Objective of marketing function is to identify potential customers, reach out to them with your products or services and encourage them to come back for more.
Whether you call yourself customer focused, customer driven or customer first, the idea is to cater to specific needs of the customer in order to prove exceptional service so that they stay with the company and eventually you develop their trust and loyalty in you.
However, most of the times, there is a massive disconnect between the marketing department’s approach and the corresponding organization structure and eco-system. While marketing department’s focus may be customer centric aiming at retention, the budgets allocated by the organization for such initiatives may either not be sufficient or may force teams to focus on tapping new customers. It is a well-known fact that acquiring new customers is not only tough but also expensive. On the other hand, retaining existing customers not only means less expense but also ensure high profitability. Yet, almost 80% of the marketing budgets are spent on acquiring new customers and only about 20% is spent towards customer engagement and experience to retain existing customers. Lot of brands are not making the required investments in the strategy, resources, technology or support required to back their customer focused programs.
This is a major missed opportunity. According to one survey by Marketing Metrics, the probability to convert an existing customer is 65%, while that of converting a new customer is just 10%. The cost to motivate a new customer to make a purchase is typically five to seven times more than that of an existing customer. Together that represents a huge cost to benefit ratio.
The lack of real technology driven initiatives to understand individual customers on personalized basis hampers the impact of marketing activities. Most companies rely on one-size-fits-all approach to their marketing campaigns. Customers are getting smarter and are flooded with options, until a company offers ‘tailored’ experience, it is difficult to convert prospects to customers.
A company needs a strong and sound strategy when it comes to being customer-centric. According to a Gartner report, 80% of the profits of the business comes from 20% of the existing customers. This is usually due to more frequent purchases and larger, high value purchases by the returning customers. A report by Bain and Company suggests that a mere increase of 5% in customer retention, can drive the average profits upwards of 40%. Even if we take this with a pinch of salt, even increase of half of that, is quite lucrative.
These existing-returning customers are the Most Valued Customers (MVC) for any organization. They are important for business not only because they ensure revenue but also because they are the evangelist of your brand. Their real value lies in the brand affinity that they convey through various channels and word of mouth. Their friends, family, colleagues see that as trusted interaction and in turn tend to become new customers for the brand
Many brands have started realizing the value of MVCs and are investing in cultivating the relationship with these MVC. The differentiators here is to be able to identify your MVC and be able to build a one-on-one personalized, relevant relationship with them.
Some brands (Amazon, eBay), emulate the personalization, by using product recommendation technology. This so called personalized experience is based on what many customers have bought before, and thus assuming that you will want the same. They still lack to consider the individual preferences and tendencies of individual customer. True Personalization still remains a challenge, but the companies that are using customer intelligence and customer management technology are gaining competitive advantage.
The road to customer centricity
Understanding your customers individually requires both strategic and financial commitment. Companies need to first gain an understanding of what their customers prefer and what action they take, to effectively engage and motivate them through personalized, automated marketing. This can be achieved using great marketing technology
Data Centralization – Customers interact with a brand through various channels, such as Point of Sale, e-commerce, Online, Social Media, etc. Data from all these sources needs to be aggregated, co-related and analyzed. With advent of big data, and advanced analytic tools, it is now possible to identify the customer on any channel, at real time, and give him a personalized experience, on whatever channel he is coming from.
Customer Analysis – Use the data collected, to analyze your customer. Analyze thier activities, segment the customers and using this analysis, create multiple personas of who are your real customers. Use experience mapping to identify their preferences and tendencies.
Automated engagement – Design and execute personalized campaigns based on individual customer preference and actions so that you can motivate them to act and gain their trust. This part while looks simple, is usually quite challenging. It is difficult to design a relevant campaign and make it attractive to the customer to respond to it or take relevant action. Using good analytics technology topped with immense creativity can ease your job.
Optimization – Customers are not static. They will change their preferences with time. You need to identify these changes and respond to them. Use continuous analysis of the data to identify the changes or shifts in their preferences and actions. Use these changes to change your campaign accordingly and change your interaction with the customer, to respond to his change in behavior.
The key to retain your customer is to understand your customer. In an online world, where there are no one-on-one human niceties, his online behavior is the key to identifying his individual personality and engaging him according to his preference and priorities. Increasing number of brands are now realizing the value that their most valued customers bring in and hence are investing in identifying and managing them. Subtle understanding that these customers actually bring in the new customers using most powerful marketing tool, the word of mouth, is making companies focus on retention marketing in order to maximize the return on their marketing budgets.