Everyone knows that reducing churn, retaining customers, and increasing lifetime value are levers businesses have to pull if they’re going to grow. You can’t lose one customer for every one you gain and expect to do anything more than manage your brand’s decline.
But retaining customers can be labor intensive and expensive. Marketers are dealing with a paradox where views get cheaper but real attention gets more expensive. That’s especially true now that every customer carries a computer in her pocket that can access almost any product or service, along with infinite sources of information and entertainment.
Bring the Hot Towel or Get a Cold Response
Because of this attention problem, along with the fact that products themselves are getting harder to differentiate in a commoditized world, customer retention really requires creating a boutique experience. The notion of brand loyalty is changing, and there’s a shift to what I call experience loyalty.
That means customers talk about, tweet about, pay for, and come back for the "hot towel experience." Customers are loyal to great experiences, so instead of thinking in terms of customer LTV, marketers would be better off trying to create customer return-on-experience.
Coffee Bars and Comfy Chairs Don’t Cut It Any Longer
Many brands are finding that customers are turning to offline experiences more and more, so they are experimenting with unique events, pop-up shops, and showrooming.
Take Amazon’s new brick-and-mortar bookstore in Seattle, for example. The company hasn’t said why its taking this seemingly backward step in bookselling economics, but industry analysts mostly agree that it’s a smart way to improve its ecommerce business as it will help the online retailer better understand the customer experience and drive online sales.
Or consider TOMS, an ecommerce fashion and lifestyle brand that first captured customer love by giving away one pair of shoes to charity for every pair that customers bought for themselves. Its new brick-and-mortar locations hardly even have shoes in them.
Instead, most of the space is dedicated to community activities such as yoga classes and movie screenings. Founder Blake Mycoskie said in an interview with the New York Times, “It’s a competitive advantage if you make a great product and have a larger purpose that people can be a part of.”
This isn’t squeezing a coffee bar into your flagship store. This is starting with a great customer experience and building loyalty from there.
The Funnel Filler’s Trap
New and emerging brands are in a better position to concentrate on experience loyalty because a lot of their processes in the startup phase are responsive and one-to-one already. It’s always going to be easier for a smaller beverage brand to send customers personalized birthday gifts than it is for Coca-Cola.
With creativity, legacy brands can find ways to personalize experiences for existing customers, but it’s tough. I don’t envy the CMOs hoping to do this.
They hear, “You have to analyze customer service data and then start to match these to much deeper customer profiles.” They hear, “You have to spend a lot of money on analytics and social media.” They hear, “You have to invest in the time, in transaction costs, in opportunity costs. You have to come up with a strategy, re-orient your team, roll up the tactics, measure, and then iterate.”
Then they look around for help making decisions and see that there are hundreds of analytics companies and thousands of agencies.
So instead of saying, “I’m going to retain my customers,” the overwhelmed CMO says, “Screw it. I’m going to concentrate on acquisition.”
Then everyone’s attention naturally turns to filling up the sales funnel, and whatever happens to customers who have passed through the point of sale and out of the funnel is too much to think about.
The great thing about the sales funnel model is that it’s a way of showing how you will force people on a path you designed for them in advance. It illustrates an elegant little trap.
But when we rely on it too much, it traps us marketers as much as it does the customer.
Technology Is a Tool. The Mind Is the Playing Field.
The trouble with the sales funnel metaphor is that it’s not responsive, and a responsive culture and organization is what is needed most of all by today’s CMO.
Responsive means flexible. Responsive means adaptive. Responsive means thinking about outcomes, not outputs. It means being strategic and tactical at the same time.
The companies that are winning have all those amazing digital tools and masses of data, but they also are focusing on human behavior and unarticulated customer needs. They’re focusing on their team culture. To get to the root of the customer experience, they think as much about psychology as about technology.
If I were a CMO trying to grow customer return-on-experience, there are probably two major approaches I would take:
1) Look within.
Take a look at every single step in your business processes -- from the way you develop your product to the way you make it to the way you deliver it to the way you handle returns to your customer service, and so on. Audit the way you work. Audit the way you deliver. Audit what’s happening in market.
And remember to look not just for problems but for resources and opportunities. Some of the best innovations come from picking up and using the tools you didn’t know you had. Go deeper than the “customer journey maps” to understanding the entire product and experience continuum.
2) Divide and conquer with diverse, cross-functional teams.
Get started on a problem with a small team of people from various backgrounds and business disciplines. A supply-chain manager who has never taken a customer service call in her life can’t innovate better customer service by herself. But if you put a small number of people from supply chain, customer service, engineering, design, and so on in the same room, then magic starts to happen.
You do have to make sure they have a well-crafted problem to tackle. I’m a big fan of gamestorming and using techniques such as the 50/50 experiment to bring focus to these teams.
Don’t Play Simon Says Marketing Games
Smart brands are trying to create epic and legendary moments for customers by tapping into their cognitive retention. They don't only want to make sure the message reaches the consumer in the context when the customer is open to it. They want to deliver it in a way that creates a happier and more personalized experience.
But how do you personalize at scale? At the end of the day, the CMO has as many problems as she has customers. There is no plug-and-play solution for that. A responsive culture is the only way to build experience loyalty.
It used to be that “No one ever got fired for hiring IBM.” That era is over. I don’t mean that as a knock on IBM, which is doing some interesting innovation design work themselves. I mean that as a knock on rote imitation. Big brands need to stop looking at competitors and playing “Simon Says marketing.” That’s a way to manage decline, not growth.
Upstart brands such as TOMS that are innovating for growth aren’t playing Simon Says. They’re doing improv. It’s unpredictable. It feels like a high-wire act. Everyone falls on their face sometimes, but it’s about failing forward and following the teaching of Eric Ries and his lean startup methodology. It’s never the same game twice. But with practice, you get better at it.
If you want to get out of the funnel filler’s trap and start retaining customers, you need to sit out the games of Simon Says and jump into the improv game.