Customer experience design: Can segmenting by channel improve the customer journey?

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If your business is working on experience design, the solution is unlikely to be demographic, says Hugh Wilson.

The truth hurts. But while the modern customer is channel agnostic, the majority of brands are struggling to work out how to align these multiple channels into an integrated customer experience. This issue isn’t new - but it's not getting any less painful as time passes.

However, with the emergence of a new market research technique called ‘experience tracking’, we are now at least being provided with a better understanding of a customer’s complete journey. Leading the research is Professor Hugh Wilson from the Cranfield School of Management, who has been analysing how customers deal with brands, from a consumer’s point of view, and how customers deal with firms differently.
What immediately struck Wilson was that organisations need to be more aware of the difference in multichannel engagement with consumers. The majority of marketers base behavioural targeting on customer segmentation by demographics - but the explosion of online and offline channels means marketers should segment customers based on channel preferences to ensure long-term success, he says.
“Segmentation, contrary to what we were sometimes taught in institutions like mine, in practice isn't about having a single segmentation of which you drive everything,” he says. “Some marketers beat themselves up because they’re not doing that but actually there's nothing in theory or practice that suggest that's what we should be doing.
“Actually, the right segmentation depends on the purpose and for some purposes demographics might do nicely but our point is that if you're interested in experience design – if you're interested in how to combine all the different ways which firms can deal with us for the benefit of the customer in terms of their customer experience and the benefit for us in terms of maximising share of wallet and lifetime value – then the solution is unlikely to be demographic. We found that different groups of customers do behave in a very different way in how they deal with us but that’s got very little to do with socio-demographics.”
This has struck a chord with other experts.
“Demographics aren't as predictive as they were historically because as society changes people’s age and gender is probably less predictive in the way they behave,” says Nick Baggott, course director at The Chartered Institute of Marketing, and director of Navigate Consulting Ltd. “Old people don't behave like ‘old people’ anymore.”
Customer profiles
Wilson claims that when it comes to experience design, marketers need to overhaul their thinking. He explains: “If you're trying to design a product people don't have a segment for that mostly because they’re needs based segmentation and they understand what the needs are for the product and how those differ. If you're trying to design pure channels by which you sell to and serve your customers then you need a different sort of segmentation.
“You need to segment people according to their channel preferences and those preferences aren't binary, there’s no ‘Am I an online person or an offline person?’ We all combine channels in our journeys with firms so we need to understand what those common patterns of combination are. People segment not according to their preferences to individual channels but for their preferences to what we call 'channel change' - common combinations of channels.”
Wilson studied over 5,000 customers to gauge their experience of different brands across 10 channels. Six distinct profiles emerged, each categorised by a common combination of channels. ‘Lifestyle junkie’ is characterised as having a positive attitude towards brands and marketing in general, except call centres. The ‘astute alpha’ does not respond well to uninvited outbound communication, instead preferring brand contact they can control such as face-to-face conversations and online engagement.
The ‘internet investigator’ is the most avid online user, internet shopper, product researcher and user of expert recommendation sites. ‘Dedicated fans’ notice brand presence online but are only strongly engaged by sponsorship. The ‘social shopper’ shows the heaviest test message, online and direct mail engagement as well as being an active in-store shopper. And the final profile, the ‘detached introvert’ is not particularly engaged with brands so the most effective touch points are within the context of day-to-day activities.
CRM challenges
But shifting to this new approach of using the right channels to target each individual based on their affiliation with one of the six customer profiles is not without its challenges.
Baggott says: “There are a lot of off-the-shelf segmentation tools you can buy like mosaic and all those sorts of things for demographics and geographies, and I tell clients they are useful up to a point but they're just one element of the picture and you need to add in your own data as well. This work is another useful tool that you can use to build up your own model but you should always use all of the data that's available to you and all of the interactions between the customer and yourself.”
Wilson explains that firms need integrated insight into the customer’s world, which is a generic segmentation on people’s experiences and preferences rather than one that’s specific to sectors. Most firms don’t have the insight to understand people’s holistic preferences across multiple channels or a complete view of the customer journey, says Wilson.
“You can't start unless you understand the complete customer journey. The experience tracking technique is very promising; it's going to be the first of a family of related techniques that try to get individualised insight into customer experiences and preferences across the whole journey. That’s a challenge in itself - it requires rethinking marketing research departments and how they work.”
There’s also a CRM challenge associated with this. “If we expect to be able to move seamlessly from one channel to another we want to feel that we're dealing with a single personality. We want to feel that the company knows us, understands us and cares about us, and that requires passing information from one touch point to the next.
“This is well-understood in theory and many companies have been working very hard for a number of years to try and join up their operational systems to have a single customer view but our research suggests that actually expensive and difficult though it is, it's actually entirely necessary,” he says.
There are many pockets of best practice and when it comes to channel integration Wilson outlines First Direct as one business that has intelligently mixed a very simple channel offering of telephone and internet, and in a way that feels as though customer experience is the first priority.
He adds: “When it then comes to trying to craft individual conversations on top of multiple channels, we see different exemplars with different channels. I haven’t come across anyone who has cracked a really individualised multichannel conversation but clearly, Tesco, world leaders in individualising in one channel (which is outbound mail with the loyalty card) work and their envied throughout the world for that.
“There's interesting work going on in some of our telcos particularly in trying to craft individualised conversations in other inbound channels. And I’ve also been impressed with the work that Nationwide has been doing in that regard - trying to craft individualised conversations in branches as well as online and in call centres.”
Wilson concludes: “No one's perfect but the good news is we don't need to be. We just need to get better than we were and be a little better than the competition within our sector.”

About Neil Davey

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Neil Davey is the managing editor of MyCustomer. An experienced business journalist and editor, Neil has worked on a variety of newspapers, magazines and websites over the past 15 years, including Internet Works, CXO magazine and Business Management. He joined Sift Media in 2007.

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05th Apr 2012 19:58

Thank you for a great article. The perspective is spot on. One question I had for folks on this forum is whether they ever enlist the assistance of design consultancies to supplement the quantitiative demographic-based segementation with the more qualitiative approach practiced by design teams. This  people-centered, strategic approach requires  deep immersion into the customer context, revealing needs, behaviors, motivations that provide learnings and understandings that can be synthesized into actionable insights. A webinar I attended today had one of SAS's global intelligence directors discuss the ability to capture what he called "haggling data"...the unstructured data that occurs between determined data points such as price, amount, query, place etc. I suggest that this "haggling data" can best be uncovered by design strategists practiced in fostering customer empathy and transforming it into innovative business solutions! (www.continuuminnovation.com)

 

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