fromme has seen some restructuring in his time as Managing Director of Mobilcom Debitel, a wireless carrier that is currently reinventing itself as a digital lifestyle company with an offering that includes smart home solutions. 

Morphing from a multichannel to an omni-channel provider, this reseller has started integrating channels that it had operated side by side. Although the company sells its 10,000 or so rate plans and some 15,000 articles in a few brand-name brick-and-mortar shops, most deals are done in partner stores, online and via social media, apps and call centers. Emphasizing two top priorities, Fromme says customers ought to be free to switch sales channels as they wish, for example, by placing an online order in a real-world shop or arranging a consultation in the shop via Internet. But what Mobilcom Debitel really wants to do is lure customers into shops because that is where cross-selling opportunities are. 

The bottom line according to Fromme: "Our restructuring is less about marketing and more about organization and technology." Markus Guggenbühler, Chief Information Officer of Manor tells a different tale that suggests technical innovations may not be the be-all and end-all of business. Switzerland's largest department store chain with CHF 2.6 billion annual revenue, Manor stepped into the e-commerce market just three years ago and has only had a CRM system for a year. "But we're still here," says Guggenbühler with a chuckle. He still sees technology as merely an aid. "What really matters is how well you know the customers and how the company is set up to cater to their wishes." 

He'll get no disagreement there from Julian Grießl, Head of CRM International at the Douglas perfumery chain. As far as Grießl is concerned, adapting customer relationship management to customer needs is a continuous process. He says part of this is to talk to consumers, but mostly about what can be done with products and not so much about the products themselves. Grießl explains that two-thirds of Douglas customers now consider the product experience more important than product ownership. "We have to adjust to that." 

Not every brand is a love-brand. But FC Schalke 04 has nothing to worry about on that count – its customers are fans. These days this European football club, which has 153,000 paying members, is investing primarily in digitalization to see to it that more fans become customers. "The smartphone has become our most important communication channel alongside the shop," says CEO Alexander Jobst, whose vocabulary is dotted with terms such as target group, segmentation and up-selling. Lately, Schalke has been selling a jersey with an integrated chip that also serves as a stadium ticket and lets you pay for your bratwurst. Jobst: "Now that's real added value."

(Left) Jan Möllendorf and (right) Claus Schuster.

It's all about the opt-in.

Defacto X Managing Partners Jan Möllendorf and Claus Schuster believe owned media is the way to go if you want to connect with customers directly. Joachim Thommes sits down to interview the Partners. 

Claus Schuster and Jan Möllendorf, both 50 years old, are Managing Partners of Defacto X, which is headquartered in Erlangen and operates branch offices in Bonn, Cologne, Hamburg and Munich. Defacto X is the umbrella organization for eight agencies specializing in Digital Advertising, Science and Operations, and Communication Strategy & Campaigns. Some 400 employees serve accounts such as Esprit, Ferrero and Vorwerk. 

Joachim Thommes: The EU's General Data Protection Regulation came into effect on the 25th of May. What does it mean for customer relationship management?

Jan Möllendorf: Customer relationship management and the entirety of dialog marketing will benefit from this regulation because the user's consent to the collection and processing of his data has long been part of both. The General Data Protection Regulation, the projected e-privacy regulation, the Facebook scandal - all this plays into our hands because all our work is based on the consumer's express consent; that is, the opt-in. There are going to be fewer grey areas and more clear rules, and more demand for opt-ins. Will companies go back to relying more on their own media to be less dependent on data from third parties such as Facebook?

Claus Schuster: No one can afford to ignore social networks, and that is not going to change for as long as they remain valuable communities and communication platforms for their users.

However, companies must also step up their efforts to find ways of their own to connect with customers. Owned media is indispensable for getting a direct line to the customer and obtaining addresses and contact data. This is the only way to reach out to specific customers.

Joachim: Companies had attempted to build communities and forums of their own early in the decade, but largely failed. Why should they succeed now?

Schuster: Owned media may be about a community, but that's not the main thing. Instead, everything revolves around the opt-in, the permission to address people personally. This is about offering attractive content that is only fully accessible once the interested party registers. Where this content happens to be – on your website, in an app or in a printed medium – is of lesser importance.

Joachim: A community has the advantage that you can study the habits and wishes of its customers on the fly. Could there be any cheaper way of conducting real-time market research? 

Möllendorf: Yes, communities can be a plus. But communities can't be designed on the drawing board. As a rule, they only crop up in certain market segments - and even there, they either flourish or they don't. There are many ways to gain insight into what customers want, including customer cards. The more of these different contact points you can analyze, the more complete the picture that emerges.

Joachim: But first you pile up mountains of data. How do you separate the useful from the useless?

Möllendorf: Technical advances are already making this easier today than it was two or three years ago. But more than anything else, you need experts who understand not only data, but also the given business model, strategies, processes and opportunities. You could call them business analysts.

Joachim: Two astute specialists in one person? You'll need an extra powerful magnifying glass to find them.

Schuster: Right. We're tackling this task with teamwork; that is, with marketing experts and data analysts who collaborate closely.

Joachim Thommes | DEFACTO X, Germany.