Brands such as Zappos and Amazon.com – the masters of customer experiences – are proving by example that it takes people not products to build brands.
Research shows that 83% of senior organizational leadership believes that customer experience is a crucial brand distinguisher and a key business growth indicator.
While a WOW customer experience is important, equally significant is segmentation of customers according to the value they create for your company. You have
- Long-term (loyal) customers who bring in high profits for your company
- Profitable customers but not permanent, and
- Customers whose contribution is absolutely negligent
A uniform customer service strategy for all these types of customers quite often leads to under-servicing of loyal profitable customers and over-servicing low-loyalty customers which brings in zero profit for companies.
A differentiated service that prioritizes loyal customers is crucial for the following reasons:
- Loyal customers are the ones that bring you big business. It was found in a study carried out by Joint Market Research, P&G (Proctor & Gamble) that 56% of the brand’s total revenue came from regular shoppers, who constituted just 14% of customers. Infrequent shoppers who constituted a major 86% contributed only 44% to the company. Many of these occasional shoppers rated low on loyalty too. So, your minority loyal customer base is the reason behind the majority company profits.
- New customers are profitable, but loyal customers are priceless. On the cost scale, it takes 5 times more investment for companies to acquire a new customer than in retaining an existing one. While attracting new customers is essential, you cannot go on replacing one customer base with another. And despite constant process, product, and service enhancements, every company has to face customer loss. Therefore focus should be more on engaging your loyal customer base.
- The ‘please all’ strategy is just not possible. You are as responsible to your employees and shareholders as you are to your customers. While it is essential to keep your customers happy with excellent service, you also have to show profits. While it is possible to allocate huge budgets to satisfy all your customers, such approach will soon keep you out of business.
While all customers are significant, service segmentation, in no way implies that low-value customers need to be subjected to inferior service. Different service levels need to be established without compromising quality. Low-value customers can be directed to self-service while loyal customers can be given access to service levels of their choice, including agent assistance.
Prioritization of customers should be followed by application of strategies to retain valuable customers. Capabilities-building such as technological investments, process enhancements, and engagement programs should be implemented to reward loyal customers with a WOW experience. Such strategies may involve substantial investments, but your loyal customers deserve nothing less, now, do they?
