Customer centric organisation: what does it mean?
Custer centricity is a core component of any digital transformation. It recognises that the customer base is one of the main assets of most companies and prescribes the development of critical processes across a company to provide a coordinated and consistent response to any interaction with the customer, be it in sales, operations or support .
This is not really specific to the digital age, as good customer service and care was already taught in the 19th century, and probably much earlier.
The increased competition and subsequent marketing costs on the one hand, the need for speed in learning and adaption on the other hand make it a crucial element for the long-term success of a company.
However, most of the time, customers are absent from the organisation design of a company. My constant experience is that companies are very likely to be structured around functions (design, production, operations, customer service, ...). Those functions are generally targeted to deliver more efficiency based on financial or operational but not customer related KPIs.
Even marketing functions are measured on the return on investment, meaning that most of the focus goes on the biggest areas of spend, when often the potential lies in the most effective longer term channels.
As a result, a customer is likely to be exposed to different teams in the company. Unless specific processes are in place to define, identify and monitor the standard of services, the experience can be inconsistent and disappointing for a customer, and result in high attribution and damaged reputation.
Customer centric processes with a strong involvement from the C-suite is what sets apart digital leaders from the competition: here again, leadership, vision and culture must take precedence over a mere technological response.
Customer retention: a compelling return on investment
There are obvious financial benefits: in a competitive world, acquiring new customers is very expensive and marketing often represents one of the highest areas of cost for a business.
There is a consensus that an incremental transaction from an existing customer is between 5 and 7 times cheaper in marketing than acquiring a new customer.
The impact on the bottom line can therefore be significant: a famous study demonstrates that a 5% increase in retention can improve the overall profit between 25% and 95%.
This financial benefit can snowball for a company with a strong retention performance, as the lower cost created by more loyal customers can be given back to the customer and result in higher retention rates.
Beyond its direct financial benefits, retention also reduces the acquisition costs in 4 different ways:
satisfied customers provide a very substantial contribution with the social proof: trusted reviews which will convince new prospects to purchase your product or service in confidence. They are proven to significantly improve conversion and accordingly bring down the cost per acquisition
loyal customers can also fuel very effective "refer a friend" campaigns where both the customer referring a new prospect and the recipient share a referring fee, generally much lower than the main digital channels
the marketing savings can be given back to the customers through lower prices or additional benefits and provide a competitive advantage
at last, subject to the appropriate marketing permissions, the customer base can help reduce the cost of acquisition or identify new prospects by creating audiences used across a variety of digital marketing channels
Improving retention is a no-brainer for any company. It relies on a few common sense principles such as improving the customer satisfaction by delivering a consistent and frictionless experience.
Customer experience and satisfaction: the customer journey
Delivering a good customer experience starts by understanding and mapping the customer journey, putting oneself in the customer's shoes.
Mapping the journey means identifying all the steps from researching the product or discovering it, all the way to managing repeat purchases and recommending your product or services to friends and network.
In practice, we separate the "purchase cycle" from the "customer lifecycle". The latter is often related to "customer relationship management or crm", and its purpose is to increase the retention and customer lifetime value by developing appropriate communication and loyalty programs.
The purchase cycle covers all the touch-points between when a customer first interacts with the company, online, over the telephone, or in-store ; and when the product or service has been used or consumed. At each stage, the purpose is to understand the questions, emotions and expectations that a customer may have in order to provide them with the best information and assistance.
At the sales stage, it is about understanding the information needed by a customer to make a decision (critical product features, price, delivery, return policy, warranty and support, ...) as well as what could hold them back.
When the sales is completed, the customer journey has to handle topics such as: confirmation, accessing the order to amend or cancel the order, track delivery etc … It is also about understanding what could go wrong and provide support and remediation: what happens if the shipping is lost, product is damaged, a customer struggles to make a product work, …
Identifying the pain points and providing an efficient way to care for the customer is a very worthwhile investment, as the acid test for a good customer service is what happens when things go wrong. If it has not been anticipated, it will almost certainly fail and damage the company reputation.
Mapping the customer journey also enables the company to identify further opportunities to sell more products to the customer (cross-sale) or to upgrade their offer to a more advanced product (upsell). The latter is particularly important for subscription models, or for products with value-added options.
Travel is a classic example of a journey providing clear milestones with simple communication opportunities once a sale has taken place:
in the pre-travel stage (between booking and the travel date), the company can
reassure the customer by providing simple instructions about going to the airport or accommodation (directions, contact number, …) as well as any useful information about passport, visas, formalities
provide engaging destination guides to keep the customer excited about their next trip
cross-sell relevant products: it could be accommodation, car-hire or transfer, excursions or experiences, insurance, ...
during travel, reassurance will be about ensuring that the different check-ins went fine and that the customer is satisfied with the trip and or accommodation. Guides and destinations services can help drive cross-sale.
post-travel, collecting feedback to improve the experience and manage online reputation is a best practice. It can also open up the next purchase by asking about aspirations for the next trip.
Customer relationship management: timely communication and recognition
Customer relationship management should be what it says on the tin: managing the relationship with customers.
It needs to be based on an understanding of where the customer is on the journey with the company:
prospect (they have expressed interest but not purchased yet), first time buyer (this is generally a critical stage where you need to move them into loyal customers), loyal customers (the more familiar with your products, the more likely they are to purchase and recommend).
Are they at risk of churning (they have not purchased or enquired for a longer time than usual)
Are they happy or dissatisfied with their recent experience
To increase retention, you should also recognise and reward your customers, especially at the critical stages of their journey, and for the most valuable customers: if a new customer gets a better deal than a long-standing customer (like in utilities or financial services) you will not send the right messages and will suffer from a higher attrition rate.
Generally the more products a customer has with you, or the longer they have been with your company, the more likely they are to purchase again, most of the time directly (i.e with a very effective cost of sale). Looking at a cohort analysis, we can build the retention rate between 1 and 2 purchases, 2 and 3 purchases... to identify the critical stages which, when improved, will have the highest impact on retention and lifetime value. We can then identify how much we want to spend to incentivise the next purchase (vouchers, value-add offers, ...) and mesure the efficiency.
Segmenting the customers is also a very effective way to understand which customers contribute disproportionally to your revenue and profit, and provide them with VIP service or special rewards.
When it comes to communication, any automatic program should be based around the following principles:
the most relevant communication will respond to a customer action (enrolling to a crm program, enquiry, booking, review, …) or event (service renewal, departure/return date, …)
the next level will be product recommendations based on their previous purchases (type of products, price range, …).The timing of these communications should be based on relevant milestones: booking anniversary for travel as customers tend to plan their holiday at the same time year over year ; cross-selling lenses for a new camera based on the best timing pattern ...
new information from the company such as product launches
valuable informative content
offers and promotions
Customer relationship management needs to be a strategic project led by the Chief Marketing Officer or Marketing Director. It will establish critical insights for the Marketing Strategy such as understanding who your key customers are, what are the critical moments and product benefits to grow sales.
Devoting a specific budget for retention and CRM, associated with clear goals in terms of customer base and contribution from repeat customers, will also be an essential tool to engage with the C-suite.