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As you like it: acting on loyalty drivers

5th Mar 2007
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Drawing of William Shakespeare

By Louise Druce, staff writer

We all know the consequences of bad customer service but just because you haven’t had any complaints for a while, never presume your customers won’t jump ship if the right incentives come along – especially now it’s easier to log on and check out the competition. In fact, market research has consistently shown that up to 80 percent of lost business is still attributable to people who had ticked a 'satisfied' box in a company survey just before taking their custom elsewhere. Consequently, firms are now acting on customer intelligence data to improve their chances of capturing customer hearts.

Even the Royal Shakespeare Company (RSC), which has been trading on its prestigious name for over 100 years, recognised that its reputation was no longer enough to guarantee continued strong sales at the box office. It might seem like much ado about nothing, but the only source of information on its audience was a simple ticketing database. As Kate Hornton, commercial director of the RSC, explains: “In an increasingly competitive leisure and entertainment market, we need to know more about how best to engage with audiences.”

The RSC decided the best choice would be to bring its technology capabilities firmly into the 21st century by using customer intelligence. In collaboration with Accenture and its own software vendor alliances, data mining and analysis tools were used to comb through four years worth of ticket buying information to identify specific audience segments and patterns of attendance behaviour. Only four out of eight different audience segments that emerged revealed significant return visits, becoming the marketing priority as other demographics were factored in, such as visitors’ incomes, professions and lifestyles.

This breakdown formed the basis for a series of targeted test mailings that had results as dramatic as the RSC’s productions, with the number of families turning out to watch almost tripling on the previous year. The company has also installed a desktop version of the audience database to continuously analyse audience data, tailor future productions around its priority audiences and revise marketing strategy scenarios on its own.

The idea behind customer intelligence certainly isn’t new. Marketers soon cottoned on to the fact that by lumping together customers with similar spending patterns they can better target each group according to their needs. But now they want to know who they are and what makes them tick. The easiest way to break this down is by using three basic steps: segmentation, drivers and impacts. The technology simply makes the act of gathering and analysing all the information garnered less gruelling.

Segmentation uses customer profiling to divide people into different categories. This might look at how often they buy a product; what determines these spending patterns; how much value it brings to the company and how often they enquire about new products. This can also be crossed-referenced with other demographics for more complex profiling – in the RSC’s case, customer incomes, professions and lifestyles.

Customer churn and satisfaction

The next step is to determine and define a handful of key customer loyalty drivers for each segment. For example, a survey of vehicle manufacturers and dealers by Capgemini revealed that close to 40 percent of consumers said they expect a dealer or manufacturer to respond to a request for a quote via e-mail or the web within four hours or they’ll look elsewhere. Other drivers might be special discounts or extra perks for customers who have already clocked some staying distance with the company, clear pricing information or interactive web pages.

Finally, companies need to think about how they’re going to get their marketing strategy across for maximum impact using all the information they have gathered – do customers prefer phone calls or vouchers? How frequently do they prefer to be contacted? Are there certain periods in the month or year when they are more likely to want to buy products? Are they likely to take advantage of incentive schemes such as rewards from introducing friends or family to the company’s products?

In the telecoms sector, Penny Simmonds, head of enterprise retention at Vodafone UK, believes the most important factors that determine loyalty are service and value for money. “The importance of customer service obviously varies at the different ends of the market,” she says. “For example, our largest customers have thousands of mobile and fixed telecoms users and they may need to interact with us on a daily basis. At the smaller end, a self-employed plumber relies just as much on his mobile but may only need to talk to us a few times a year.”

“Value for money is a little nebulous and means different things to different customers. We deliver value through the robustness of our network, the quality of our service and the value of our price plans, products and services.”

The key performance indicators Vodafone uses to measure loyalty are churn and customer satisfaction. Churn is a factor of the number of disconnections as a percentage of the customer base, and satisfaction is measured through a ‘Customer Delight Index’, which measures customer perception of the key drivers such as price plans, service, account management and so on. Simmonds says the company is also investigating customer advocacy and product holding as additional measures.

The products and services themselves are also loyalty-focused. For example, a tariff check tool has been built in to analyse customer usage to establish the best price plan that fits the customer’s profile. Other models have been built in to identify less loyal customers to try to increase their tenure either through service-led initiatives or by cross-selling suitable products. Vodafone is also in the process of rolling out a system to support next best activity. For instance, if a customer calls the contact centre and the company identifies that they have recently used their phone abroad for the first time, it would recommend a service that would give them more benefits if they decided to use their phone in another country again.

However, Simmonds emphasises that while technology speeds up delivery and captures and interprets customer wants, needs and behaviours, it isn’t enough on its own. “Some of the biggest drivers of customer loyalty require minimal technology,” she remarks. “One of the biggest impacts we have seen has been through measuring ourselves (individually and from a business perspective) differently, ie through churn and customer satisfaction. This has collectively made us think differently about how we impact our customers every time we interact with them. It is an old chestnut but what gets measured gets done”.

Read more features, practical case studies and white papers about customer loyalty and how to improve your customer value proposition.

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