Digital Alchemy - Customer Lifecycle Management Whitepaper


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Digital Alchemy - Customer Lifecycle Management Whitepaper

  1. 1. © Digital Alchemy Limited. All rights reserved. Customers are overwhelmed by the volume of customer information and the complex mix of purchase choices.Inthisenvironment,itiscrucialformarketerstochangethewaytheycommunicatetotakefull advantage of a constantly changing environment. Marketers often invest a disproportionate amount of their resources to acquire new customers but fail to manage and grow customer relationships, resulting in a high customer churn rate. No matter what is being sold, whether it is a cup of coffee or a car, it is clearly unsustainable if a business focuses on single-event selling. It has to be an ongoing strategy for understanding customer lifecycles and ensuring repeat business. To retain customers and to build a relationship with them, you need the ability to know what they want and to deliver it when and where it is needed. Customer Lifecycle Management (CLM) recognises that prospects and customers move through stages in their relationships with an organisation, from initial contact through to fully engaged brand advocates. Acquiring new customers is costlier than retaining the existing ones, a strategy solely focused on winning a large number of customers during the acquisition stage is no longer practical in today’s environment. Marketers need to understand a customer’s needs throughout their lifecycle and switch the focus from acquisition to nurturing & growth. It can be a real challenge to shift an organisation from exchanging monologues with customers to engaging in real dialogues, informing and helping where appropriate, as well as remediating the bad experiences when necessary. What is it? Customer Lifecycle Management (CLM) Effort Effort Acquire Grow Retain Acquire Grow Retain Figure 1: Traditional Thinking and Process vs Figure 2: Strategic Thinking and Process. In the past, traditional marketers concentrated on acquiring volumes of customers by luring them with promotions: when the promotional period expired, the customers also disappeared. In contrast, modern strategic marketers adopt a long-term perspective, actively nurturing and building a relationship for the duration of each customer’s lifecycle.
  2. 2. © Digital Alchemy Limited. All rights reserved. To make the transition from the old customer experience funnel to the new customer experience funnel, marketers must reduce their focus on the acquisition stage, becoming more active at the growth stage and more attuned to the attrition risks at the retention stage. A customer is typically acquired as a result of their initial attraction to something in the overall offer; by continuing to meet or preferably exceed their evolving expectations, there should be no compelling reason for them to look elsewhere. Clearly, CLM plays a major role at all stages along the reformed funnel (Figure 2). Customers emit relevant traces or cue throughout their lifecycle. All such activities need constant monitoring with relevant data captured, integrated and used in the analytics process. Combining this with other appropriate personalised information helps to define individual customer profiles and propensities when armed with these insights marketers can react faster and with greater precision whenever monitored behaviour indicates that a customer is once again in-market or has some other need. This knowledge also enables businesses to enhance the experience in other ways, such as reducing the customer’s search time thereby improving convenience, adding further value to the relationship. With repeated interactions over the lifecycle, customers grow to rely on the company’s proven ability to satisfy. Even a few less good interactions can be tolerated by a customer providing the company demonstrates empathy and a willingness to remedy unsatisfactory performance. If anything, being there for the customer in good and bad times, it will make the relationship more ‘real’. DigitalAlchemy’sproprietarymodeldescribescustomerlifecyclein5stages: acquisition,onboarding, nurturing & growth, retention and winback. Each stage is characterised by different objectives, initiatives and actions. “One way of achieving this result is by establishing a better relationship with the end user, a bond that canofferarealinteractionwithindividualcustomers in a relevant and timely way. CLM can make this happen.” - Mikko Hietanen, CEO of Agillic, one of the successful companies offering CLM technology
  3. 3. © Digital Alchemy Limited. All rights reserved. DA’s CLM concept consists of 2 components: the Product Journey Map (PJM) and the Customer Experience (CE) PJM focuses on the product level. This is designed to match a product’s lifecycle with the customer’s needs throughout their own lifecycle. Naturally, with the enormous variety of product types available, each product has a different lifecycle length. For example, a product lifecycle of a post paid mobile plan could be longer or shorter than a superannuation policy’s one. Once the touchpoints at each stage of the PJM are identified, appropriate customer communications can be initiated. CE focuses on the customer level. As CE aligns with an organisation and business objectives, CE doesn’t have a clearly definable stage within the lifecycle to map with. The emphasis of this component is on touchpoints and initiatives throughout the lifecycle. CE is designed to initiate an interaction through the touchpoints when significant events are triggered during the customer lifecycle. It is also important to monitor each touchpoint to check whether customers are satisfied with the experience and the associated product or service. Outcomes of CE are customers becoming advocates for the organisation, creating referral, retention and profitable growth. Within CE there are initiatives that will be aligned with business objectives to strengthen the relationship with customers in the long term. Additionally, CE can be expressed within a campaign idea or with different types of offers. Initiatives Explanation Trace/cue Information that customers leave so that marketers know that customers are in the market Complaint If customers make a complaint, an organisation should remediate the situation Health check Regular health check to ensure that an organisation has a healthy relationship with customers Figure 4: Example of initiatives and explanations Acquisition Onboarding Growth Retention Winback FOCUS Capture information and acquire high value customers EDUCATE Ensure customers have a good experience and do not have to fumble around NURTURE Listen to customers’ transactions and respond to their needs REMEDIATE Be there for the customers and help them when things go wrong MANAGE Give churn customers a reason to reconsider Figure 3: Lifecycle diagram with a brief example of the action that should be executed at each stage.
  4. 4. © Digital Alchemy Limited. All rights reserved. Figure 5: Initiatives and offers triggered by the PJM and CE can overlap. This is when optimisation is helpful. Optimisation will ensure customers only receive the most suitable and profitable offer based on predefined business rules and constraints. PJM - for a post-paid SIM card on a two-year contract (Product A) Welcome SMS Usage stimulation Bill spike- a mend the plan and waive the fee Follow-up call Birthday free call Reminder SMS-outage service Potential bill spike Onboarding Growth Retention Winback Usage drop trigger, send stimulation offer Take up a “member get member“ offer Acquire Lapse LapseAcquire Jane’s CE - for Product A A Typical In-House Implementation Building a database always takes longer and hits more unexpected ‘bumps’ along the way than at first envisaged. The project undertaken by your IT and marketing teams will certainly be no exception to therule.MostITdepartmentsaregoodatoperatingsystemdatabasesandmanycanbuildreasonable transactional databases, but it is most unlikely that they will have the extensive experience required to build a state of the art relational marketing database. For their part, marketing departments often lack the time, resources and IT skills. The main upside to building the MDB in-house is the useful insight that individual staff can acquire combined with their intimate knowledge of the database’s various idiosyncrasies and nuances.
  5. 5. © Digital Alchemy Limited. All rights reserved. What is in it for you? Enhanced customer relationships, loyalty and lifetime value CLM helps to improve the customer experience by building a customer’s knowledge about the company and its products throughout their lifecycle. The key to customer loyalty and a long-term relationship is being able to meet short-term needs every day. Just as Rome was not built in a day; building loyalty takes time and effort, and requires the right strategy, culture and implementation. It is an evolving process. “Rather than managing only the lifecycle of each service, the customer centric approach focuses on the customer lifecycle and how end-user demands change over time. A customer that has just joined a Communication Service Provider is unlikely to have the same expectations two or three years later.” - Araceli Del Rio Sastre, Strategic Marketing for Nokia Siemens Networks. One of the telecommunication companies using CLM to improve their customer’s lifetime value. The above diagrams and examples show how a PJM and CE map with the customer lifecycle. Suppose Jane is a customer of telecommunication company XYZ. She has just taken up product A which is a post-paid SIM card on a 2-year contract. At the Onboarding stage, Jane will receive a welcome SMS to guide her through her mobile plan and usage stimulation via SMS which are based on her usage history. During the Growth stage, Jane calls to complain about bill spike. This is an opportunity for company XYZ to remediate the situation. A representative recommends an adjustment to a more suitable plan and waives the amendment fee. Now, having changed her plan, Jane receives a follow- up call to enquire whether she is satisfied with the new plan and services, and a surprise and delight offer for a one-day of free domestic call on her birthday. Four months before Jane’s contract ends, Jane’s call usage has been dropped. This is a significant event that triggers a special offer to stimulate Jane’s usage and increase her tenure. Jane then renews her contact.
  6. 6. © Digital Alchemy Limited. All rights reserved. A leading healthcare company using CLM combined with marketing automation Challenge: In the healthcare industry, customer service is a key differentiator; it is at least as important as the plan, price and the insurer’s network of service providers. The challenge therefore is to provide outstanding service within an acceptable budget. Solutions: CLM and automation were implemented to upgrade business processes and improve customer service. In order to truly enhance the customer experience, a consistently high standard of customer contact was integrated across all the touchpoints and throughout the customer lifecycle, from acquisition to retention. For example, using proactive automated alerts, the health insurer was able to update and advise customers of their claim status or remind them when they need to refill prescriptions. Similar services can be performed wherever and whenever interactions are triggered throughout the customer’s lifecycle. Outcome: The combination of CLM and automation delivered impressive results: - Proactive alerts reduced the numbers of calls and agent contacts by 17.5% - Estimated annual savings totalled USD 4.5 million - More than 30% of calls could be resolved in a self-service channel, potentially saving tens of millions of dollars Improved retention rates, response rates and ROI Industry forces are driving businesses to maximise the value of each customer interaction through differentiated marketing, sales and service. Positive financial outcomes can be seen as a direct result of correctly implemented CLM and the ability to deliver positive customer experience or save your customers from undesirable experiences. Below is living proof of a successful CLM implementation.
  7. 7. © Digital Alchemy Limited. All rights reserved. Technological shift To turn the CLM concept into practical reality, you need a technology foundation that is both robust and flexible. Transforming into a customer-centric organisation also requires investment in appropriate tools capable of executing the processes. These must then integrate with existing systems and have the ability to support and adapt to changes in ongoing data flows. The key tools for contemporary database marketing, as identified in other DA white papers, are those that enable event-based marketing, automation and optimisation. What are the requirements? Organisational change You may believe that your organisation is already customer-centric... but think again: very few companies manage customer relationships adequately and they are certainly not managed holistically over the entire lifecycle. Becoming a customer-centric organisation requires a significant paradigm change. Instead of doing all the talking, the whole organisation must learn to listen to and understand customers in order to engage them in meaningful, value-adding dialogue. Moreover, every part of the organisation needs to be able to empathise with customers, and consider what they think and feel. It is very difficult to cultivate enterprise-wide change, however it is incumbent upon marketers to convince all stakeholders to embrace the new mindset. Achieving this requires a CLM champion at senior management level and proof points that the required seismic shift can deliver benefits and success for the whole organisation. In conclusion, Customer Lifecycle Management calls for fundamental change in the way an organisation does business. Customer-centricity is at the very heart of marketing so it is not surprising that many organisations already believe themselves to be practitioners but reality is often distant from perception. The traditional product/business lead marketing and customer centric marketing are at opposite ends at the same continuum. CLM helps us create a valuable balance between the two. Like many other contemporary marketing issues, CLM will not be resolved solely with a technological solution; cultural change is of equal and probably greater importance and priority. Certainly CRM technology, revenue management, distribution channels and corporate culture are converging with strong inter-dependencies that require a holistic view to understand business impacts and how the various customer touchpoints need to be managed – and these are good signs. Nevertheless, while the building blocks are increasingly available there is still a long way to go and no organisation is achieving anything near true CLM. This is a real opportunity for those prepared to complete the puzzle.
  8. 8. © Digital Alchemy Limited. All rights reserved. About Digital Alchemy Digital Alchemy Limited (DA) is Asia Pacific’s leading Database Marketing Services Provider. DA’s team of professionals are dedicated to working with clients to improve their marketing efficiency and to capture latent customer value. Established in 2003 and operating in Sydney, Melbourne, Auckland,Bangkok,HongKong,Nanjing,andSingapore,DAhasbeencontributingtothesuccessofan expanding breadth of clients including leading companies in financial services, telecommunications, motoring services, media and other industry sectors. “This document has been prepared for the purpose of providing general information and should not be relied on in substitution for individual professional advice. Copyright in this document is owned by Digital Alchemy Consulting Pty Limited, and except as permitted under the Copyright Act 1968, no part of it may be reproduced by any process, electronic or otherwise, in any material form or transmitted to any other person or stored electronically in any form without the prior written permission of Digital Alchemy Consulting Pty Limited.”
  9. 9. © Digital Alchemy Limited. All rights reserved. Reference Cited “Make your customers feel special”, <> ” How CLM can Optimise Revenue in Today’s Telecoms Market”, < telenor-sonofon.html> “From Acquisition to Retention: Delighting your customers with service”, <> “The Continuing Evolution: Customer-centric Revenue Management Journal of Revenue and Pricing Management (2008)”, <> “What’s critical in the vertical, COM council (2011)”, <>