We’re In The Age Of Customer Divisibility: Why It Is More Productive And Profitable To Market By Micro-Segments And Targeted Personas

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While a few smart, innovative companies around the world are making dramatic strides in building customer value, keeping desired customers, and generating lots of money and profits, CX seems to be pretty much treading water, both as a concept and in applications for enhancing communications and relationships with customers. General estimates are that 60% to 80%+ of CX programs fail to meet objectives. Too many companies, executives, and managers have gotten burned out and disappointed with CX due to misunderstanding and misapplying techniques thought to be personalized and relationship-focused and leveraging customer loyalty behavior.

Many companies which were early big investors in CX have largely seen these initiatives go the way of re-engineering a couple of decades ago: They’ve thrown vast sums of money into the creation of relationship systems without considering how, strategically, this builds customer value and loyalty on a persona-based and microsegment, if not an individual customer, basis.

A marketing director at a major wireless telecom supplier in Venezuela complained that she had been restricted from executing targeted loyalty programs for over eighteen months while IT management and the CX software vendor worked through their massive customer database problems. In the meantime, the telecom had suffered classic ‘leaky bucket’ loss, with established customers rapidly defecting to telecom suppliers which offered better value and relevant regular communications with them. Lack of value-based and targeted content, delivered on a frequent basis, was a major contributor to the turnovers.

Similarly, and to a somewhat lesser extent, the effectiveness of traditional customer loyalty programs, most of which are principally designed to simply encourage more frequent spending with the sponsoring supplier(s), is increasingly coming into question and review. Recently, as an example, several major supermarket chains in the United Kingdom and United States have abandoned their long-standing loyalty programs in favor of broad price discounting strategies. Their discontinuation reasons revolved around strategic economic viability of these programs. We’ve also witnessed loyalty program consolidation and retrenchment in the U.S. airline industry. Parenthetically, none of these programs are, or were, especially adept or focused on generating customer data which could be applied for multiple objectives, including persona development for sales and marketing purposes.

A lot of organizations have soured on CX and customer loyalty as a result of stories like these; but a select group are gathering, managing, and using customer data in a positive, financially rewarding, holistic manner. Executives and professional staff want to know, and need to know, how this happens. At every CX and customer loyalty conference around the world, these questions are asked over and over by attendees: Tell us how to fix what we’re doing. Tell us what works and who is doing it. Help us make the best use of our resources to build customer value.

CX certainly isn’t dead, but neither is it a panacea for strategic growth. What CX is, or ought to be, has been nicely defined by a senior marketing consultant “The ability of an organization to effectively identify, acquire, foster and retain loyal, profitable customers” The same definition could be applied to effective customer loyalty programs.

Relationship marketing and CX are now at (actually, past) the point that persona development, micro-segmentation, data integration, and personalization software are both available and affordable, even for smaller and mid-sized companies. Yet, it’s clear that few organizations have taken the right course. Many CX programs have crashed or receded due to data quality, analysis, and application issues, taking with them the opportunity for closer customer relationships.

In an editorial entitled “The Perils of Personalization”, the senior editor of CIO Magazine said: “Forget trying to increase your market share in this economy. It costs too much, and returns can be elusive. In these fiscally tight days, the thing to do is squeeze more profit out of your best customers and persuade them to spend more money with you. But before you pursue that strategy, you have to know how to massage your customer information. Therein lies the tricky part…the path to customer segmentation is strewn with mines, which could easily blow up inyour face.” She’s nailed it. Customer segmentation has many challenges and paths to failure.

In discussing how banks, for one group, approach high, moderate, and low volume customers through segmentation and personalization, she concluded: “Thus, the moral of CX might be: Don’t even bother to think about doing it until you understand exactly who your customers are, how they drive your business, and what you want to do with the information you’ve collected. Otherwise, you could lose your shirt without even trying.” Banks, which are notoriously commoditized, in general, at creating value-based customer relationships, should pay particular attention to statements like that; but, her perceptions really apply to companies of any size and in any industry, business-to-business or business-to-consumer..

For smaller and medium-sized companies, known as SME’s, the challenge of creating real customer personas is particularly daunting. Frequently lacking the resources or the knowledge to gather, store and apply even the most basic customer data puts incredible pressure on them. They often realize the importance of having current, applicable customer information;
but realization, alone, is not nearly enough. They fail to act on the need to create customer personas, and that equals disaster.

Consider these results from a study of 1,000 SME’s in the U.K., conducted by Sage, a supplier of customer data management software to this market:

– 46% rely on verbal customer feedback, while only 7% say they’ve used the results of customer research or complaints to help improve their service levels; and 12% do nothing at all.

– Over half of the SME’s – 54% – have no record of new or lost customers; and, of those who do, 40% keep this information on a manual basis.

Commenting on these results, CX consultant Clive Gray said: “In the current economic climate, keeping your customers happy and attracting new customers has never been more important, particularly to small businesses, who cannot afford to lose customers. We are concerned that a significant number do not seem to actively seek out new customers or make the most of new technology to stay in contact with, and react quickly to, existing customers.”

Unless a company can effectively practice CX fundamentals such as defining and understanding customer segments and personas, gathering and interpreting customer needs, and learning how to collect, clean and qualify, store, collate, manage, and apply customer data, and target the data appropriately, success will be elusive. Conversely, doing it well can differentiate any company, positively and strategically, with customers.

Jeremy Braune, Managing Director of Brandspeak Limited, a marketing communications consulting organization in the U.K., has been quoted as saying: “…organizations need to adopt a more structured and rigorous approach to development, based on a real understanding of what their customers actually want from them. The bottom line must always be to start with the basics of what is most important to the customer and build from there.” The vital nature of having the right customer information, as well as sharing and applying it on a targeted basis, can’t be overstressed.

In Gorgias, one of Plato’s lesser-known morality plays, he stages a debate (featuring Socrates as moderator) on the nature of rhetoric, or public speaking. The questions Socrates poses: Is public speaking art or science? Is it good or evil? Through Socrates, Plato concludes that public speaking is: “Not an art but a knack gained by experience.” Those who take the best of art and science are like gourmet chefs. They know what they are doing and why it works, and they can distinguish between good and bad results. The same thinking, I’d submit, applies to effective CX programs through the use of customer personas.

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