Real customer relationships, those that result in the customer feeling a genuine sense of loyalty to the firm, are predicated on a series of satisfying experiences with the company. Relationships are not developed overnight. Until the customer senses some attachment to the company, then no relationship can be said to exist. At best it is a satisfying encounter, which, if it reoccurs often enough, could become a relationship. Thus, relationships are born of successive experiences of customer satisfaction.

What, then, drives customer satisfaction? Surely it is the ongoing creation of value in the mind of the customer. Customers will not be satisfied unless some form of value is created.

Everyone talks about value, how to create customer value and how to add it, yet few companies really understand value from the customer's perspective. They often have an internal view of value, one that is focused on optimizing short-term value for the company and its shareholders, or that stresses the creation of more valuable customers, often leaving the less valuable to fend for themselves or to pay their own way. The word "value" rarely addresses the creation of value that will lead to genuine long-lasting customer relationships.

THE CUSTOMER'S VALUE MUST COME FIRST
The creation of value for the customer must lie at the heart of any customer relationship strategy. Yet, I encounter companies that talk about creating customer value, but what they are really addressing is the creation of increased value of the customer. That is, they are trying to make customers more valuable to the firm by selling them more products and services, by increasing their frequency of purchase or their share of wallet. While there is nothing inherently wrong with creating more valuable customers, this may have little to do with the creation of lasting customer relationships. Some customers who buy a great deal from a firm do not have anything approaching a genuine relationship.

Peter Drucker has observed that the new definition of the function of business enterprise is the creation of value and wealth. In many companies today, particularly those that are publicly traded, this has come to mean a focus on the creation of what has come to be known as shareholder value. This is, of course, a laudable objective and one toward which companies should strive. But what is the connection between shareholder value and customer value? I would suggest that it is impossible to create sustained value for a firm's shareholders unless value is being created for its customers. Yet, today in many firms shareholder value strategies are focused on the reduction of costs though the closing of physical facilities, the laying off of employees, and the wholesale embracing of technology. The goal is to operate more efficiently, to deliver customer service at a lower cost, thereby increasing short-term profits and (supposedly) shareholder value. But this is a decidedly short-term view and again has little to do with the creation of customer relationships. In fact, such a short-term strategy is generally antithetical to the establishment of customer relationships. Thus the creation of shareholder value in this view often leads to a diminution of customer value as service levels deteriorate, leading to a threatening of relationships as service and customer satisfaction decline.

FUNCTIONAL VERSUS EMOTIONAL VALUE
Some firms that have gone down this route in the interest of enhancing shareholder value will argue that customer service has not been diminished. In fact, they will suggest, service has been enhanced because, through the use of technology, the customer can now deal with the firm in a much more convenient way. Access is available through several channels and is guaranteed 24 hours a day, seven days a week. Now, let's think about what kind of customer value has been created. Let's think about the difference between functional and emotional value.

There is no doubt that value can be created for customers in many different ways, some of which I would suggest (supported by much research evidence) are much more important in the creation of lasting customer relationships. Sadly, the view of value creation or value addition - "value added" has become one of the most popular marketing claims of recent times - is often limited to the creation of value for money. Companies add new features to their products while maintaining price. Or, they retain all of the essential product features and find ways to reduce price. Or, in a recent twist on the creation of value for money, they "bundle" together a number of products and services and offer them to the customer at a price that is lower than the sum of their individual prices. What, you ask, is wrong with that? Absolutely nothing. In fact, it is commendable, but it generally does not lead to the creation of lasting customer relationships, because a price advantage and the customer patronage or "loyalty" that results generally last only as long as it takes for the competition to respond. Value for money represents, therefore, the simplest and most easily copied form of functional value.

Functional value, pertaining to the customer's acquisition and use of the product, is generated by price, convenience, access or technology. Unfortunately, competitors can most easily duplicate functional value. They can certainly drop their price to match yours; they can stay open just as long as you can; and they can install the same technology. Thus, creating functional value offers a fleeting competitive advantage.

THE PERSONAL TOUCH PAYS LASTING DIVIDENDS
The much more lasting form of value will elicit an emotional response from customers. It is less easily duplicated by the competition and generally contributes to less emphasis on price. Consider, for example, the value that is created for customers when a firm employs qualified, friendly, helpful employees. Value is created every time a customer is made to feel welcome, important and valued. Some work I have done in the retail grocery sector recently suggests that a supermarket adds value when it places benches at a couple of locations in its stores so that seniors can stop and "take a breather" while shopping. The supermarket also adds value when its stock clerks will lead customers to the items they cannot find, rather that simply sending them to find the items for themselves. Such initiatives on the part of companies create an emotional response from customers. They are pleased that the company has thought of them and that employees go out of their way to be helpful.

The creation of such emotional value for customers is fundamentally different from the creation of functional value through price reductions, increased convenience and technology. Both forms of value are important! However, genuine customer relationships cannot be formed on the basis of functional value alone. Customer relationships require an emotional connection with the firm if they are to thrive.

As we implement CRM programs and activities we must ask ourselves whether we are really creating value for our customers. What kind of value is it-functional or emotional? The emotional is the more lasting, yet the more difficult to create. A reliance on technology alone will not do it. We must have an eye on the "softer" side of value creation; that which is based on the emotional connection between the company and its customers. How we make them feel is at least as important as how easy we make it for them to deal with us.

Jim Barnes is Executive Vice-President of Bristol Group, a full-service marketing information and communications company with four offices in Canada. He is also Professor of Marketing at Memorial University of Newfoundland.