Solving for the Customer Ecosystem

Posted by Manish Grover in

 Digital Business

Nov 8, 2011 | Total views: 151

2

Link

Manish Grover
Program Director
More articles by the author

As we move towards connecting with our customers and consumers over multiple new channels such as mobile and social media, we should keep in mind that the original challenges with customer relationships still need to be solved. The primary one is that of treating the customer as a relationship and harnessing every promotion or campaign as just one step of an overall strategy.

Social media and mobile have opened the doors to an exciting new paradigm which primarily consists of moving beyond the “fire and re-energize” marketing of the past. In that old model, every promotional campaign caused a demand spike, which attenuated over a period of time, only to be propped up again by another campaign. We mastered that type of campaign – running analytics to understand customer responses, preempting competitive promotions, devising bundling strategies, sending coupons to lure the customers in and a host of other very effective tactics. But today, we have a choice to dramatically improve upon that strategy and effectively utilize the abundance of information that customers themselves are willing to generate for us.

The Customer Interaction Index
We base our conclusions on the vital dimension that we call the Customer Interaction Index. This index measures the maturity and strength of customer perception. The higher the index, the higher the strength of your relationship with the customer is. The key factors are:

1. Price to value perception – what price premium will the customer be willing to accept for the perceived value of the product versus  products from competition
2. Inclusion in the purchase cycle –  how does your product integrate with the key factors that trigger the customer to purchase and use your product
3. Switching barriers – how easy is it for a customer to switch to another product
4. Cause of purchase – how well does the product forecast and insert itself into the causes that require consumption of the product category

Each of the above factors have different implications for different brands. For example, credit cards have an inherently high Customer Interaction Index while Consumer Packaged Goods companies have an intrinsically lower Customer Interaction Index. This means that CPG firms must find newer ways to embed themselves into the customer’s purchase cycle. They should also find innovative ways to create switching barriers. It must also be noted that different parameters on the Index have different levels to which you can influence them. The price to value perception is perhaps the most difficult one.

Marketing in the new paradigm
The emerging mobile and social media channels provide us with effective ways to improve the Customer Interaction index. It is important that we utilize the opportunity to move away from the “fire and re-energize” approach. The following four-point framework is designed to leverage the full potential of the new age:

1. Connect every new campaign to the previous one
   Do you remember how the customer responded to your last campaign or do you lose that personal information among the mass segmentation analysis of your current channels?
2. Create avenues that connect your product to the customer purchase cycle
   Are you reaching your customers when they are in the midst of their purchase cycle or after they’ve decided to buy?
3. Build a memory of transactions to increase switching barriers
   Is a customer’s decision linked to the price and the inherent perception of your quality or do they have to make larger sacrifices if they buy from a competitor?
4. Provide returns to customers that pre-empt price promotions and volume discounts

Is your promotion strategy merely training customers to look for the next discount or are they participating in a larger ecosystem enabled by their purchase?

The exact tactics for enabling the above framework will depend on the type of product and the type of interactions. The key to that will be a personal Customer Interaction Index rather than aggregated segmentation techniques. Companies, who seem apparently at a disadvantage from an interaction perspective, actually do have a rich array of options. A step in the direction of building an ecosystem will prove to be highly rewarding.

Using the emerging channels
While mobile and social media are excellent avenues for enhancing your Customer Interaction Index, new marketing strategies must be adopted. Sending coupons to customers mobiles, or making coupons available on Facebook will no doubt bring returns, but significant value will be left on the table. Creating events and inviting customers to participate in campaigns will be a step in the right direction. But the crucial next step will be to convert this engagement into business and realize an impact to the P&L. To achieve that goal, we will have to embed ourselves into the customer’s purchase cycle. For almost all products, from diapers to toothpaste, to cheese to a vacation, and even a home loan, it means creating an ecosystem that gets the target customers into the campaign and keeps them engaged with relevant tools and attractions.

Creating such an ecosystem cannot be prescriptive and varies based on the quality and other value drivers for a product. The key question to answer at every stage is: What are the events that lead to the purchase and how can we influence them? Subsequently sending a coupon when a customer is in the store is a sub-optimal option. This trains customers to expect more discounts. Instead, the right option is to influence a customer’s decision before they get to the store (or go online).