Knowing customers wherever they touch your business

We have seen businesses who have been later entrants into internet and even mobile shopping losing ground as they lose customers who view such retailers as out-of-touch with their requirements. HMV was a great example where it seems their lack of investment in online in preference for diversification left a great brand anachronistic and irrelevant for its customer base and struggling for market share.
Today’s consumer wants a relationship with a brand that he or she values, trusts and wants to participate with through any channel. In return they want to be recognised as the same customer whether they engage on-line, in-store or on a mobile device.
Contact through any of these are valuable touchpoints where the relationship can be tested and data acquired, validated or augmented.
We had one client in fashion retail who were looking to stop publishing their printed catalogue since the number of orders being placed by phone or order form was declining. Analysis of how many of their best customers wished to manage the relationship across all channels was fascinating; typically they would wait eagerly for the latest catalogue and then having selected the items that attracted them they would go on-line to browse these products in more detail. Having made the decision, they would then visit their local high street branch and try the product and buy in-store. Taking away the catalogue would have had severe implications on their store sales.
The key is to recognise the customer however they present themselves to the business but ideally without the need for a loyalty card to encumber the experience as it replaces the enjoyment of shopping with a mundane device. In the work I did in the UK theme park sector in the 1990s and 2000s we shunned a ‘back-to-earth’ effect of data capture, relying alternatively on an in-context method of acquiring data which became part of the fun day out.
Once this can be achieved in retail (and I have some ideas of how to do it) the relationship can be integrated and rather than just today’s special offer being emailed or sent by SMS message, the individual can enjoy a much more tailored experience.
If any retailers would like to discuss this methodology do get in touch at mc@dmcounsel.co.uk.

Advertisements

Know your members, grow your business

Whilst reduced discretionary spend continues to increase share of wallet and restrict personal subscriptions and cost cutting means less corporate money to pay for staff memberships there is an approach that can help maintain and even increase revenue levels.

It is essential to be in a position to address your own business imperatives like pre-empting churn by knowing which members are less likely to renew their subscriptions, determining propositions to help withstand cutbacks for your products and services or perhaps strategies for reversing the slowdown in recruitment of new members. Practically all will need direction on how to improve the effectiveness of marketing activity.

The solution lies in leveraging probably one of the most valuable assets of the organisation. By maximising the use of your database you will turn it into a powerful marketing tool. What you know about your members can help drive a better understanding of how they use and value their membership, leading to more relevant communications, better management of the relationship and increased loyalty.

Your organisation will have membership data. Some organisations will have membership relationship management (MRM) systems with all data in one place, but more likely is the scenario where some may be held in central systems whilst more is held in additional departmental data repositories like standalone databases or as spreadsheets. The object is to turn all that data into information and that information into knowledge or insight.

Using your database goes far beyond just direct marketing. The key lies in bringing together everything you know or could know about your members, prospective members, customers and other constituents, their activities, actions, purchases and behaviour. A single view can reveal who is active and who is dormant, who will only ever remain a customer for publications and training, who attends events and participates in branch affairs and when and to which campaign they have responded. It can also help determine who your next contingent of advocates may be.

Along with basic identifiers like name, address, telephone number, Email address and date of birth you are likely to hold qualifying data such as gender, occupation and professional qualifications. Ideally you will also have access to details of their behaviour, such as renewal history, event attendance, training and contact history.

This will give you access to the ‘who’ did ‘what’, ‘when’ and ‘how’ that go to deliver the profile of a constituent. There is no substitute for accurate data – analysis tools can’t compensate. Meaningful results can be achieved without sophisticated modelling but with high quality, robust and reliable data; it’s the quality that will determine how much of a grey guide or ‘black & white’ specific analysis can be reached.

It is essential that you assess your data before trying to develop any analytics. Inaccurate data will skew the results. If you cannot improve on the quality in the timeframe, then at least being aware of the inaccuracies will help in the interpretation of the outcome.

Building these profiles of your constituents will enable you to determine how long someone stays loyal and what might be done to pre-empt churn. It will facilitate the application of scoring and lifetime value techniques to help build predictive models and identify the communities within your membership base for targeted marketing.

This identification of communities can be viewed as segmentation“….the division into homogenous clusters which may be identified and marketed to with a specifically targeted communication strategy”. It is potentially more costly since it requires greater levels of management yet it promotes greater effectiveness through improved relationships.

Most people see the benefit of segmentation but the question is how should you segment them? By geography, by demographics, by professional qualifications or by behaviour? I would suggest it is a combination of all of them. The other dimensions to consider are concerned with how the constituent wishes to conduct their relationship with the organisation. I call it the ‘spectrum of engagement’ which runs from the apparently active member who says ‘send me every communication, proposition and offer that there is’ at one end to the member who appears distant or dormant at the other who says ‘I know where you are when I need something; don’t bother me’. The key concept to grasp here is that your most loyal member and potential advocate could exist at either extreme and, in fact, anywhere in between.

You need to know what is happening within your constituent base. Equipped with the kind of data mentioned above you can start revealing important measures. I normally start with trying to understand what touchpoints each constituent has had with the organisation. Taking each of the services or product areas your organisation offers count how many constituents have availed themselves of the combinations on offer. Table 1 shows an example of this.

Count of current members

Bookings (courses/ events)

Attended event / delegate

Made enquiry

Took exam

Book shop sales

6381

Y

Y

Y

Y

Y

2066

Y

Y

 

Y

Y

1066

Y

Y

Y

 

Y

4061

Y

Y

Y

 

 

2989

Y

Y

Y

Y

 

2075

Y

Y

Y

 

 

1133

Y

Y

Y

 

Y

7340

 

 

Y

Y

Y

6836

Y

 

Y

 

 

1407

 

 

Y

Y

Y

606

Y

 

Y

Y

 

6375

 

 

Y

 

Y

3132

 

 

Y

Y

 

1904

 

 

Y

 

 

1068

 

 

Y

 

Y

13680

 

Y

Y

 

 

3349

 

 

Y

 

 

200

 

 

 

 

 

Table 1

This is the same concept that we have come to recognize when buying consumer products on-line; the helpful hints that tell us that people who have bought the book we are looking at have also bought these other titles, green socks and a set of gardening implements. It is known as ‘market basket analysis’ and is a totally valid model across any combination of goods or services.

Here we can see how many members have been active and which dormant. It also reveals some issues for further investigation like the 6,000+ members who took an exam without buying any course books or the 7,000+ who make bookings but never attend i.e. do they book on behalf of others?

The next most interesting insight is usually a view on churn (see Table 2). By matching the year of defection against the recruitment year trends can be identified. It appears, realistically, that churn increases the longer the membership period. However, what happened at the end of 2009 to make the number increase and carry this trend on into 2010 with 186 members not even completing their first year? This is where the penultimate data element comes in: tacit knowledge – the experiences and understanding that exists within the minds of the people who run the organisation. Using this to interpret the outcome of these analyses is the tipping point between information and true knowledge.

Years as a member

Set up Year

0

1

2

3

4

5

6

Total

2005

3

25

22

26

19

34

48

177

2006

31

52

40

35

231

51

440

2007

30

70

60

239

289

688

2008

33

85

242

461

821

2009

19

86

204

309

2010

186

219

405

2011

17

17

Number of defecting constituents

Table 2

Gaining insight into your members, customers and other contacts will help you understand who the best are, what opportunities exist, how to hold on to them and find more like them. Insight also provides the other side of the coin: who the worst are and what they are costing you in lost opportunity so that you avoid them and others like them in the future.

If you don’t have the insight into your members, how do you hope to manage the relationship?

What we have considered so far helps us understand the “Who”, “What”, “When” and “How” that were behind the members’ actions. The final data element addresses the ‘why’ factor – the additional dimension that establishes true differential between passive passenger and active member? This is the difference between reporting on the data and analysing the data, to reveal why a member remains loyal and leverages his affinity to the organisation in his working and social life.

To achieve this you must include a view of the attitudes and aspirations that drive their membership decisions. Known as adding the psychographic profile, such insight into members will:

  • Help identify and pre-empt their failure to renew membership;
  • Show opportunities for cross- selling other services and up-selling on what they buy;
  • Help you understand why specific propositions are successful with certain types of member or customer;
  • Reveal preferences, such as which types of contact will never become active members or participate at local branch level; and
  • Increase the effectiveness of prospecting.

You can achieve this through fusing the analysis of member and customer involvement derived across all of the points of contact with your organisation with targeted market research survey data to determine the true differentiators. The outcome can then be used to create communication strategies to ensure no opportunity is lost and the member is always directed towards the best next action, driving relevant, targeted communications.

Consider the scenario where information acquired through tracking response and behaviour is matched to the researched view of attitudes and aspirations to create member profiles. These can be used to determine how best to move the relationship forward or flag up potential danger signs. Does their most recent action (or inaction) indicate possible churn? Has their most recent behaviour been exceptionally different to all that that came before? Are they approaching a major milestone in their relationship with the organisation such as a threshold of membership level that requires examination or CPD audit and which has traditionally been a jump-off point for members like them?

Having insight into what motivates their behaviour can be used to generate a relevant communication or even direct that member to the right web page or telephone agent as part of a strategy to retain their membership or upgrade into a new level of membership.

Remember the ‘spectrum of engagement’. On the one hand, the active and the other the aloof or one could say there are committed members and those that participate on an adhoc basis. You need to know where each constituent is on the scale and it is the organisation’s role to determine the position and use that knowledge to drive the relationship, the regularity and content of communications and the propositions offered.

What you can determine about current members can also be applied to prospecting activities in a similar way, to help meet acquisition goals. By applying the profile knowledge to new applicants, the organisation can be better prepared for what kind of member the new applicant is likely to be.

Armed with this knowledge you can ensure your marketing strategy addresses these issues to drive the relationships.

Scoring your customers

Companies must continue communicating with their customers through a consistent strategy that is driven by customer insight. Rating current customers is not solely based on how much they spend but has as its basis the classic RFM (or RFV in the UK) model that creates a score based on recency, frequency and monetary value. My recommenation is not to stop there but to add more elements such as Returns, Complaints, number of enquiries, length of time they have been a customer and create a contact plan that reacts to the dynamics of these scores.

Often we will identify cohorts of customers that represent bad business. The solution can either be to review the business process for how you do business with them, e.g. relegating them to an ‘exclusive’ on-line relationship where the cost of managing them is reduced rather than taking up the time of a salesman or telephone agent; alternatively the bullet might have to be bitten and you resign the account.

However, building segmentations or communities of valuable, profitable customers by profile and comparing their behaviour will also drive the communication; but don’t just use it to determine when to make contact. Customer insight should also drive the ‘next best proposition’ for each customer so that the sales person can be proactive in establishing opportunity. What you know about your customers can also be used to drive new customer acquisition by comparing prospects’ profiles with your customers and determining the best proposition.

Customers rate companies with whom they deal by the quality of the communications and this means relevance, personalisation and timeliness.

Can you risk leaving travel customers to make up their own minds?

A recent survey by Directline Holidays concludes that  Word of Mouth is most trusted recommendation when it comes to booking the right trip.

Travel companies have the ability to build and nurture such tactics from within their own customer data. Considering the customer’s overall relationship with the company will assist in creating a customer journey that delivers advocates who will either perform actively or passively for the brand.

Active advocacy is where the satisfied customer will recommend the firm to their relations, friends and wider acquaintances; sometimes a reward sweetens the process. Passive advocacy is where using what you know about your best customers enables you to ‘clone’ new customers who are likely to appreciate similar destinations and levels of service and so behave in a similar manner.

All of this can achieved by collecting and maintaining the right data about customers, engaging them in a relationship and progressing them up the “loyalty staircase” to advocacy.

The survey also stated that “almost a quarter of those surveyed said they were not influenced by anything” (source: e-tid 20/8/12). Can you risk your customers being left to their own devices? Make sure they are influenced by their peers, by relevant propositions and a customer relationship that delivers real benefits.

The extended 3-letter acronym to drive retail direct sales

Analytics software is useful, but some concept of what should be analysed is also of value. Retailers will often create a RFV model, combining Recency (of last purchase), Frequency (regularity of purchase) and Value (either total spend or average order value, for example) to create a score for each customer.

We have found that adding additional elements expands the score from the 3-letter acronym to a multi-letter acronym such as RFVRCA where you add on the instances of Returns, Complaints and Abandoned on-line baskets committed by the customer.

This score then becomes a comparitor between customers, a selection criterion for campaign or proposition and changes in the individual’s score over time become a valid measure of success of the relationship.

Applying demographic, lifestyle and psychographic profiling provides an even more granular segmentation and the ability to apply the concept to prospects, with the benefit of making relevant offers to convert them to customers.

Such models can be created without investment in analytical software and can be applied in rules-based workflow and business process, with the dynamics regularly reviewed and the model(s) enhanced.