It’s all too easy to get caught up in the possibilities of technology for revolutionizing retail. Emerging technologies like chatbots and magic mirrors are new and exciting and have obvious potential for reshaping customer experiences, but at the end of the day all these cool technologies are simply a means to an end. It’s very rare (closer to never) that we’ll talk with a retailer and hear ‘we want to use xyz technology’.
What they’re really looking to do is improve customer experience, which in turn improves customer value to the business – ie, the bottom line.
How exactly that happens will come down to a combination of factors: not just the technology that gets connected, but the data that’s gathered, and the decisions that are made on the back of that mass of information. And while connecting different kinds of technology will obviously result in different kinds of data, it is possible to improve customer experience (and ultimately customer lifetime value) without going overboard on investment. So, no, it’s not all about using the newest – or the most – shiny toys.
A (very brief) consideration of the concepts
"Customer Relationship Management (CRM) is a technology and system that sustains sales, marketing and customer service activities. It is designed to capture and interpret customer data, both structured and unstructured, and to sustain the management of the business side of customer related operations. CRM technology automates processes and workflows and helps organize and interpret data to support a company in engaging its customers more effectively." Paul Greenberg
CRM is an enabler – it enables better, and more rewarding, customer relationships. Any business that goes through the not uncomplicated process of implementing a CRM has to have a better reason for the investment than simply ‘having a CRM’. At its most basic a CRM platform is a repository for customer profile and demographic information: not completely useless but falling well short of its potential. Next generation CRMs like Plexure are dedicated to getting more out of the technology – engaging customers more effectively by collecting and making decisions based on not only historic data but live information streams that allow real-time optimization. The decision to invest in a CRM platform should be based less on ‘where can we put this customer information’ and more on ‘what will enable us to collect and use information that creates better customer experiences’.
Customer experience is a factor of the interactions between a brand and customer during their relationship – as Forrester defined it back in 2010 “how customers perceive their interactions with your company.” Customer experience management is what the brand does to optimize brand interaction in order to optimize customer perception – and we’re not talking simply financial transactions here. This is a case of using the available data to optimize every single customer touchpoint to make sure each individual’s perception of your brand over your relationship is favorable. Because that directly impacts this:
Customer lifetime value (CLV) is the overall value of a customer to a brand, taking into account not only how much your customer spends, but also what you have invested in that customer. Unsurprisingly a loyal customer will spend more over the course of their relationship with a business than an occasional visitor, and it costs less for a business to retain an existing loyal customer than it does to create a new one. Because of existing goodwill, a loyal customer doesn’t require heavy discounting to get through the door, and is likely to visit more often, spend more and engage more readily without significant convincing (or investment).
Loyal customers are critical to any brand’s success, and having a full appreciation of the value that they bring will inform decisions on what customer data to collect and how to best use it (and progressing on from that, what technology should be involved in order to make this happen…) For a detailed rundown on calculating CLV, check out this fabulous infographic from Kissmetrics.
Why do we care about your CLV?
Every decision you make as a customer-facing business is going to affect customers; some of them will be happy with what you do, some will not. It seems logical to make decisions that retain your happy, loyal, low maintenance customers in order to maximize CLV. This may lose you some of your unhappy, disloyal and high maintenance customers – or, and this depends on the information you have at your disposal, you may be able to identify opportunities to turn that segment around. More happy, loyal, low maintenance customers without the significant investment new customers typically require? Nobody’s going to turn their nose up at that outcome, but the obvious implication is you need to have access to the level of information necessary to make this marketing magic happen. Just knowing a customer’s name and what they bought last month is not going to cut it.
The pitfalls of an unevolved CRM
There is a significant missed opportunity in ignoring the fundamental shift in customer expectations brought on by the emergence of e-commerce and connected customer experiences. We’ve discussed it before but in a nutshell, these days customers generally expect more personal, more relevant, more engaging experiences from brands than were previously the norm – and they don’t expect to have to work any harder to get them. With the rise of new forms of communication and commerce, marketing has to evolve to remain relevant, and a surprising number of retailers have yet to make moves.
You can’t simply ignore the fact that retail customers no longer shop solely in stores. They browse online, they engage via social media, they view promotions and play games on their phones, they snap and pin and chat and Insta and deal with brands on multiple channels before, during and after making a purchase. This is important data, and it’s all interconnected – you need to understand how one channel plays off another, and which channel(s) work best for reaching what customer when.
It makes little sense to stick with a traditional CRM and add on a separate social CRM, then an e-commerce platform, then whatever other database you wind up needing, all the while keeping the data from each channel in its own system and effectively siloed. It’s difficult to share information between disparate systems; easier to accept that multi- cross- or omni-channel commerce is the new reality and use a CRM that’s actually built to handle that complexity.
This is where you get the ability to optimize customer experience and drive CLV: generating a single cohesive view of each customer across channels; understanding their intentions and context; engaging them in ways that are relevant and meaningful to them. Using CRM to drive CX and ultimately CLV.