Rules of Engagement

• Know your customer and your channel partners. Most companies spend a lot of time getting to know their customers. After all, that’s the first rule of customer engagement. But most companies don’t give enough thought to their market channels and channel partners, and how those partners can enhance a customer experience. Look for partners both you and your customers trust, as Hallberg did for MemberHealth.

  MOST COMPANIES SPEND A LOT OF TIME GETTING TO KNOW THEIR CUSTOMERS. AFTER ALL, THAT’S THE FIRST RULE OF CUSTOMER ENGAGEMENT. BUT MOST COMPANIES DON’T GIVE ENOUGH THOUGHT TO THEIR MARKET CHANNELS AND CHANNEL PARTNERS, AND HOW THOSE PARTNERS CAN ENHANCE A CUSTOMER EXPERIENCE.

  Not knowing your channel partners can diminish how your customers experience your product or service. Until recently, that was the case with automobile dealers. Buying a new car—or, worse, a used car—was always dicey. You gritted your teeth, ready to endure a bargaining session and hoping you would get what you were promised at the price you agreed to pay. But when Vehix and similar Internet services made the dealer cost of an automobile known to the world, dealers stopped haggling about price and started paying attention to service and customer experience. They became better channel partners for automobile manufacturers, and some customers now even like and trust them.

  Hallberg knew and understood the added value local pharmacists could bring to his customers. He also knew that, in rural and suburban communities, a pharmacist is often the first person a customer turns to for healthcare help.

• Help your channel partner deliver more to the customer. You can choose to have a passive relationship with the distributors or sellers of your product, but if you can help them do their job better, they will work harder for you. Enabling pharmacists to provide generic drugs for free was a brilliant move. And MemberHealth also remained very intent on making sure that the pharmacists made sustainable profits.

  But to help your partner deliver more, you also need to understand your partner’s business model: How does a partner really operate and generate its profits? Sometimes a partner is reluctant to give you the degree of transparency needed to create an efficient and productive working partnership. But don’t give up. Be transparent yourself and engage your partner at a new level of trust. Hallberg already knew his partners’ businesses very well. You might have to work harder to get to know yours.

• The deal must contain something for everyone. If your business model is based on the contributions of multiple players, each one must receive a substantive benefit to keep all the players in the game and doing their jobs. The MemberHealth business model includes customers (aka beneficiaries), pharmacists, the federal government, and MemberHealth itself. The beneficiaries conveniently get the drugs they need at a fair price—and sometimes even for free; they also get to do business with people they know and trust. The pharmacists do a good business at a fair profit, and the complexity of their transactions is reduced; they also get increased professional satisfaction. The government gets the cost benefits of an efficient service provider. And MemberHealth gets the benefit of a growing, profitable business. Everyone wins and contention is removed from the system of doing business. (Later in this book, I introduce a similar situation through a company called Right Media.)

  IF YOUR BUSINESS MODEL IS BASED ON THE CONTRIBUTIONS OF MULTIPLE PLAYERS, EACH ONE MUST RECEIVE A SUBSTANTIVE BENEFIT TO KEEP ALL THE PLAYERS IN THE GAME AND DOING THEIR JOBS.

• Keep your eye on the end customer. When lots of people are involved in a business model, it’s possible to get distracted and forget who the ultimate customer really is. I often see this in large corporations when people in departments and business functions start talking about “internal customers.” I always remind people that the only real customer is the person who pays for a company’s product or service. Although a business model must benefit all the players, it should be designed from the perspective of the ultimate customer. In the case of MemberHealth, the beneficiary is the ultimate customer.

  I ALWAYS REMIND PEOPLE THAT THE ONLY REAL CUSTOMER IS THE PERSON WHO PAYS FOR A COMPANY’S PRODUCT OR SERVICE.

• Layer on benefits to keep customers engaged. A MemberHealth beneficiary is first engaged by the benefit of doing business with a trusted pharmacist. But then look at how MemberHealth has added additional benefits: low-cost drugs, convenience, and the elimination of complexity and multiple cards. Engaging customers should not be a static exercise. The more value you can deliver, the longer you will keep the customer engaged.

  ENGAGING CUSTOMERS SHOULD NOT BE A STATIC EXERCISE. THE MORE VALUE YOU CAN DELIVER, THE LONGER YOU WILL KEEP THE CUSTOMER ENGAGED.

• Consider giving something away for free. For a profit-making company, this advice might seem counterintuitive, but look at how making generic drugs free worked for MemberHealth. It encouraged the right choices and lowered everyone’s costs. Giving something of value away for free might also encourage customers to do other business with you. And for MemberHealth, the free drugs are not just samples; they are part of an ongoing business proposition.

  I recently attended a lecture by the musician and sage Jimmy Buffett. He drew a distinction between the music industry, which is made up of performers like himself, and the record industry. The latter, he argued, was in a state of breakdown because of its unwillingness to adapt to new realities and because it has lived off practices that have taken advantage of musicians for years.

  A good deal of music is now available for free on the Internet, but rather than change its business model, the record industry’s response has been to sue its customers to prevent them from taking advantage of the free access. Everyone knows that the Internet will eventually make music, as with most information, free or almost free, but the record industry is ignoring this reality. However, Buffett makes all his live concerts available for free so that people who might not be able to attend the performance can still hear his music. In the end, they buy CDs of other Buffett performances.

  Just be sure that what you give away for free has real value to your customers. I promise that it will keep them engaged.