Imagine the following scenario: You walk into a popular restaurant, famished. As soon as you sit down, the waiter throws the menu at you with lightning speed and starts rattling off the descriptions of each dish at a rapid pace. You can barely understand anything due to the fast speech, so you randomly order the signature dish. After waiting for 30 minutes, your meal finally arrives, only to find that the expensive dish is not only scant but also not very tasty. With poor service quality and disappointing food, you start questioning why you chose this 'popular restaurant' in the first place…
Have you noticed? Just like how people won't revisit a restaurant with poor food, when we encounter bad service or buy a product that doesn't meet our expectations, we usually don't give that store a second chance to improve our impression. On the contrary, a positive customer experience leaves a good impression of the restaurant, making us more likely to return or even recommend it to friends and family. Therefore, providing a good customer experience is a crucial indicator of a brand's ability to effectively manage customer relationships.
First, let's define 'customer experience'. Customer experience is the sum of all interactions a customer has with a brand. This includes the feeling when visiting a physical store, the experience of browsing the brand's website, the impression when interacting with customer service, and even seeing the brand's advertisements on social media platforms like Facebook. All these interactions contribute to the overall customer experience.
So why is enhancing customer experience so important for customer management? The purpose of customer management is clear: to improve customer goodwill, trust, and loyalty towards the brand through excellent customer experiences and membership programs. This, in turn, encourages customers to return to the brand for repeat purchases, thereby increasing their lifetime value (LTV). According to research by beBit TECH's corporate consulting team, a good customer experience can result in a 50% reduction in operating costs and a 58% increase in lifetime value. Conversely, a poor customer experience can lead to a 52% loss of customers and the potential loss of 9-12 prospective customers. This highlights that improving customer experience is a necessary step for brand growth.
To improve customer experience, you first need to understand your customers' needs and identify their pain points. This allows you to address issues effectively. It's not just about seizing every opportunity to engage with customers, but also about delivering the right message at the right time to make customers feel valued by your brand. Fortunately, in this digital age, we have many marketing tools like Google Analytics (GA) and Customer Data Platforms (CDP) that help brands collect various types of customer data, enabling a deeper understanding of their customers.
However, once brands have amassed a wealth of customer data, how can they leverage it to maximize its value? Customer data can be categorized into two main types: O-Data (Operational Data) and X-Data (Experience Data). Here's a closer look:
By integrating O-Data and X-Data, brands can create comprehensive customer profiles, segment their audience accurately, deliver personalized communication, and ultimately drive customers towards completing purchases. This combined data approach helps brands enhance customer lifetime value (LTV) by fostering better customer experiences and relationships.
Through data analysis, brands can determine member tiers based on various indicators to identify high-potential customers and allocate more resources to them. This analysis also allows for more efficient resource distribution based on key metrics. Among the plethora of O-Data (Operational Data) and X-Data (Experience Data), which data dimensions can help brands better assess their customer lifetime value? Brands are advised to segment their market based on behaviors such as site visits, browsing and purchasing behavior, and order status. By analyzing these data, brands can determine which tags accurately predict customer lifetime value and thus decide the final segmentation dimensions.
For instance, if a brand has data on ‘transaction records' and ‘browsing behavior,' and it turns out that ‘browsing behavior' more accurately predicts which members are likely to convert, brands could prioritize activity reminders for the ‘recent website visitors' segment.
Once the segmentation dimensions are decided, brands can segment all members and further understand the profiles of different member segments. This includes consumption frequency, relationship with the brand, lifestyle, exercise habits, etc., utilizing data to gain a deeper understanding of each member in every segment.
The most common segmentation dimension is to tier members based on ‘spending amount,' such as designating those who spend over $10,000 annually as diamond members. Brands can then understand the profiles of their members at different tiers to decide what kinds of benefits to offer to each tier.
Once gaining a better understanding of the profiles of various member segments, brands can better grasp the actual needs of different segments and deliver personalized messages to enhance the customers' perception of the brand. For example, if we find that women aged 25-30 purchase sanitary pads every three months and usually buy both day and night pads, and occasionally adding cocoa powder to their orders, we can tailor our communication accordingly. When reaching out to these women, we can inform them about special offers on sanitary pads and also include information about cocoa powder and chocolate products. By delivering such thoughtful, personalized messages, we create a positive customer experience, encouraging continued interaction with the brand.
Single purchases are never enough. Brands can use a three-step approach inclusive of ‘segment marketing strategy,' ‘performance review,' and ‘segmentation optimization' to continuously refine their current segmentation methods. This helps to identify the most suitable segmentation dimensions for the brand and increases the likelihood of repeat purchases, ultimately boosting each customer's lifetime value.
For example, we might discover that ‘women aged 25-30' is not the best segmentation dimension. There could also be a segment of ‘men aged 35-50' who purchase sanitary pads for their daughters. By using conditions like ‘purchased sanitary pads more than twice' and ‘visits the website once every three months,' the brand can more accurately identify the audience who are likely to purchase sanitary pads, thus deliver reminders to these customers to repurchase through personalized messaging.
After the previous steps, the brand will have had identified the most suitable segmentation dimensions and corresponding marketing strategies for different segments. Beyond segment marketing, it is crucial for brands to identify their core, loyal members who are willing help the brand in spreading awareness, attracting more people to become members. This can be achieved by designing attractive referral incentives and offering additional benefits to encourage these customers to share their positive experiences. Through effective word-of-mouth, brands can attract more new customers, creating a positive feedback loop.
By the end of this article, you should be aware of how important customer experience is in a brand's customer management, as well as have better understanding towards customer experience enhancement to create more value for members. Customer management is certainly not an easy task, but brands can certainly improve customer experiences through consistent efforts, ultimately increasing their customer lifetime value.