The Future of Marketing and Customer Engagement – Introducing the Emerging and Rapidly Growing Practice of the Customer Defined Experience

Did you ever consider the following questions related to the future of marketing and customer engagement?:

• What are the levels of progression of an organization’s customer engagement and marketing capabilities – from the most basic to advanced?

• What percentage of companies fall into each customer engagement & marketing capability level?

• What is beyond the current advanced level of customer engagement and marketing capability and the wave of the future?

• How do you simultaneously and significantly reduce the overall cost of customer engagement and marketing delivery while also significantly increasing your overall customer engagement and marketing effectiveness?

• What does the future look like in terms of increased customer engagement and marketing ROI?

• What is the most effective method for creating maximized customer engagement?

If you did, then this blog is for you as it succinctly answers these questions and more.

Future Leading Practice: The Customer Defined Experience

The above chart depicts the 3 primary & existing levels of customer engagement sophistication as well as the wave of the future which is The “Customer Defined Experience”. These four (4)  levels of organizational customer engagement capability are as follows:

1) Level 1 – “Shotgun Customer Experience”, very unsophisticated, yet inexpensive. Practiced by approximately 25% of companies.

2) Level 2 – “Segmented Customer Experience”, somewhat sophisticated and moderately expensive. Practiced by a majority of companies, approximately 70%.

3) Level 3 – “1-to-1 Customer Experience”, very sophisticated & expensive, Practiced by <5% of companies.

4) Level 4 – “Customer Defined Experience  which is an emerging leading practice, only practiced by <01% of companies, but the number of companies that are moving toward this capability level is growing fast. I am predicting that this will be, by far, the most effective method in terms of both ROI and cost effectiveness.

The Customer Defined Experience Using Marketing as an Example

We will now isolate marketing as a functional example (vs. customer service, sales, etc.) to illustrate how the customer defined experience will be different than traditional marketing practices. The above chart depicts the traditional levels of marketing sophistication and the expected ROI of each level. The newest trend in marketing and customer experience is also revealed in future level called “Customer Defined Experience, Marketing”. Each level consists of the following marketing practices:

• Level 1: Primary focus on “Shotgun” marketing (approximately 25% of companies). In this approach, companies  send the same offer to as many people as possible with the hope that some of them might take the offer being put forth. With this practice, companies send the same offer to customers and prospects, regardless of their unique interests, needs, wants, history, etc.

• Level 2: Primary focus on “Segment Marketing” (approximately 70% of companies). This approach models the behavior and history of customers in order to group them into unique ‘tagged’ needs groups. They are then sent offers that appeal to that distinct segment group.

• Level 3: Primary focus on “1-to-1 marketing” (<5% of companies). This approach combines sophisticated modeling techniques and artificial intelligence to ascertain the unique needs of each customer or micro-segments (depending on the level of marketing technology sophistication, pure 1-to-1 marketing might not be able to be achieved). Companies that use this level of sophistication are few and we can point to major credit card companies, Amazon, Google as models utilizing this type of approach.

• Level 4: Future Emerging Practice “User Defined Marketing”. (<.01% of companies, but growing fast) Companies like Bank of America, Wells Fargo, Marriott and Southwest Airlines are headed in this direction with the increasing querying of their customers on preferences, needs, wants, likes, etc. The extension of this is to allow customers to define their own experience – how/when they would like to be marketed to, by which channel, which content/tone they prefer, etc. As evidenced by increasing numbers of customer insights groups, this is the trend of the future. Instead of expending all of the effort in modeling/AI/etc. to attain 1-to-1 marketing which attains a 80+% match, why not ask your customers what they want/prefer which will ensure a 100% match to their needs nearly 100% of the time? Research I have conducted has indicated that 72% of customers want a more interactive ‘relationship’ with the companies they do business with, including defining their own customer-company experience – across all of their company touch-points: sales, marketing, customer service, warranty claims, etc. More on this point later in this article.

 

Customer Defined Experience, Marketing Example

The above chart is arranged by the levels of marketing sophistication across the top with the following categories arranged on the left for each marketing level:

• Primary Marketing Focus – What marketing activity do organizations at this level of capability primarily focus their efforts?

• Marketing Proactivity, Analysis Main Focus: For each level of marketing capability, how proactive is the marketing organization and what is the major focus of their marketing analysis?

• Primary Marketing Technology Enabler: For each level of marketing capability, what are the primary technology enablers in order for them to achieve their marketing goals?

• Main Marketing Metric: For each level of marketing capability, what are the most important marketing metrics?

• Expected Marketing Approach ROI: For each level of marketing capability, what is the expected ROI and return on marketing for following this approach.

Level 1 Capability – Shotgun Marketing

Shotgun Marketing Practices

 

Let’s examine the first level of marketing capability, that being Shotgun Marketing. These organizations have the following organizational characteristics:

Primary Marketing Focus: The primary focus for these organizations is to expand their pool of those who will receive their marketing promotions so that there will be likely someone in the mix who will be interested and respond to their canned & generic offer. I heard a comment from a marketing organization I worked for whereby the general manager (overall leader) of the business actually said to me – “just widen the list and I don’t care if Mickey Mouse is on the list, as long as we have 1,000,000’s of folks to send our e-mail to.”

Marketing Proactivity, Analysis Main Focus: The main orientation and focus for organizations at this level is generally a reactive,  whereby the main focus is post campaign execution analysis and ‘seeing how we did in terms of number of responses they had to their offer(s)’.

Primary Marketing Technology Enabler: As you would expect at this level of marketing capability, technology  is generally very basic, rudimentary and inexpensive and would typically include simple and flat file (i.e. Comma Separated Value (.CSV) files) list generation using MS Access or Excel for list generation and very similar and simple spreadsheet type tools for post campaign analysis.

Main Marketing Metric: Since the focus noted above is reactive and post campaign focused, the main metric almost obsessed on by organizations at this marketing capability level is response rates (vs. true sales lead creation rates and actual conversion rates).

Bottom Line with Shotgun marketing organizations: With approach you save $$ by relying on very unsophisticated marketing personnel, processes, technology but this approach rarely produces a high marketing ROI with response rates generally in the 1-2% range due to the inherent high outbound volume. This approach also annoys customers and marketing recipients with mostly irrelevant offerings, products, services, etc., customer risking opt-outs, complaints, ignoring any/all offers by customers/prospects from the same (annoying) company, etc.

Level 2 Capability: Segment Marketing

Segment Marketing Practices

The 2nd level of marketing capability, is Segment Marketing. These organizations have the following organizational characteristics:

Primary Marketing Focus: The primary focus for these organizations is to ensure that the right marketing and sales offers are deployed against the appropriate segment group in order to ensure a marketing lift vs. shotgun marketing practices. An example of this is sending the frugal buyer segment offers for saving $$ by buying quantity of product or by sending offers for products that are discounted (i.e about to be discontinued products) vs. full price products.

Marketing Proactivity, Analysis Main Focus: The main orientation and focus for organizations at this level is generally what I call a ‘retrospective plus’ organization whereby the main focus is post campaign execution analysis and determining the quantitative results (response metrics, plus  perhaps ROI metrics) PLUS the main root cause analysis as to why the campaign yielded in these quantitative results.

Primary Marketing Technology Enabler: At this level of marketing capability, technology in use is fairly sophisticated such as using SAS for building segment models and customer deciles and tools for campaign execution like Salesforce.com and post campaign analysis tools like Adobe and Tableau.

Main Marketing Metric: Since the focus noted above is quasi-reactive and post campaign, the main metric  obsessed on by organizations is overall campaign and segment level response rates as well as ROI if the organization has built a direct response attribution model for campaigns (matching campaign responses to actual customer purchases).

Bottom Line with Segment marketing organizations: By utilizing this approach you spend more $$ by relying on somewhat sophisticated marketing personnel, processes and technology.  This  approach also produces a higher marketing ROI than basic shotgun marketing with response rates generally greater than the 3% range. This approach also ensures segments and marketing recipients within those segments are receiving mostly relevant offerings, products, services, etc. in respect to their needs, wants, preferences, etc.

Level 3 Capability: 1-to-1 Marketing

The 3rd level of marketing capability is 1-to-1 Marketing. These organizations have the following organizational characteristics:

Primary Marketing Focus: This strategy strives to ensure that the right marketing and sales offers are deployed against the appropriate individual customer (vs. segment groups)  in order to ensure additional marketing lift vs. segment marketing practices. An example of this is recommending a product that uniquely suits and individual customer’s needs when they are your website for another reason (customer service, billing, warranty claim, etc.).

Marketing Proactivity, Analysis Main Focus: The label is place on organizations at this capability level is generally what I call a ‘proactive predictive’ organization whereby they are recommending items to customers in real-time based on their specific needs profile. The analysis focus of this type of organization is real-time algorithmic learning by analyzing the effect of the real-time offers and then adapting algorithms to further refine the offer (e.g. slightly different product, slightly different price, better warranty coverage, etc.)

Primary Marketing Technology Enabler:  The technology in use for 1-to-1 marketing is very sophisticated and correspondingly expensive.  The goal is to use artificial intelligence for building individual customer profiles based on observed customer behavior.  Automated response engines are then used for real-time customer interactions and offer generation as well as ‘adaptive learning’ algorithms based on offer acceptance/rejection.

Main Marketing Metric: Since the focus noted in 1-to-1 marketing is proactive and real-time, the main metric is customer longitudinal behavior and associated key metrics like lifetime value, loyalty rates, etc.

Bottom Line with 1-to-1 marketing organizations: With this approach you spend a great deal more $$ up-front by relying on very sophisticated artificial intelligence with automated customer analytics and offer engine technology.  This approach does produce a much higher marketing ROI than segment marketing with response rates conservatively greater than the 8-10+% range.  This approach also ensures customers and marketing recipients are receiving extremely relevant offerings, products, services, etc. in respect to their needs, wants, preferences, etc.

Level 4 Capability: Customer Defined Marketing

Customer Defined Marketing Practices

The 4th level of marketing capability is The Customer Defined Marketing (& Experience). These organizations have the following organizational characteristics:

Primary Marketing Focus: The primary focus here is to ensure, for those customers who are willing to co-define their own experience with your company and brands, that there is an opt-in conduit whereby customers can self-define what type of marketing and customer experience they will have across all touch-points. Examples of this is allowing customers to define, through their own personalized ‘preference portals’, customer experience parameters such as the following:

1) Their tolerable periodicity of how often they want to be marketed to;

2) Selecting the channels they prefer for marketing, customer service, product recalls, etc. ;

3) Preferred time of day, week that they would like to receive marketing, communications;

4) When it is warranted to override their current opt-out settings (i.e. critical product defects notifications).

5) The specific types of content customers are interested in subscribing to;

6) The types of offers customers would like to receive – closeouts, higher end products, types of products/services, etc.;

7) …Many more customer defined parameters.

By enabling these customer-defined preferences above, you are approaching 100% in terms of ensuring the customer receives the right offer, by the right channel, at the right time, etc.

Marketing Proactivity, Analysis Main Focus: The main orientation and focus for organizations at this level of (future) capability is generally what I call a ‘proactive, holistic, continuous’ organization whereby the company is continuously seeking to deliver the desired customer experience with the goal from each customer is rating the company as being rated as extremely open, engaging, encouraging proactive listening, is a good and reliable brand partner, drives high levels of customer satisfaction, etc.

Primary Marketing Technology Enablers: With this level of marketing capability, the technology is not as sophisticated (or expensive) as in 1-to-1 marketing, but requires a paradigm shift back to aligning with the basic premise that the customer is always right and enabling customers to self-define their preferred marketing and overall customer experience through preference portals (enabling the self-defined experience) and through business process rule workflow engines like Pega Systems to deliver the customer defined experience.

Main Marketing Metric: Since the organizational orientation as noted above is proactive and continuous, the main metric almost obsessed on by organizations at this marketing capability level will be ongoing levels of customer engagement, satisfaction and loyalty.

Bottom Line with Customer Defined Marketing (& Experience) organizations: With this approach you spend less $$ by relying on sophisticated marketing personnel, processes, and technology.  The strategy  is expected to produce a much higher marketing ROI than all other marketing capability levels by enabling the customer defined experience and inherently having 100% accuracy rate (customer defined needs/preference = delivered customer marketing/experience).  This approach also ensures customers and marketing recipients are receiving TOTALLY (self-defined)  relevant and preferred offerings, products, services, and communications.

In implementing this solution, companies will have to take into account the following considerations:

1) Not all customers will want to opt into defining their own experience. By using lucrative opt-in incentives companies have been able to achieve nearly 70% participation rates by customers. The remaining customers can be managed by simultaneously utilizing any of the two previous capability levels of segment marketing and/or 1-to-1 side-by-side with customer defined marketing.

2) Delivering a unique customer experience, once defined, will be difficult. By utilizing automated work-flow and business rules engines in conjunction with marketing automation and service automation tools, pathways (e.g. customer use cases) can be set up to automatically deliver the desired customer experience for sets of customers with the same defined preferences.

3) The customer really doesn’t know what they want. I constantly hear  from business leaders and CxOs that the customer doesn’t really know what they want/need so why waste the time and expense to ask them. These are the same executives who are shocked when I provide customer insights or focus group feedback that consistently and totally contradicts their own perception of how the customer perceives their company and brand(s). I applaud the business leader brave enough to ask for these insights since the majority of business leader tout their great pulse on their customer base to internal stakeholders without ever validating these claims with actual customers. In addition, customers today are extremely savvy, sophisticated and aware and want to be in control of their own company/brand experience.

4) Customer won’t really spend the time to tell us what they need/want. A customer insights group I helped developed has 5,000 current members who are required to volunteer several hours a week providing a Tier 1 US bank with feedback on different pre-market launch products, services and approaches. There are another several thousand on a waiting list waiting to join this insights group to volunteer several hours a week to provide company/brand insights. Additionally, the loyalty level of this insights group toward the bank is 57% higher than non-members with members providing verbatim feedback on their participation in the insights group as follows:

1) “Finally a bank that listens to its customers”

2) “We consider bank {xyz} to be a great brand partner”

3) “{xyz} bank totally breaks the paradigm of most ivory tower banks just throwing products at you to buy, they actually care about our opinions and listen to us”

4) “They actually give us feedback on how our suggestions are shaping their future products and services – WOW!”

Therefore, the bottom line is that customers today are very eager to become a brand-partner provided you ask them, allow their direct company-brand participation.

Expected Marketing ROI Per Capability Level

The above graphic points to the fact that, with every increase in marketing sophistication and accuracy in providing your customers and prospects what they need/prefer, the increase in ROI also rises dramatically. The holy grail of this is the practice of Customer Defined Marketing and the abandonment of the expense and exercise of hypothesis building and refinement (iteratively guessing at what your customers want/need) and simply providing a conduit in order that your customers tell you precisely what they want/need/prefer. My research has shown that over 70% of a typical sophisticated customer base is more than willing to tell you what they want/need from your company.

Join the ranks of market leader like Wells Fargo, Marriott, Southwest Airlines, Ritz-Carlton, Bank of America and many more joining the customer defined experience future who query their customers on their wants, needs, preferences, likes/dislikes, etc.

Therefore, instead of your company spending a great deal of $$ on ever more sophisticated hypothesis building (intelligent guessing) what your customers want and prefer, just simply ask them and join the ranks of these market leaders that are participating in the emerging practice of the future – the customer defined experience.

Blow Away Your Competition by Replacing Your Old CRM Program with the New Customer Relevant Relationship Management (CRRM) Model – Part 2: The Necessary Components.

1) Introduction:

In my previous blog, I covered what the new Customer Relevant Relationship Model (CRRM) is and the benefits of adopting this new model. In this blog, I will cover the components of the new CRRM model and what you need to put in place to make this new model a reality.

Ever wonder why companies like ESPN, Apple, Google, Zynga, Amazon, and Marriott dominate their respective markets? The reason is that they are ‘Customer First’ organizations and are passionate about listening to, understanding and then delighting their customers based on leveraging true customer insights. They treat their customers as business partners vs. commodities and include them in many critical decision making processes. They get this new CRRM model. Why/how ? – Read the rest of this blog to find out…

The differences between the old CRM model and how these companies are embracing the newer CRRM model are depicted in the following chart:

The Old CRM Model vs. New CRRM Model – Customers as Business Partners

2) Customers are fed up with old Dictatorial Management Style & Want to be Empowered as Business Partners

Customers and stakeholders today are longing for a company to partner with them and include them in the corporate decision making process.  These same constituencies are sick and tired of political, corporate, and other organizations making unilateral decisions for them that are really not in-line with their needs,  wants, etc. The backlash from this unwanted dictatorial management style of some companies can be seen in the Bank of America fee customer rebellion, the customer backlash from Netflix deciding to  split their company without first consulting with their customers and HPs initial decision to exit the computer market.

3) Components of the New CRRM Model:

In order to progress your organization from the old CRM model to the new CRRM  model, a few key essentials must be put in place and are as follows:

A. New CRRM Model that includes the 360° Cultivation of Customer & Market Insights.  This model enables a 360° view of all customer and market insights including customer feedback, preferences, likes, dislikes, social sentiment, competitor activity, etc. This new model takes your insights to an entirely new level whereby you are now enabled to delight customers, stakeholders and stockholders by having insights that are light-years ahead of insights provided by a traditional CRM model.

B. Customer First Culture driven by management that is passionate about their customers including a set of customer first principles and guidelines developed by company leaders

C. Customer Ratings & Feedback Structure that will identify areas where you will collect customer 360° feedback from customer and stakeholder interactions

D. Customer Feedback & Preferences Cultivation Process and corresponding infrastructure in order to allow your customers to continually rate how well you are serving them

E. Customer Health Scorecard that provides real-time insights on how well the customers, stakeholders and stockholders perceives you as serving them as well as insights into a Continuous Customer Improvement Process (CCIP) that enables you to continually improve your customer perceptions, satisfaction, brand loyalty, etc.

These components can apply to large enterprises as well as Small to Medium Businesses (SMBs).

The following graphics are all sample components from the list above (A-D) that need to be put in place to enable this new CRRM Model.

New CRRM Model – 360° Cultivation of Customer & Market Insights

 3A) The above chart “New CRRM Model – 360 Cultivation of Customer & Market Insights” demonstrates the new insights model that must be put in place to deliver world-class stakeholder and customer programs.

These enhanced insights will enable you to deliver products and services that delight your customers, stakeholders and stockholders as well as enable you to leapfrog the competition in terms of market share if they continue to rely on their antiquated CRM data and analytics insights only model. 

For Small to Medium sized Businesses (SMBs), some of the insights do not apply, but the following charts (3B-3E) most certainly apply and can be tracked via simple Microsoft Excel spreadsheets.

CRRM Customer First Policies & Organizational Principles

3B) The above chart “CRRM Organizational Guiding Principles” demonstrates the principles that must be in-place to be customer first culture. This culture is driven by management that is passionate about their customers and governs the company around a set of customer first policies.

Sample Enterprise CRRM Customer Rating & Feedback Structure

3C) The above chart “Enterprise CRRM Customer Rating & Feedback Structure” illustrates a sample structure (will vary for each type of business) whereby customer feedback and preferences will be cultivated in order to develop 360° insights into customer needs, wants, likes, etc.

Enterprise CRRM Customer Feedback & Preferences Cultivation Process

3D) The above chart “CRRM Customer Ratings & Feedback Cultivation Process” illustrates a how customer feedback and preferences will be cultivated in order to develop 360° insights into customer needs, wants, likes, etc.

Sample Enterprise CRRM Customer Scorecard Ratings Visualization

3E) The above chart “Enterprise CRRM Customer Scorecard Ratings Visualization” illustrates a how customer feedback and preferences ratings will be visually represented in a scorecard. 

Sample Enterprise CRRM Customer Scorecard Metrics

3E-2) The above chart “Enterprise CRRM Customer Scorecard” illustrates a how customer feedback and preferences ratings will be rolled up into an analytical scorecard that provides insights into customer trends,  customer feedback, customer issues, core customer strengths and weaknesses, etc. 

This scorecard can also be used to manage a Continuous Customer Improvement Process (CCIP) that continually drives improvements to customer perceptions, ratings, satisfaction, etc. 

Sample Scorecard for “Shopping Experience”

The above depicts how analytics and metrics would be maintained for a business who had a retail or wholesale shopping function.

Sample Shopping Experience Scorecard – #2

Robust Scorecard Analytics and Metrics should support Customer Trend Identification and Root Cause Analysis for Customer Issues.

Sample Branding & Public Relations Scorecard

Sample Public Relations Scorecard Above gives you insights into how well your company and brands are perceived by customers, stakeholders, stockholders, etc.

Sample Customer Service Scorecard

Sample Customer Scorecard Above from Customer Service tells how well you are serving your customers.

Sample Marketing Scorecard

Sample Marketing Scorecard Above Gives you insights into how well your Marketing Efforts are resonating with your customers.

Sample Product Management Scorecard

The Sample Product Management Scorecard above gives you insights into how well perceived your products and services are with customers and prospects.

4) Company & Customer Benefits of Adopting the CRRM Model:

By treating customers as business partners (vs. commodities) and including them in the corporate decision making process, as well as allowing them to rate how well you are serving them from an array of customer facing areas, companies can reap huge rewards including the following:

1. Better insights into the types of products and services customers want & need

2. Fiercely loyal customers who feel part of the corporate team

3. Customers who are most likely to spend more, be retained longer and purchase at premium prices with higher profit margins

4. Customers who are very likely to be brand advocates and refer others to your company, brands, and services.

5. Customers who feel connected to the company and empowered to improve company operations

The following are actual customer comments from those who have participated in a customer feedback program to help shape products & services:

“I feel like xyz company cares about me since they ask my opinion”

“Finally a company that listens to us”

“It is so refreshing to have a company ask you your opinions on products and services vs. ramming something down our throats that we don’t like”

“Wow – this is fun. I enjoy providing my opinion”

“As silly as this might sound, xyz company is the only company that ever asked me what I wanted”

“In my opinion, xyz company is much more progressive than their competitors by seeking consumer opinions, what matters to them, etc.

 5) Conclusion:

More dynamic companies like Goodle, Zynga, Amazon, etc. are inviting customers to become part of the corporate decision making process and empowering them to provide feedback, insights and rate company operations in order to drive continous customer improvements. Companies who adopt this new CRRM model whereby company management is democratized by including stakeholders and customers into the decision making process will reap the rewards of ever higher customer acquisition, retention and spend – leading to ever higher profits and share price.