Today, nearly every brand you come across says it’s focused on customers. Whether the company calls it customer-first, customer-centric, consumer-focused, or market-driven, the idea revolves around placing an organization-wide emphasis on delivering to the specific expectations of customers with an eye on providing an exceptional experience in order to retain them, delight them and eventually earn trust and loyalty.
However, while there is no shortage of brands saying they embrace some variation of the concept of being customer-centric, the majority of businesses are not organizationally, technologically or even financially aligned with the concept, making it nearly impossible for them to actually deliver on it.
As Gartner states, the average brand generates 80% of its profits from 20% of its existing customers. This is largely attributed to more frequent purchases and larger order values by returning customers. Additionally, Bain and Company states that increasing customer retention by a mere 5% can result in an average profit increase upwards of 40% for a business.
Dissecting the Disconnect
A massive disconnect exists within most marketing departments between the mission of being a customer-centric business focused on driving retention and the corresponding structure and budget allotted to support this sort of initiative. In fact, many marketing organizations are holding onto budget structures from a bygone era, which is the equivalent of embracing an analog strategy in a digital world.
While very few question the measurable value of retaining one’s existing customers, many marketing teams continue to fall short on maximizing this. These brands have labeled themselves as customer-centric to indicate to the market that they’re focused on delivering exceptional, tailored experiences, but they fail to place the necessary resources to execute on this.
The disconnect here lies in the fact that the average marketing budget still allots upward of 80% to customer acquisition initiatives, with typically less than 20% going toward customer engagement and experience to retain those valuable existing customers. Brands are simply not investing in the resources, technology, support, or strategy to back their customer-centric mantra.
This is a major missed opportunity considering new customers typically cost five to seven times more to motivate toward a purchase than existing ones. According to Marketing Metrics, the probability of converting an existing customer is 65% on average, while the probability of converting a new customer is only 10%.
In fact, over 78% of customer on average say they now expect brands to deliver personalized engagements based on their previous interactions.
On top of this, the lack of a technology-driven strategy to understand customers on a personalized basis in order to deliver those promised tailored engagements often results in the brand relying on the traditional one-size-fits-all marketing campaigns and promotions. This generic, impersonal approach often damages the brand among savvy, cynical consumers who expect personalization and relevancy, particularly when a brand promotes itself as customer-centric.
In fact, over 78% of customer on average say they now expect brands to deliver personalized engagements based on their previous interactions, according to Marketo. However, only 16% of brands are able to deliver this level of tailored experience according to Forrester.
Setting a Sound Strategy
Taking on a customer-centric approach is largely a sound strategy when you consider the value that established, happy customers provide to a business.
While most brands view this evangelism as an organic phenomenon that occurs by happenstance, many brands are realizing that they have the ability to influence it by cultivating their MVC relationships. The key is being able to identify their MVCs in order to effectively engage them on a personalized, relevant level.
Your Most Valuable Customers (MVCs) generally don’t just have a mere affinity for your brand, but are often evangelists for your business. The value they deliver comes not only in the frequency and value of their purchases, but also in the brand affinity they convey across social channels and via word of mouth. These powerful, often-trusted interactions can generate new customers from friends, family members, colleagues, and connections based on credence.
Those brands that are adopting customer marketing technology are gaining a sustainable competitive advantage by leveraging their big cross-channel customer data.
Personalization remains a challenging frontier for marketers, but those brands that are adopting customer marketing technology are gaining a sustainable competitive advantage by leveraging their big cross-channel customer data spanning point-of-sale systems, ecommerce platforms, social accounts, mobile applications and other technologies.
Becoming a truly customer-centric organization requires both strategic execution and financial alignment. Companies first have to gain a comprehensive understanding of their customers’ actions and preferences in order to effectively engage and motivate them with personalized, automated marketing. This largely can be accomplished with technology and strategy focused on:
- Data centralization: Align and centralize data across fragmented sources, including point-of-sale systems, ecommerce platforms, mobile applications, and social accounts.
- Customer analysis: Visualize your customers through channel activity analysis, and persona, segment, and experience mapping to understand their preferences and tendencies.
- Automated engagement: Develop personalized campaigns designed for relevant engagement based on the individual customer’s preferences and actions in order to motivate action and earn trust.
- Ongoing optimization: Continuously review shifts in customer activity data, both positive and negative, to adjust engagement strategies based on frequency, messaging, product, and channel.
The key to achieving a genuine customer-centric focus for your brand lies largely in the committed financial support the organization provides to these marketing initiatives. Taking a more balanced approach between acquisition and retention marketing efforts, even from a traditional 80/20 to 50/50 budget split helps deliver the necessary technology investment to synthesize data, understand customers, and effectively engage them on personalized levels.
An increasing number of brands are realizing that the multidimensional value their Most Valuable Customers provide is too critical to ignore any longer. They realize that ignoring established customers could easily result in them abandoning their brands. This is motivating many brands to shift the balance of their marketing budgets in order to strategically execute on maximizing their Most Valuable Customers to extend their lifetime value.
For more insight and best practices on developing your customer strategy download your complimentary copy of ‘The 25 Must Haves to Supercharge Your Customer Experience.’