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The concept of loyalty is a very profound human emotion like love and trust. Loyalty is an outcome of shared values and experiences, forged with time. It’s not a fling, its about integrity, trust and dedication. Loyalty truly is the holy grail of brand relationship even in the interactive digital marketplace. When we think about loyalty between people, we know that it takes a long time to develop such deep feeling of trust. The same aspect of time certainly applies to brands too. Brands are concepts you can see, feel and experience, even have a dialogue with via customer interfaces and people representing the brand in question.
Well, think hard and consider which brands, products or services are you loyal to? I would imagine there are some. Then think, which brands show genuine interest in you, making your life easier, helping you, respecting your wishes, sharing your values, trusting you completely. Can you think of any?
Companies are quite good at “doing things right”, professionally and operationally delivering what is expected from them. The superb quality of certain product does create trust and loyalty as such due to rational and emotional consideration. This is especially true when your life could depend on that product. On the other hand companies are not that good at “doing the right thing”. Doing the right thing has to do with a context of engagement, feeling of fairness and trust. If your phone breaks a day after the guarantee closes, what does the company do? In case you have bad luck and you fall behind you payments for some period of time, what does the company do then? If the company has a choice between 10% higher profit margin and environmental or societal benefit, which will they choose? There is a lot of data that shows, how profitable “doing the right thing” actually is in case of reclamation. When you do the right thing, listen to your customer, pay attention and do your very best to make things right, the customers reward such deed with their wallets and hearts.
So, my advice for brands is coming straight out of the Bible, Matthew 7:12, The Golden rule: “Do to others whatever you would like them to do to you.” This truth is eternal and applies to Brands on- and offline just as it does to people. Loyalty truly is a concept that takes time to evolve and it can only be earned over time.
Well, the concept of loyalty, in case of commercial operation, means that brands are measuring their brand loyalty with KPI’s like RFP analysis (recency, frequency and monetary), length of customer relationships, life-time-value, share of wallet and Net Promoter Score. All of these measures have to do with loyalty, but they could also be about something else. Not all behavior that appears to be loyal has to do with the concept above. Let’s take a look at commercial loyalty strategies:
1. Rational Loyalty
2. Emotional Loyalty
3. Habit based loyalty
4. Imprinted customers
5. Legal loyalty
6. Structural bonds
Most loyalty programs don’t deliver brand loyalty, really. That is due to the fact that people have all loyalty cards and they pick cherries from where ever they happen to find best offer at that point in time. Points based loyalty programs are often buying loyalty from customer. You get more discount when you buy more and you get offers only available for members. Loyalty can be completely rationally driven model that create a behavioral pattern for customers to buy when it’s cheap. Naturally, they don’t if you don’t have an offer for them. In the open online market its very easy make comparisons.
Most often, members also get bulk messaging in which there is nothing personal. A membership equals the license to sell. Selling is often positive. Customers consider selling as active relationship in which the company is offering new services and value for them (servicing by selling). Buying several products or services from a single company generate stronger relationship and lower attrition probability. Everything above is basically positive, better than no program. However, when customer relationship is based on rational decision, another company with more aggressive approach can do considerable damage.
Emotional loyalty has to do with the true concept of Loyalty. Brand as a whole has its foundation in customer experience, quality, integrity, service, ethics, trust, corporate responsibility and values. If the brand feels right for the customer he’s less likely to consider competitors. Also, the loved brands become part of customer’s own identity and they don’t lose customers without warning. If customers truly love your brand, they let you know if your pricing or position is having a strong challenger and they actively ask your approach to the situation. Emotional loyalty is not price driven. You can have healthy margins and customers accept it. In such a position customers also offer their helping hand and are much more open to participate in open innovation or co-creation dialogue or giving you advice how to improve your service even further.
In current business environment there’s too much of everything all the time. It’s very difficult to differentiate yourself by offering or pricing. The truly emotionally driven approach to loyalty is to consider how the company can show it’s loyalty towards customers. How do you take care of your customers? How do you make certain that the value you are delivering to your customer becomes even higher? How do you solve problems that your customers have?
Habit based loyalty
In most businesses there comes a time when customers re-consider whether to buy the same brand again or to buy something else. If the customer is involved in continuous relationship it requires active sign-off from the current relationship. If you can turn single purchases in to continuous relationships in any way, you are likely to drive much higher loyalty. That’s the best part. Once the customer is engaged in continuous relationship it requires time and effort to close it. The bigger the required effort is, the less like people are to go thru with it. Some of the best psychological themes for loyalty are laziness and minimizing points of discontinuity creating experiences like billing. One of the great ways of improving loyalty is allowing customers to have automatic payment methods directly from account or via credit card (eg. Netflix and Spotify). As a result customer does not get direct invoice for the service delivered but it’s included in credit card invoice or directly paid from account. Attrition probability drop is quite significant with such a method and the relationships could continue for as long as the credit card is valid.
When people establish behavioral patterns like reading a newspaper every morning, their likelihood of attrition is much lower. Habit based loyalty is really about keeping the status quo. Low profile and making certain that there is no need for active consideration for the customer enable very profitable type of loyalty.
I have have been completely loyal to LensOn contact lens selling online store for the past four years. This is because they send me an email enabling me to repeat purchase with only two clicks. I didn’t even remember the brand, but in case I didn’t order instantly I would go back to my email and search: “contact lenses”. This search will bring me the email I am looking for and with only two clicks I’ll order new package of contact lenses. Because my credit card information is already stored in the service, this habit is extremely easy for LensOn to maintain.
Another fantastic case of habitual loyalty is online banking. The first online bank was issued in Finland and since then the whole retail banking has changed completely. People no longer have a reason to go to the bank. They can take care of all their finances online. As an outcome people have become user interface loyal. Only in case of major need for relationship driver service, like mortgage, people would consider changing their bank relationship. Online banking is like electricity, as long as you get it when you need it, there’s no problem. If you don’t, you have a major problem. If the service keeps on going there’s nothing to question the current relationship. Online banking enabled huge cost cuts and automated service processes. Cost to serve is now marginal. Once online banking was introduced and became a habit for customers, the vast majority of customers became profitable. Banking margins and profits have grown and the profitability has increased without attrition.
Customers are not necessarily loyal to the company, but person they are in a relationship with. If customers get imprinted to their counterpart and the person stays with the company, relationships could be very strong emotionally, rationally and habitually. Trusted person can be an enormous asset for a company. The online revolution has diminished the role of person-to-person relationships in consumer businesses. The role of brands and trust in service processes has substituted the void to some extent. It’s not quite the same but works too.
The company’s customer interfaces and people servicing customers should still be trained to reach for such relationships. The brand is as good as the person representing it. Some major hairdresser chains evaluate their employees based on the fact, how many of the hairdresser’s customers book their next visit from the same hairdresser. This measure is beautifully simple and revealing. Being a great hairdresser is not just about the quality of your work, it’s very much about the whole experience. Especially women open up and discuss at the hairdresser. They could easily spend two hours with the hairdresser and spend a lot of money on the experience. It’s about being heard, appreciated and pampered along with getting your hair cut and dyed.
Legal (Contractual) Loyalty
Mobile operators in Finland suffered from very high attrition rates after number portability was enabled. Churn rates reached +30% level even though customers were very happy with their operators. This is a great case proving that customer satisfaction DOES NOT EQUAL loyalty. Customers want to have a new mobile phone every two to three years. The need to get a new handset created natural discontinuity to relationships. Mobile operators have an orientation to offer good deals for new customers and winning higher share of dynamic market. This orientation led to higher advantage for changing a company than staying with the current one. These operators had same level of perceived value and customers had rarely real preference. Most customers had only options that were equally good in general. Only differentiating factors were the brand communications and current offers.
The operators started selling customers 12 month agreements, which offered lower cost calls in the evenings or weekends. These agreements sold quite well and led to lower attrition rates. Once 3G bundles were introduced they included 24 month agreement and were sold with handset subsidies. Against your 24 months agreement you got the mobile phone at about half price. These agreements dropped attrition rates below 10%. In other words agreements offered steady relationships and predictability. As a result mobile operators profits increased and people purchased more expensive mobile phones, which enabled major increase in the use of data creating completely new mass market. Everybody won. After the 24 month agreements ended, the attrition rates increased back to 15-20%. Although the attrition rate increased, they didn’t reach previously familiar 30% rates.
Human nature is lazy and towards many product and service ranges, indifferent. In order to gain market share in a business like this brand has to actively sell and create discontinuity with sales. Electricity agreements are a great example of this. Very few people compare electricity pricing and actively change a power company unless it’s actively sold. When you get a call offering you -5-10% and the offered power is produced with water and greener than your current option, it’s easy to agree. Even better, the new company also close the previous deal so that the only thing you need to do is say ”yes” on phone. It is possible to surprise a competitor with heavy attack in a case like this. Unless the competitor has closed agreements for certain period of time, they are likely to lose a lot of customers almost over night. Who would start comparing for 5%? Very few would. Who would accept such offer when it doesn’t require any effort? Quite many will. Only thing hindering people to accept such an offer would be to tie them in the relationship with an agreement for certain period of time.
Loyalty by structural Bond
What could you sell your customer to make him dependent on you? Structural bond is an interesting approach to loyalty and how to create value in which the customer becomes dependent on.
When Polar Electro introduced their wrist top computers with heart rate monitoring they soon created online Personal Trainer in the end of 1990’s to supplement additional training advice for users beyond possibilities of the cadget in it self. Personal Trainer recorded all your training to a database and created record. It helped analyzing your training requirements and results very effectively. In the early 2000 this was a ground-breaking innovation. When all your training history was online, Polar Electro had a structural bond on you. If you wanted to change to more advance training tools, you had to buy another Polar wrist-top-computer in case you wanted to keep your training record ongoing. Currently mobile phones have same functions and you can use variety of platforms for storing your data eg. Samsung back-up, Apple iCloud or Android saving to Google account. These platforms effectively still create structural bond although some of them are now cadget independent and available to iPhone, Nokia and android. Still, Polar Electro’s Training Tool is an effective loyalty driver for everyone who has been using it for the past decade. The current rush to “internet of things” will produce massive offering of services just like Polar Electro’s training tool. As this market is only just opening, every brand should consider right now, how can they lock their customers in.
Facebook also has a strong structural bond, your friends that are already there. When everyone is already there, it becomes very difficult to leave and completely stop using it. It is also very challenging for other services to get really active users, because Facebook is a strong habit and it holds your entire social life and has become big part of yourself – part of who you are and how you represent yourself to the world.
No matter what you do, some customers will leave eventually. Still, applying effective win back strategies could diminish negative churn. One telecom company actually managed to win back 80% of already lost customers. Win back operation was probably the most profitable function the company had ever created.
Just one more advice, when you are trying to develop your company’s customer relationship excellence, you can’t just look at the customers who are happy and satisfied. Their responses will only strengthen the status quo and hinder innovation and adaptation to changing business environment. Lost customers on the other hand are a great source of insight and improvement advice. Any information that help you predict discontinuity, increase the probability of re-purchase, or shield customers from competitors influence and decrease retention clearly increase profitability.
Loyalty certainly is something worth thriving for. Just remember the Golden rule when you are making choices – even though you work in the interactive digital market place.
- Symbiosis Strategy – Creating the ultimate value proposition
- Branding = Change management and operational excellence
- Marketing’s new and re-designed 7P’s
Managing Brand – The most profound KPI’s and measures /
From marketing automation to service automation
- Managing customer interfaces
Harward Business Review just published a great article about Customer Experience and Journey. See here. The main point of the article is, that managing single touchpoint engagements doesn’t provide sufficient customer experience.
My advice is: Don’t design just touchpoints – Design chain of events, proactive and reactive. Development and measurement is often done engagement by engagement. The service design approach also highlight such emphasis. I’ve done Customer Journey mapping and methodology development since 2004 and agree with the article, only it’s lacking tools and methods how you should approach the challenge. I can help with that.
I’ve written an article series about customer journey management and you can choose and pick, which areas you are interested in or read them as a series of articles:
- Customer Journey FLOW
- How to map and study Customer Journey
- Customer Journey stage 1: Brand as a platform
- Customer Journey stage 2: Initiation
- Customer Journey stag 3: Choosing and buying – cross-channel influence
In order to really do Service and CX design for the entire customer relationship, you need to understand that there are very different journeys to begin with.
- Purchase journey (From awareness to consideration and transaction, Acquisition)
- Service journeys post purchasing (Using the product or service, value-in-use)
- Planned (e.g. Address change, regular maintenance etc.)
- Unpredictable (e.g. Product failure, reclamation, insurance coverage, etc.)
- Delivering a service as a customer journey (taking a cruise or flight, restaurant, using media, etc.)
- Retail customer journeys (e.g. IKEA store experience)
Once you have both Insight and Topsight level understanding about customer journey in full, you need to take a look inside the company. What organisation bodies are involved with customers, what kind of technical environment direct their operation and what kind of data steers their actions. The reality is, that management reporting practices represent management understanding and decisions. The systems and technical infra on the other hand define how the corporate body acts. In case you need to change the way how the corporate body in total behave, you need to define required technical changes, change management and manage change. In my experience, creating Service Blueprints has been quite effective tool for both challenge recognition at current status mapping and Customer Experience planning.
The potential is absolutely amazing. The customer’s expectations are constantly growing harder to fulfill and companies that are agile enough to cure “Corporate Autism” and take the steps required to move from “inconsideration marketing” and mass mailings to service automation, Customer Experience and Journey design at total relationship level, can win marketshare and increase profits considerably. The business-as-usual approach is no longer sufficient, you need to free the full potential an organisation can offer and tear down silos in order to take advantage of synergies available.
In the big picture, your company must act professionally and fulfill minimum requirement perfectly. Failing these requirements cause criticism and decrease your NPS results. Acting human, being considerate, thoughtful and proactive on the other hand increase the number of people willing to recommend you and increase you NPS score. Succeeding in both cumulate earned trust, which is the foundation for long-lasting and profitable customer relationships and strong brand.
In case you do well, the process will enable you to design lean processes and define the best possible value your business processes can possibly deliver. In my opinion this is the Future for CMO’s position inside the company. It’s not the job for CMO’s to define business process management, but it’s the CMO’s responsibility to make certain that everything the company does, delivers maximum customer value and experience across all customer interfaces
In case you can capture customer contacts, you can start servicing and inspiring customers individually and simultaneously your capacity to influence increases. The bigger share of the customers buying in a certain category you have in your database, the more effective means you have to influence their behavior and market dynamics. The ultimate goal is to synchronize customer portfolio with product and service portfolio across all touchpoints and marketing interfaces.
In my experience the only way to do successful customer journey and experience design and create sustainable management model for it is to do the work upside-down. You start from the actual interfaces, motives, contexts and people. From there you continue inside the company culture, practices and technology and design the strategy level after you understand everything else. Like this:
The Holy Grail of customer value is Symbiosis. Check Symbiosis Strategy – creating the ultimate value -article here.
This is a video by McKinsey Chief Marketing & Sales Officer Forum on Sep 12, 2013, It’s All About the Customer Journey
Author: Toni Keskinen, Marketing Architect & Customer Journey Designer, Toinen PHD
Join The Future CMO Movement LinkedIn Group here
This time this article is more about a question, than an answer. We do need to change but to what? Earlier on I wrote an article about how the creative work and marketing planning will transform in to something new. As we do know the brand’s own customer interfaces are becoming more and more important as a media and amazing tools for continuous relationships and engagement. Customer interface management is becoming do or die for CMOs. Understanding Customer Journey and the dynamics around it are becoming the new black in planning process. Altogether the priorities are rapidly changing as well as the the organization and world around CMO. Forbes just published an article about “The end of Expert – Why no one in marketing knows what they are doing?”
“It’s a stark verdict from a prominent source. “There are hundreds of thousands of people who were trained and mentored, and studied classical marketing, and they got good at it,” says Clark Kokich, chairman of digital agency Razorfish. Unfortunately, the world has changed – and that education is no longer relevant. “If your self-worth and your confidence is based on you being an expert, you’re in deep trouble, because there aren’t any experts,” says Kokich, author of Do or Die: Surviving and Thriving in a World Where the Old Ways of Marketing Aren’t Getting It Done. “Sure, there are experts in some fields. Someone may be really good in SEO or in mobile. But there aren’t any experts in making this transition”
So, how should CMO arrange his/her internal organization and how should creative work be a) created b)produced and c) measured. How should the marketing overall work flow internally and externally? What kind of partner structure would be ideal? What to in-source and outsource?
There are several task to take care of:
- Define who are your customers, what kind of behavior do you want from them and what kind of actions actually deliver such behavior?
- Define how do you reach them and how do you communicate with them
- How do you create and manage own web interface, social media interfaces, customer service, retail, sales,..
- How do you create big ideas that inspire and contribute to the corporate overall image as well as turn these inspirational ideas in to customer experiences?
- How do you measure and quantify, learn and implement continuous change?
Earlier on you had one agency for above the line creative design. These guys were the kings of the hill and everything else was less important. Then you had below the line agencies for Direct marketing, email marketing, in-store promotion, promotions in general, marketing PR, SEO and SEM agency, media agency, research agency, online agency,… Well, you had all these agencies and you had internal organization and a person to run each agency or discipline along with budget allocated for that specific purpose. eg. Direct marketing. This kind of world view has died over the past five years.
The new world is still under construction. You have now creativity in media agencies and analytics people in creative agencies. The new ways of organizing and sharing responsibility are just emerging. This is why I hope you could participate and share your best working practices and experiences for collaboration.
Author: Toni Keskinen, Marketing Architect & Customer Journey Designer
Join FutureCMO Movement LinkedIn Group here
Planning 3.0 – combining Creative, Communications, Experience and Business planning = Customer Journey Management
Admap published a writing competition results – best articles about “Planning 3.0”– How will we be planning in 2020? The winner, Nick Hirst said “We need to transcend the often polar disciplines of ‘conceptual’ (creative agency) and ‘practical’ (media agency) planning to deliver, not communications, but great brand experiences.”
I couldn’t agree more! Although mr. Nick Hirst’s and other rewarded articles were great, what really made an impression to me was the pre-words the judges wrote. They analyzed the articles they received and came to conclusion that the future of planning looks like… ‘We don’t know’, or at least, ‘we don’t agree’.
According to judges the most striking theme about the entries was not about how the entries were presented but how they represented a clear new chapter of planning, not necessarily a consistent chapter, but a new one nonetheless. This new era could be dubbed the, ‘the post-specialist era of planning’.
Planning has grown around specialists in data and analytics, user experience, information architecture, trend analysts, digital strategy search optimizers, social media and crm gurus… Until now, the dominant conversation about strategy has been about the need for these specialists, and for them to be distinct and separate from what has gone before.
Entries to this Admap Prize competition no longer championed the specialists as skill sets that deserve their unique place. Instead, they argued that they should be the very future of planning in its entirety; the planning specialism becomes the planning mainstream. According to judges, authors wrote of the data and analytics skill as simply becoming planning – all tasks of planning would become measurable and, therefore, the measurement/analytic skill would become planning. Or, the specialist skills of social media strategy would become the fundamental of brand planning, given the very social future that brands face.
According to main judge, JWT’s Guy Murphy two things will happen
1. There will be a sense of planning returning to be a more singular and holistic way of working. Certain planning tools will become the norm for all planners – just as the notion of ‘paid, earned and owned’ seems to have become standard currency for media thinking today.
2. Planning will become more influential. The assimilation of its new-found specialists skills will make it a richer, more effective and more confident force. It will make a decent fist of managing the huge and growing complexity that faces brand building and communication. This will shift the role it has been playing.
In my opinion 2020 is far far away and everything mentioned above is already happening. Planning is rapidly facing new requirements for its effectiveness and moving towards more holistic view. Actually this holistic approach is gaining momentum in general.
Last week IBM organized “Smarter business day 2012” event in Helsinki. Data analytics was an issue there too. What IBM’s director for Analytics division Juha Teljo presented that the whole analytics business is moving from application centered approach to analytics centered approach by 2020:
So, along with planning, also the whole infrastructure is becoming analytics – that is planning – centered. Once I search about this matter, I also found IBM’s view on how to create Analytics Center of Excellence inside your own organisation. The 150-page material is attached here: 5Keys to BA Program Success
The winning article by Nick Hirst agreed with this idea of holistic planning. He recognized User Experience planners as the first breed of future planners: “User experience goes way beyond Information Architechture. While the latter is a specific discipline concerned with the organisation of information to ensure its swift, intuitive navigation, User Experience considers the experince of the user as a whole: their expectations, their level of interest, their attitudes even how they feel. Concepts like surprise of disruption, or even entertainment – all proven tools for affective and effective communications – are anathema to a classical Information Architect, but entirely within the imaginative realm of the User Experience Architect.
Even now they think about both the effect of an indivicual, small experience – a piece of copy, a picture, the way a button workds – and the overall journey. Even now, some agencies are recognizsing the ‘planneriness’ of what they do, and reconceiving them as Experience Planners. But just imagine what would happen if we unleashed that kind of thinking on everything else that comms agencies do now.”
I think the future of planning will be even more amazing than expected and I do think that Nick Hirst’s dream is becoming reality. Here’s what I think:
- Planning marketing will be about planning competitive advantage, that is corporate strategy and operations. see Forbes article here
- Corporate Image will be more and more about actual experiences and shared opinions – planning will be about designing and managing customer interfaces and experience. Article here https://futurecmo.org/2012/11/10/marketing-do-or-die-managing-customer-interfaces/
- Comms and marketing to customers will become service experiences – event based automatic communications that integrate with the customer’s situation and needs in any given location or interface. Marketing automation becomes service automation along the customer’s journey. The center of gravity will be the Customer Journey understanding and design.
- Planning will become more holistic than ever – we are moving towards business design. At this point planners will become the McKinsey’s consultants of tomorrow or McKinsey’s consultant will take care of the business design on behalf of marketing planners of today. McKinsey is already moving towards customer journey and experience planning, see this article http://cmsoforum.mckinsey.com/article/winning-the-consumer-decision-journey#.UIOLl_Mukic.email I would take it even further, here’s why https://futurecmo.org/2012/10/21/customer-decision-making-journey-flow/
Companies that are taking analytics and planning seriously are already doing much better than their peers. By 2020 you really have to be great in order to survive. And let’s not forget – analytics is useless without understanding and decisions (generate corporate autism) – planning and management. I thinks this means the dawn for customer journey planning and management as the new breed of holistic planning work!
Author: Toni Keskinen, Marketing Architect & Customer Journey Designer
Join FutureCMO Movement LinkedIn Group here