Using new technologies for customer service

Interactive media marketing – If you believe that the internet, WAP technology or e-mail are going to replace the traditional advertising methods you are going to be disappointed. Despite new media television and media are still ideal methods of advertising passive one to many awareness messages of mass marketing.

Instantaneous and effortless response – imagine how many more products will be ordered if it can be done through remote control or through the click of a mouse – rather than mailing in coupons or picking up a phone.

Electronic mail – the cost of direct mail has increased in cost over the years. Further the cost of processing the response can be more expensive than the cost of the mailer. This means that direct mail is cost effective for relatively high value items.

Interactive media consists of several competing technologies – The WWW is still slow for most users. The perception is that it is still not safe for credit card purchases. The ultimate digital media that wins out it the media that offers security in the mind of the consumer and quick response and delivery times. The potential for e-commerce is still incredibly strong.

How are companies striving to convert customers to new technologies

It is important for you to think of ways to use electronic media in your day to day business operations – since this will ultimately be the realized future of business.

Consider a car manufacturer has a website full of the technical details and specs of a vehicle but to actually experience a vehicle you have to visit a dealer. Just imagine if this website could tell you at the very least the address of the dealers and which have a specific model in stock. Also if you could negotiate prices with dealers online?

Imagine if you could log in with your ID to a help center and access information specific to your system. The online help center could know the configuration of your system and help you immediately.

Imagine you could log on to a clothing manufacturer’s website upload your picture and then see yourself dressed in the designer’s latest creations right on your screen.

Millions of people go to home improvement and wholesale club warehouses. These are places designed for cash and carry efficiency. But imagine if they had a virtual online store for the times that you are busy and don’t mind paying a premium for mail order delivery.

Ultimately the commercial success of interactive marketing will depend upon developing applications that actually reward the business or customer in terms of adding convenience, cost advantage, and even fun!

Identifying the right data – It is important to identify the right data if you want to provide world-class service to customers. You should be able to cover at least 95% of requests of customers using the data that has been collected. What future information might be required in extracting a unique slice of customers and prospects? The benefits include having correct customer and prospect attributes. With accurate data about customers you will be able to model correct communication for sales strategies. Following is methods that you can use to collect basic customer information and more detailed customer information.

Transactional data – No segmentation system can work if you don’t know who your customers are, how much they purchase of what and when. It is not simplistic as it sounds. Do not download all the information available at the accounts department to your database rather summarize and consolidate data to create actionable information.

Company demographics – For all your customers and prospects the following basic attributes will lay a solid foundation for customer segmentation.

• Category code – A four digit code is sufficient descriptive definition. But if your company operates in several standard industry codes then it might be necessary to use either six digit codes or eight digit codes.
• Company size – there are two choices here to go by sales value or by the number of employees as it is easier to obtain than total sales
• Site type and linkage –  it is important to understand the customer’s company so analyze it in terms of branches, research center, head quarters and division etc. After identifying the structure start linking the sites to create a corporate structure.
• Financial year – for those needing prior budgeted approval to buy your product it is important to know when the budgets are prepared and approved to that you can approach the client at the right time.

Relational demographics – the product that you are selling is linked to selected facts about the customer. For example if your are selling telephone/PABX systems it is important to note the type of computer system used, data flow, no of extensions and existing data protocols etc.

Behaviour – you should study the behaviour of clients since it gives insights to buying behaviour and how to increase sales lead conversion. Therefore on your marketing database include separate columns to track what type of behaviour the client adopts. This will make your marketing effort more effective.

Needs – as converse to the leading attributes the ability to attach needs to customers is an art rather than anything else. The following are the needs that are normally discussed.

Individual needs are important since we do not sell to companies direct but to people working in those companies. Secondly, marketers have tried to cluster companies into need based groups (for example some companies just in time delivery). While the concept is sound how do you tag a company with the correct label. It is difficult to tag companies like this for two reasons.

1.        The input is from people within the company and there are diverse opinions from among the customer company staff.

2.        Studies have shown that 69% of customers defect because no one is paying attention to them. In a competitive workplace the soon as you leave a customer unattended they are take by your competitor. So it is important not to tag companies but to treat each company as having a unique need or requirement.

Today’s successful customer relationship programs must include.

• Keeping customers informed when they are about to receive a product or service
• Helpful reminders or suggestions
• Friendly non-confrontational customer service
• Prompt attention to customer problems
• Customer service who follow up on the customer

Finding the true worth of a customer

To find out a customer true value you must first find out your share of the customer’s total lifetime of purchases in your product service category. Secondly, you must put a value on the loyalty of the customer to your brand over the life of the relationship with the customer.

The challenge is how to cope with the necessary data and how to develop the ability to capture the transaction information. Since not all businesses have the ability to capture the required data, other means of monitoring and capturing information needs to be found.

A variety of software is now available to analyze large amounts of data – these are:

1.        Data warehousing – storing of large amounts of data

2.        Data marts – summarization of data operations, sales, HR, etc)

For real time data interpretation, a variety of easy to use tools distribute data in executive friendly format to designated people in the organization. The systems used are as follows:

1.        Executive information systems

2.        Decision support systems

3.        Online analytical processing

4.        Front-end query tools

Software also exists to enhance customer service management through the creation of the hybrid system using the distributed customer information. A contemporary customer service database can provide customer histories to anyone who has contact with the customer at the time the customer needs help. Different systems are available for companies of differing size.

Share of the customer – the battle for customer loyalty is also a battle for a greater share of the customer’s purchases (also called wallet) Today’s customers who purchase consumer durables are no-longer multi-brand purchasers they should be described as multi-brand considers. Since they look at a number of brands before starting to seriously consider any one brand. This means that share of consideration is also an issue.

Every customer contact point – whether it be telephone, personal contact, mail, e-mail must be kept current and complete within the database marketing information system. The loyalty of each customer will depend strongly on this database.

The combination of customer historical transaction, service and activity information will be the foundation for developing a new potential code that will identify the potential of each customer in the database. When this code is coupled with the lifetime value, a customer service representative will know instantly which customers deserve more attention because they contribute most significantly to the company’s bottomline.

It will take a big investment of time and money to create a detailed segmentation model for customers but this will enable you to proactively identify customer requirements and through the model you will be recognize new segments with potential of more sales and profits.

However, it is important not to ignore the basic principle of making customers special. So remember that an automated answering system might not be the ideal solution for your business.

What is segmentation? – segmentation makes it possible for you to break down the customers in your market universe into any number of different combinations according to the criteria that you have chosen. Its objective is to allow you to work with each segment separately to meet unique needs.

To carry out segmentation you could adopt the following steps:

1.        define your customer universe for segmentation

2.        Identify the needs and concerns that drive their purchasing

3.        Comparing their needs and likely profit potential to their strengths identifying areas of overlay.

4.        Developing actionable segments based on clusters of similar customer needs.

5.        Validating your segmentation model and hypotheses.

6.        Assigning customers/ prospects to segments tagged with firmographic and other profilers

7.        Grading customers in each segment to project their profit potential.

8.        Defining your best most profitable and loyal customers.

9.        Targeting resources proportionately to segments with best long term profit potential.

10.     Developing marketing plan for each targeted segment via an effective media mix.

11.     Establishing measurements to track profitability by segment, against such quantifiable goals as expense to revenue ratios, repurchase and retention rates, product penetration, dollar volume and referrals.

What will the market segmentation that you carry out reveal:

1.        The net current and potential profitability of each segment after the expenses associated with acquiring and servicing these accounts.

2.        How much opportunity for further profitable development each presents and from whom.

3.        Where/ how further development of your products and services can have the greatest impact

4.        The percentage of your marketing resources that should be allotted to each.

5.        The kinds of messages and offering to which each will most likely respond.

6.        The media which will be most effective in reaching them within the segments budget.

Developing a marketing database

Marketing segmentation is an amazingly powerful way of organizing everything you know or can find out about your potentially most profitable customers. The knowledge organized and preserved in a database is the springboard for relationship management.

You should ask the key questions for relationship management:

1.        Why have these customers chosen your company as the solution provider above all others?

2.        Which of their needs have you particularly qualified and been willing to meet?

Start with what you know about the company. Also ask those who know best about the customers – the account managers, sales reps and dealers questions about your customers.

The information that you gather through these means is unique to your company. Also find out what’s available with industry research – trade journals, government publications and professional organizations are a good sources for information.

However your best source of information is the customers themselves.

• Offering inbound freephone number or helpline
• Establish user groups
• Publishing a market or segment specific customer newsletter and interviewing customers for articles
• Scheduling advertising and direct mail with a response mechanism
• Querying visitors to your trade show booth.
• Conducting surveys or focus groups.

You also need a reliable means of gathering all this information into a marketing database. Remember that a well-designed and well-implemented database is a powerhouse of corporate memory.

Mining the database – transforming data into information

There is a big difference between raw data and usable information. To create usable information you have to create recognizable patterns, specific needs and buying behaviour in the information. The information to be useful should reflect common pattern for significant group.

Creating and understanding the segments

Making each segments as different as possible from another is critical for successful segmentation. Here the computer software is useful since it provides several criteria against which you can check the data that you have gathered. This might result in some very unusual results and new segments.

After identifying the segmentation that you want to adopt – ask what characteristics does each customer have in common within each segment. This will also result in usual important features of customer needs being uncovered which you can capitalize on.

In short segmentation, allows you to define very specific needs-based market segments, into which you can divide your entire customer universe into present and potential needs.

Once you have computerized analysis of segmentation of different portfolios of customers, each grouped around a different cluster of needs; you are now ready to interpret the information regarding the different segments. There is not one right segmentation scheme depending on the program that you choose to run you may arrive at a dozen alternatives. But if your segmentation system provides key insights into the behaviour of customers then place emphasis on that type of market segmentation.

Calculating the economic value of each segment

The terms grading and segmentation are two different terms although people use them interchangeably. Grading is an important concept where the economic value of a segment or entire customer base is converted to some economic value. It temporarily discounts customer attributes and looks at historical sales data and forecast sales data – most of this information should already be available in-house.

Grading is a means of estimating the revenue currently and potentially available from a given segment, allowing you to identify which groups are not only most responsive but can also help you increase profits. This allows you to make informed decisions about how to make resource allocations.

All customers in each segments are divided into 5 grades based on the revenue generated from them over a given period. The top 5% are rated AA; the next 15% A; the next 25% B; the following 25% C and the bottom 30% D.

Determining projected lifetime value not just raw sales volume lets you fine-tune your grading system even further. To calculate lifetime value from anticipated revenue, subtract what it costs to acquire, supply, and service this customer. Next calculate the anticipated length of time you’ll retain his/her loyalty to project how much profit will bring you over the duration of the relationship.

Grading can be a significant productivity tool – not only does it allow you to direct your investments where there is the highest return it is also the basis for a better field sales strategy.

Information to Action

Segmentation only pays dividends if you can assign customers to a particular segment and you can do this only by preparing a customer profile based on buyer behaviour and demographics (psycho-graphics)

If you can compute the lifetime value of each segment you can assign resources so as to maximize returns. The important factor here is that you switch to a customer-focused approach rather than a product focused approach. New marketing initiatives can be deployed using marketing budgets that were previously spent on unprofitable business. You can assign an appropriate percentage of your marketing budget to each segment which merits pursuit.

Loyalty Schemes

There are many ways of design customer loyalty programs.

Overt or covert loyalty programs

Announcing a program to the public sets clear expectations in the mind of your customer. Customers will believe that the program is available to everyone and on an on-going basis. It is difficult to predict the effect of the loyalty program impact on customers since there is no control group – since technically everyone can participate in the loyalty program.

A covert program is communicated to a group of customers through the mail, telephone or Internet. You select the customers and you also establish a control group. In this situation it is better to avoid a club like situation as this might actually reduce sales as those outside the club defect to competitors. But you can promote special services and special offers for those who have been chosen for the program. Make sure that you communicate that the program will not continue indefinitely.

In most cases a covert approach is more suitable during the test or the evaluation period. Some industries a loyalty program to be part of the overall marketing campaign in this situation it is very difficult to judge the impact that the loyalty scheme is having on sales.

Soft benefits v. hard benefits

Few companies can afford to give out tangible or meaningful rewards. Travel companies, telecom companies and credit card companies offer hard benefits since they can and it is becoming part of the cost of entry. Many other companies cannot afford to give hard benefits although this is a good promotion technique. For soft benefits ensure that you plan well in advance what benefit that you will offer and whether it will effective to get the correct reaction from customers.

Conclusion

Segmentation helps you to understand what your customer wants, build loyalty and profits. It also helps to educate your company of different segment needs. Segmentation allows you to design and implement sales promotion campaigns in such a way to ensure maximum response. This in turn allows you to allocate limited marketing resources effectively.