A customer oriented marketing organisation will increase customer value
During my 17 years’ career as consultant, I learned that strong marketing companies often have two separate marketing departments. On the one hand they have their marketing department to acquire new customers, and on the other hand they have a marketing department focusing on customer value. The model that is often used is the “get – keep – increase” model.
The acquisition marketers focus on getting (acquiring) new customers, while customer marketers focus on keeping them and increasing their value.
The main KPIs for a customer marketer are:
- Number of customers
- Customer loyalty, i.e. the time that customers stay as a customer
- Churn: the percentage of customers that leave in a year
- Turnover per customer
- Profitability per customer
- Customer life time value: # customers x lifetime x contribution (turnover – cost)
- Satisfaction or NPS (net promotor score)
- Customer experience
Strategies are evolving as the customer life cycle evolves
There are several strategies and tactics to increase customer value. Strategies and tactics are varying in function of the life cycle phase.
First of all, it all starts with the acquisition phase. Companies – and their sales people – need to acquire the customers that do have a fit with the company, and also with the right promises. Set the expectations right. When you don’t meet the customer’s expectations, the customer will leave very soon. Probably the acquisition cost will be higher than the return you got. You lost money on this customer.
After the acquisition phase, there is a very important phase, i.e. the welcome phase. In this phase customers need to be confirmed in their choice. Great marketing companies do have welcome programmes, e.g. customers are called to check whether they have all information they need, or customers get a personalised information package. Of course, marketers need to be prudent in developing this kind of customer welcome actions. For example for a customer that bought a BMW, there is much higher welcome budget than for a customer that bought a cheap cell phone. Keep the customer profitable.
The longest phase is the loyalty phase. The goal is to keep the customer in that phase. There are a lot of techniques to keep customers loyal, but don’t start anything as long as the two basic requirements aren’t met: great service and a good product or service. If you do have this, then you can start thinking about loyalty programmes or pampering campaigns. Cross-selling and up-selling campaigns are also great loyalty drivers. And also down-selling can be the right choice. In telecoms this is often used as a technique to create loyalty. Switch your customer to the right product or service, at the right price, if the offer is more adapted to his needs, even if you earn less in the short run. In the long run the customer lifetime value will be higher because the customer will become more loyal. I’ve lead migration projects that tripled the customer value just by down-selling. Of course, never start without a business case.
At a certain moment of time, customers are starting to think about leaving, or switching the brand. This is the phase were customers consider to leave. It is very useful for marketers do develop predictive models. It is possible to predict who is going to switch brands and leave your company as a customer. During my career as a consultant, I worked for customers that could predict 50% of the customers that were thinking about leaving, without having expressed it. As soon as you know who is going to leave, it is easy to develop personalised actions to retain customers. Often a simple nursing call is already enough in order to make people changing their mind.
The last phase is the phase in which people actually leave. For a lot of products and services, it is very difficult to know whether the customer has switched, but in a lot of cases, it is. For example in telecoms, energy, automotive, … people often express the intention to change. For those cases, it is important to have retention offers ready. Offers that you can make in case the customers expresses the will to leave.
The customer journey
Customer loyalty will increase customer value. One of the main customer loyalty drivers is to make sure that the customer experience is great along the customer journey. How to start with it?
- First of all, you’ll need to understand who your customer is. It seems very simple, but I can assure you that a lot of our customers are struggling with this. Most of the marketers do have an idea. In order to increase customer value and experience, you need to know:
- what your customer segments are,
- what the personas are for those segments,
- how they behave and what their customer journey is along the touch points they use,
- and finally you’ll need to measure their customer experience along all those touch points and identify critical points.
Here is a stepwise approach:
Start with a segmentation of your customers. Most companies do have this, however segmentation is often confused with targeting. Targeting is choosing which customers you do want to target. Segmentation is dividing the market into homogeneous groups with similar needs and similar behaviour. The sum of all segments is the total of your market and they should not overlap. In McKinsey language this is called MECE segmentation, i.e. “Mutually Exclusive, Collectively Exhaustive”.
Once you do have this, we’d recommend to develop personas. Personas do help to give a face to the people that are represented in the segment. Il will help marketing and sales to better conceive with the segment and to understand the people of the – in general – rather abstract segments.
Give the personas a role in your business. How do they behave? How do they use your service or product?
Next develop your customer life cycle. What are the important phases in the life cycle? Make a time line of the customer life cycle.
Develop the touch points customers use during each phase in the customer life cycle. It’ll be a road map, for each persona, from getting to know your company or brand to becoming and being a customer. It’s their customer journey.
Finally try to measure the customer experience for each touch point. You cannot measure them all. This would be too time consuming and too inefficient. You’ll need to pick your battles. How can you measure customers experience? 4P square developed a model to measure customer experience (CX). It’s the resultant of three components: (1) effort, (2) success and (3) emotion, or CX = f(effort, success, success).
Executing the above steps will indeed help you understand your customer and increase customer value.
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