Monday evening: The phone rings. It’s a customer service rep from a food retailer I’ve bought gifts from in the past — we’ll call it “Super Gourmet.” Previous purchases have been made online or by phone. I don’t need any of its products today, so I say I’m not interested.
Thursday afternoon: I receive an e-mail newsletter from Super Gourmet. My needs haven’t changed, so I delete the message without opening it.
Saturday morning: Another rep from Super Gourmet calls. Again, I say I’m not interested. At this point I’m getting a bit irritated to be contacted three times in one week.
One week later: Super Gourmet telephones, again. I’m fed up and tell them to take me off their telemarketing list. As much as I enjoy their products, the hassle factor has reached an unacceptable level.
Two issues result from this type of situation. A customer who was satisfied with both the quality of the products and the level of service became disgruntled with Super Gourmet. I may not purchase from the company when a future need arises, and I may tell my family and friends about the bad experience.
From the perspective of this company’s marketing department, precious time and money were unwisely spent contacting me. The budget could have gone toward better targeted customers or those in a different medium, like direct mail.
So how do companies that market through multiple channels handle the complexity of managing and optimizing customer contacts? One possibility is for Super Gourmet to reduce the number and frequency of its marketing contacts. But the number of contacts is not the real issue here. This is: Super Gourmet isn’t providing the right message to the right customer at the right time through the right channel. To meet this substantial goal, companies must develop and implement a comprehensive customer contact strategy.
A successful strategy integrates sales, service and marketing efforts into a single, cohesive plan for managing customer communications, and results in more profitable relationships. Contact strategy development involves several key activities, including segmenting and profiling the customer base, prioritizing customer contacts, and creating and testing the strategy.
Customers have different needs and behaviors and must be communicated with in different ways. Therefore, the first step toward a contact strategy is to segment the customer base. Many organizations have existing segmentation schemes and can begin to develop profiles based on those segments. There are multiple methods to segment customers, including recency/frequency/monetary value, purchasing behavior, product cycles, life cycles and attitudinal approaches. The key is to assemble groups that are clearly dissimilar from each other.
A customer-focused contact strategy heavily depends on defining the objectives of each unique segment. Segment-specific behaviors, profiles and objectives are critical in creating your strategy across channels. Profiles contain information such as demographics, purchasing behavior, profitability, campaign response rates and other customer metrics.
Market research should include customer motivations and attitudes toward a company’s products and service, and their purchasing behavior. Mine your database for customer metrics such as tenure, number and frequency of purchases, average order, response to direct mail and e-mail, and rankings between segments.
For example, a “high value” segment profile might show women ages 35 to 45, with annual purchases of $3,000, purchases 12 times a year, children in the home, low usage of gift cards, few markdown purchases and a desire to receive advice from sales personnel.
Contact strategy involves all methods of communication with the customer — in-person, mail, inbound and outbound telephone calls, e-mail and Web site activity. It’s critical to identify and prioritize all potential contacts with a customer throughout the life cycle for each segment to make sure your strategy encompasses the entire relationship and not just direct marketing efforts. For example, a high-value retail customer may receive monthly catalogs, thank-you letters for large purchases, sale reminder e-mails and personal attention by a sales associate in a store. Once the existing contacts have been detailed, several questions should be answered:
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Are there any key contacts missing? For example, should a quarterly call to evaluate customer service be added?
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Is the customer receiving enough communications or too much?
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What is the purpose of each communication?
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Are the communications targeted to each segment?
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Which contacts are producing the most revenue?
Define any desired interactions by triggers, time series and product propensity events and add to the list of existing contacts. Then determine which contacts are most important for each segment’s needs and to meet corporate goals. Prioritization of all contacts will provide the focus for creating the framework for each segment.
The foundation of the framework is to define enterprise business rules, contact guidelines and contact hierarchy. Enterprise business rules determine which actions happen when certain activities occur across the organization, for all functions. Contact guidelines provide the instructions on who can receive what, how often and through which channel. The hierarchy is in place to overcome conflicts resulting between the business rules and contact guidelines.
For example, business rules determine that a high-value customer receives a “special showing” catalog in January, but the contact guidelines for a high-value customer limit direct mail pieces to two per month. One customer has already received a thank-you note and is scheduled to receive a sales circular within the month. The contact hierarchy is that “special showing” catalogs take precedence over circulars; therefore, the customer is taken off the circular list. As part of the framework, alternatives can be developed. In the case noted here, the customer could have received a different sales circular, an e-mail or a call from a sales associate.
Every company has different business rules, contact guidelines and contact hierarchies unique to the business and to customers’ needs. This is the opportunity to refine the messages to target the needs and attitudes of each segment. As targeting improves, revenue and customer satisfaction will increase.
Now it’s time to test the contact strategies to see if they’re effective. Approach testing using the same rigorous process employed in a marketing trial. As with any test plan, determine up front what’s being measured, (revenue, response rates, customer satisfaction, opt-out rates) and ensure measurement and tracking systems are in place before starting the test. As needed, refine the strategies being tested.
After development and testing, the strategies can be implemented throughout the organization. This step involves coming up with any systems necessary to support the business rules, as well as communication and training of new processes. Implementation may take some time depending on the system enhancements required. If this presents a barrier, define an interim plan to follow that will accomplish as much of the strategies as possible without large technology initiatives. There are many elements of the business rules and contact guidelines that do not have to be automated and can be put in place quickly.
Periodically refine the contact strategies as business goals, operations, budgets and customer segment profiles change over time.
Developing a comprehensive contact strategy is a massive undertaking for most organizations, but it offers the potential for great rewards in increased revenue, more efficient marketing spending, lower attrition and greater customer satisfaction.
Kim Martin is a business consulting manager at Fair, Isaac’s Global Marketing Solutions unit in Dallas.
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