Marketing Success Is (Almost) All About the Data: Optimizing Customer Loyalty Behavior Initiatives

Much of what I’ve learned over the years about sales, marketing and customer service has to do with the critical importance of customer data, and how those data are converted to actionable insights. It’s how companies generate the right customer data, manage and share data the right way, and use it at the right time. It’s also how they use data to the best effect, to optimize loyalty and profitability, that makes them successful, or not, on an individual customer basis. Culture, leadership, and systems will facilitate effective information gathering, storage and application; and, CRM, CEM, ERP, or other acronyms notwithstanding, it’s impossible to be successful without having as much relevant anecdotal and dimensional content about customers as possible.

Much of what I’ve learned over the years about sales, marketing and customer service has to do with the critical importance of customer data, and how those data are converted to actionable insights. It’s how companies generate the right customer data, manage and share data the right way, and use it at the right time. It’s also how they use data to the best effect, to optimize loyalty and profitability, that makes them successful, or not, on an individual customer basis. Culture, leadership, and systems will facilitate effective information gathering, storage and application; and, CRM, CEM, ERP, or other acronyms notwithstanding, it’s impossible to be successful without having as much relevant anecdotal and dimensional content about customers as possible.

Bill Gates, often a prophet, said in “Business @ The Speed of Thought” (1999):

The best way to put distance between you and the crowd is to do an outstanding job with information. How you gather, manage and use information will determine whether you win or lose.

He might have added, had he really understood how to create and optimize customer loyalty, that what information, particularly customer-specific information, a company collects, and how they manage, share and apply it to the customer will determine how successful they can become.

One of my key sources for the uses of information gathered by customer clubs and, particularly, loyalty programs, for example, is friend and colleague, Brian Woolf (www.brianwoolf.com). Brian is president of the Retail Strategy Center, Inc., and a fountain of knowledge about how companies apply, and don’t apply, data generated through these programs.

In a Peppers & Rogers newsletter, for example, Don Peppers quoted Brian in his article, “The Secrets of Successful Loyalty Programs”:

Loyalty program success has less to do with the value of points or discounts to a customer, and much more to do with a company’s use of data mining to improve the customer experience. Top management hasn’t figured out what to do with all the information gleaned. You have all this information sitting in a database somewhere and no one taking advantage of it.

You need to mine the information to create not only relationships but also an optimum (purchasing) experience. The best loyalty programs use the customer data to improve not only promotions, but also store layout, pricing, cleanliness, check-out speed, etc.

Firms that do this are able to double their profits. When these elements are not addressed, all you’re doing is teaching the customer to seek out the lowest price.”

Tesco, one of the world’s largest retail chains, is using its customer information for a number of marketing and process initiatives. In his book “Loyalty Marketing: The Second Act,” Brian described how Tesco leveraged customer data drawn from its loyalty program to move into offering banking and financial services:

With information derived from its loyalty card and enriched by appended external demographic data, they can readily develop profiles of customers who would most likely be interested in basic banking services, as well as an array of related options, ranging from car loans and pension savings programs, to insurance for all types of needs—car, home, travel and even pets. It costs Tesco significantly less than half of what it costs a bank to acquire a financial services customer. Without a doubt, having detailed customer information gives them a competitive edge.

A few years ago, Tesco parlayed its offline customer data to also become the world’s largest online grocery and sundries home delivery service. Additionally, Tesco uses its customer data to target and segment communications to the millions of its loyalty program members by almost infinite demographic, purchase and lifestyle profiles. In his book, Brian notes that Tesco can create up to 150,000 variations of its promotion and reward statement mailings each quarter. These variations, as he says, ” … are both apparent and subtle, ranging from the product offer (i.e., which customers receive which offers at what price) to the content of the letter and the way it is personalized.”

Tesco is absolutely a company that knows how to leverage customer information. Its customer database contains not just demographic and lifestyle data, food spending in stores and on home delivery, but also specifics about its customers’ interest in, and use of, a diverse range of non-food products and services. As Bill Gates’ statement suggests, incisive and leveraged customer data has enabled Tesco to put distance between itself and its competitors, in both traditional and non-traditional retail markets.

An understanding of the real value and impact of customer information, and a disciplined plan for sharing and using the data to make a company more customer-centric, is needed more than ever. A good analogy, or model, for CEM and loyalty program effectiveness or ineffectiveness in building desired customer behavior, may be what can be termed the “car-fuel relationship.” A car, no matter how attractive, powerful and technically sophisticated, can’t go anywhere without fuel.

Not only that, to reach a desired destination, the car must have the right fuel for its engine, and in the right quantity. For customers, the car is CRM and its key data-related systems components (data gathering, integration, warehousing, mining and application).

The destination is optimized customer lifetime value and profitability. The fuel is the proper octane and amount of customer data.

Leading-edge companies are focusing on customer lifetime value as a destination. They are collecting the right data and using the right skills, processes, tools and customer information management technologies to make sure that key customer insights are available wherever they are needed, in all parts of the enterprise. Jeremy Braune, formerly head of customer experience at a leading U.K. consulting organization, 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.”

I completely agree. It’s (almost) all about the data.

No More Menial Jobs and 2 Other Steps to Customer Experience Transformation

As a marketing consultant, I read great articles about Customer Relationship Management (CRM) every day on the job. Most of them focus on the sales and marketing aspects of CRM … what strategies to employ, tools to use, messages to send out and so on. But let’s not forget that world-class CRM programs also include awesome customer service, essentially creating a Total Customer Experience that fosters long-term, profitable relationships with customers.

As a marketing consultant, I read great articles about Customer Relationship Management (CRM) every day on the job. Most of them focus on the sales and marketing aspects of CRM … what strategies to employ, tools to use, messages to send out and so on. But let’s not forget that world-class CRM programs also include awesome customer service, essentially creating a Total Customer Experience that fosters long-term, profitable relationships with customers.

For many companies, however, the customer service element in CRM is often an afterthought. Banished to a windowless office in the bowels of the company, customer service teams are quite literally out of sight, out of mind. Much of the time, this function is even outsourced entirely. But I have a sneaking suspicion things are going to change big time in coming years, and here’s why.

It’s no secret that companies are now dealing with super-informed, savvy and influential end-users who leverage Social Media and the vast research resources of Web 2.0 to make their purchase decisions. Let’s call this new end-user ‘Customer 2.0.’ In this new paradigm, the balance of power is shifting away from the sales and marketing teams, as firms are discovering that Customer 2.0s are by and large unresponsive to traditional sales and marketing tactics.

This means that customer service is, quite literally, becoming the first and only line of defense. If customer service is poor, it follows that the overall Customer Experience should be lousy, too. Given these facts, it shouldn’t be too controversial to suggest that in the business world of tomorrow, excellent customer service will not only the hallmark of a successful firm, but a Key Performance Indicator (KPI) by which success is measured.

Providing top-notch customer service necessitates transforming the way a firm does business and engages with its clients—aligning it to a model where customer service plays a central role in the firm’s operations. Welcome to the world of Customer Experience Transformation.

For customer service, I define Customer Experience Transformation in three broad swathes:

1. PersonnelIt’s time to view customer service as a profit center, not a cost center.

Say goodbye to the days in which customer service is viewed as a cost center, staffed with bottom-of-the barrel employees who can easily be replaced. To the contrary, customer-focused firms hire smart, savvy and highly motivated customer service representatives, knowing full well that these valuable employees are the firm’s principal ambassadors to the outside world.

I recently read an excellent article in Ad Age titled “Are You Ready for a World Without Menial Jobs?” The crux of the article is that instead of cutting costs, the world’s most successful retailers are actually investing heavily and spending for more than their rivals when it comes to recruiting, training and retaining customer service staff. Turns out, this steep up-front investment ends up paying off in spades down the road, in the form of higher sales and increased profitability.

2. SystemsWorld-class service needs world-class infrastructure supporting it.

Truth be told, customer support is only as good as the systems a firm has in place to support its operations. In the world of Customer 2.0, a Web presence acts as a primary point of engagement with customers. In that vein, it’s crucial to provide customers a Web presence that is not only clean, clutter-free and easy-to-navigate, but also—especially when it comes to providing personal or account info—personalized and secure. Furthermore, a website must be also optimized for ALL major Web browsers and operating systems, including—and especially—mobile.

In the age of Social Media, no firm that’s serious about providing customer service can avoid having a social media strategy. Without getting into a nuanced approach required for firm-wide Social Media engagement, as regards customer service, Social Media can and should be used to listen to, engage with and monitor a company’s customer base. There are some great SCRM (SocialCRM) and Social Media monitoring tools out there. Supported by savvy staff, they can be used to ensure customers are being engaged with quickly and effectively.

Internally facing, there are myriad important questions to ask, as well. Where are customer data stored, and how often is this database updated? How often are these data being synced with information from outlying systems, including IVRs, marketing tools, etc? What CRM solution is being used, and are best-practices being followed? If not, good luck tracking KPIs.

3. DNAChange the way you act, and you’ll change the way you’re perceived.

In many ways, corporate DNA is the most important element in Customer Experience Transformation. Corporate DNA is synonymous with corporate culture, which permeates the way in which an organization engages with its customers. For many companies—especially those in legacy industries—becoming customer-focused requires a major pivot.

To illustrate this point, let’s focus on the healthcare industry. Because in the US, health insurance is almost always procured by the employer, the primary point of engagement with end-users is usually when they call up to see why claims haven’t been paid. Now if you’ve never had healthcare in the US, you know this is most definitely not a pleasant experience. No wonder people don’t care for healthcare companies, in general.

Now, of course, denying and approving claims is far from the only thing that healthcare companies do. But, as a customer, you’d never know it. What this implies is an industry ripe for transformation.

If a healthcare company wants to be regarded as a healthcare company—as opposed to a health insurance company—then why not start by acting like one? Better yet, act like a health partner, providing customers with practical healthy lifestyle tips and ideas that will improve their health and, presumably, lead to fewer claims down the road.

Better yet, find out more about customers and send out highly personalized healthcare information they can use in their daily lives. Or, taking it a step farther, how about using that information to create fun contests and social media engagements customers can participate in, ‘gamifying’ the user experience.

In this model, although the business model has not changed, the overall customer experience has been transformed, resulting in a more positive brand perception, higher lifetime value and, of course, increased profitability.

Is your organization creating an awesome customer experience? If you have any questions or feedback, please let me know in your comments.

Thanks,

—Rio