Better segmentation can drive customer relationships

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By: Wise Marketer Staff |

Posted on January 24, 2008

Better segmentation can drive customer relationships

Most business need to more carefully consider their approach to customer segmentation in order to build stronger customer relationships based on relevance and trust, according to Keith Pearce, EMEA marketing director for Genesys Telecommunications Laboratories.

Managing customer relationships for profit means taking a closer look at segments and service levels, Pearce explains. Indeed, customer segmentation strategies are one of the best ways to balance the delivery of the best customer experience with the need to maximise long-term customer loyalty and revenue.

Focus on segments first When enterprises adopt customer segmentation strategies, they often focus on traditional techniques such as campaign management and personalisation, which are often designed on the basis of customer tiers, linked into current profitability. Customer service benchmarks such as up-sell potential or likelihood to churn are generally not considered.

And as companies adopt more customer-centric business processes, service will play a pivotal role in providing the more personalised customer interactions that enhance caller satisfaction. A segmentation strategy that is integrated with customer service provides the framework for delivering an appropriate customer experience based on the customer's value to the organisation.

Defining customer segments Customer segmentation begins with an evaluation of the following aspects:

  1. Revenue generated from the customer;
  2. Cost to acquire and retain the customer;
  3. Resulting profit from the customer.

This information can be used to generate simple tiers based on the current financial contribution, and therefore value, of each customer relative to others. It is common that a small percentage of high-value customers contribute the majority of profits, and a similar percentage of low-value customers may actually detract from profits.

Financial institutions and air travel, for example, may have 20% of their customers contribute as much as 150% of their end profit, with detractions made from it due to costs associated with low-value customers. Most customers will end up somewhere in the middle, where up-sell/cross-sell opportunity and churn are both more prevalent and therefore more influential to a company's financial success.

Detailed analysis of business-specific factors such as time-series trends, individual customer actions and collective customer behaviour analysis help to further refine initial customer segments. A major change in spending habits or account balance can indicate imminent customer churn, while detailed product analysis may open up cross-selling opportunities. Using customer service techniques that target specific experiences for each segment can help increase the value of every customer to your business, and so reduce the number of costly "low-value" customers.

Targeted services for customer segments Customer service based on segmentation usually results in an over-simplified strategy: the better the customer, the better the service. This will seem reasonable to many, and in some cases will be successful, but this can also result in lost customers and missed opportunities. A better way to approach customer interaction is to offer every caller the appropriate service. Technologies such as multi-media contact channels, intelligent customer interaction routing and computer-telephony integration support the delivery of appropriate service, as well as provide revenue opportunities.

Customers assume that a wide range of media channels will be available to them because they are aware that the technology exists. It is therefore important to invest in solutions that will both provide these options and also make the service through them consistent across the enterprise. Intelligent routing enables contact centres to balance resources, prioritise customer interactions across all channels and services, and identify cases that require special treatment. Armed with these powerful tools, companies can create competitive advantages by offering unique services, a more proactive approach, or simply more responsive and convenient interactions.

Ideas for segmented customer service One fundamental approach to segmented customer service in contact centres is to devote more experienced agents to higher-value customers. This offers a balance between the need to be responsive to customer contacts, yet still provide an improved experience to those that are more valuable. A more advanced technique is to provide additional service benefits to more valuable customers - such as frequent flier club benefits or credit card bonus points - and utilise contact centre technologies to market these perks to customers falling within the targeted segment. For example, a financial services customer on the borderline between age segments may be routed to a "services consultant", trained to recommend loans, investment options, and similar products or services that are relevant to customers in that group.

Another more sophisticated approach may be to develop strategies specifically for customers likely to churn. Intelligent routing can deliver calls from these customers to specially trained agents who are able to extend special offers or make exceptions in order to retain the customer. These interactions can also be monitored in real time, enabling the kind of reactivity and individual attention this segment usually requires. This may mean automatic prompts trigger email or text message in response to important events.

This strategy for specific segments can be tracked over time, analysed for effectiveness and modified if necessary, so even if customers are lost, the strategy can be improved to prevent it happening again. Historical evaluation of segmented customer service will also help justify the investment of capital and resources by clearly demonstrating the results.

Multimedia-enabled quality monitoring technologies enable contact centres to automatically record interactions with specific customer segments, allowing them to assess whether different approaches, or perhaps even different agents, would produce better results. These recordings of successful techniques can also be used to train new agents, increasing the rate of improvement.

Balancing self-service with assisted service Self-service channels can be very effective at lowering costs without diminishing quality, and can also provide a responsive and accessible service for customers. Today, offering callers the option to access information over the phone via self-service is as widely accepted as automated teller machines. New systems can accurately identify customers through voice recognition technology as well as through digits entered into the keypad. It is also becoming more standard for these new solutions to be based on open standards such as VoiceXML, which allows for rapid development of specialised voice self-service applications.

Although the phone remains the preferred method for a customer to contact a business, the Web is an increasingly popular source of resolving enquiries. This offers an even greater opportunity for differentiated customer service, leading to greater competitive advantage. Web self-service technologies, such as knowledge bases, can be more helpful to customers if they are integrated with an assisted service. Access to rich depositories of information can reduce the volume of customer contact made through more expensive methods, such as an agent service.

Web service can also provide insights into the interests of customers, revealing trends such as frequently entered keywords, which can be valuable when refining targeted marketing campaigns and agent scripts. Businesses that capture detailed knowledge of previous encounters and then pro-actively use it to develop intelligent routing and customer segmentation strategies will benefit from cross-sell and up-sell opportunities, faster turnaround, and improved customer satisfaction.

Conclusion Ultimately, customer segmentation strategies complement the business imperatives of customer understanding and insights. All customer communication will contain valuable information that can be used to improve their customer relationships.

Focusing on customer segmentation allows businesses to differentiate themselves by offering unique services and support to their most valuable customers without compromising service standards for other customer tiers.

Companies can therefore drive profits higher and reduce customer churn through focused strategies that are based on proven methods of success for the treatment of each customer segment.

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