What is a Customer? Part 2
Current Customer (aka Bae)
Stages of Dating
Current customers are those who purchase goods or services from you. Depending on your business model and product, the frequency of purchase from your customers will vary. You may offer a subscription or membership (e.g. Amazon Prime, Lemonade, Stitch Fix) where your customers pay a recurring cost. Or you may offer products/services that are one-time purchases, some of which are typically purchased more frequently (ex. groceries, gas, haircut) than others (ex. travel luggage, computers, TV).
Looking at it from a different lens, we can segment current customers between ‘new’ and ‘existing’. Why? Because their behaviors, needs, and expectations are different.
We hear this all this time - first impressions are critical. Even the smallest misstep could cause your demise. If your first date doesn’t go well - for example, he/she is late, or shows up hungover from the night before, or spends the entire time texting other people - chances are you’re probably not interested in a second date, especially when there are other “fish in the sea” that might be a better fit. Time is money, and we aren’t going to invest time unless it’s worth our while. ‘New customers’ are just as flighty. Switching costs are low so this is where you often see the biggest drop in customer retention.
Once you move from dating around to a more serious relationship, you begin to build trust with your partner and become more forgiving and understanding. This same psychology applies to your ‘current customers.’ You’ve already done the hard job of convincing them to use your product/service and ideally have provided a phenomenal first experience to get them through the door. Now you must become an amazing host. Most consumers understand that mistakes happen but what could make or break your relationship with them is how you handle and resolve those issues. However, it is critical to minimize repeated issues otherwise you break the trust that you’ve worked so hard to build.
What do they want?
As a consumer, what would convince me to continue using a product/service?
Provide reliable products and services: Your product/service must work as promised. This sounds obvious but I’ve seen companies hastily check the box on this fundamental step. It doesn’t matter how beautiful your website is if I can’t order products from it because it’s always down or the checkout button doesn’t work.
Resolve my issues promptly: If I have a question or an issue, I expect you to solve it and solve it quickly. No, I don’t want to go through a series of IVR instructions to then wait on the phone for 20 mins until I finally connect to an agent. Why do I have to wait 48 hours to receive a 2 liner email response to my simple request?
Recognize my loyalty: We want to feel appreciated by you, especially if we’re giving you lots of our hard earned money.
Personalize my experiences: Companies collect a tremendous amount of consumer data both passively and actively (ex. tracking web page visits, storing order history, collecting survey results). I’m willing to give this information in exchange for personalization. Do something with the data to show me you know me. Treat each customer as an individual and you’ll earn their respect and their loyalty.
Predict my needs: Similarly, how can you make the experience seamless for me by anticipating what I need and fulfilling them?
To stay competitive in today’s world, you not only need to nail the table stakes, but also deliver moments of delight to your customers if you hope to build loyalty and create superfans.
What should be your goals?
According to HBR, acquiring a new customer is anywhere from 5 to 25 times more expensive than retaining an existing one. If you’re not convinced that retaining customers is so valuable, consider research done by Frederick Reichheld of Bain & Company (the inventor of the net promoter score) that shows increasing customer retention rates by 5% increases profits by 25% to 95%. Therefore, your goal is to minimize customer churn (percentage of your customers that end their relationship with your company) and drive greater retention and loyalty.
So, how might you provide an amazing customer experience to your existing customer base? And how might you turn happy, satisfied customers into loyal brand evangelists? Some ideas that I’ve seen effective include:
Recognize and reward your loyal customers.
Loyalty programs that offer the allure of differentiated benefits have been effective for many companies. This model incentivizes repeated purchases, rewards loyal behaviors, and creates brand switching costs. Airlines notably use this strategy to keep you flying with them.
These loyalty programs are often tied to a rewards system. Let’s take Starbucks as an example. You earn Stars for every $1 spent. Once you earn enough to achieve Gold Level, you can redeem them for a free drink or food item.
Your most loyal customers should also receive elevated service. Give them access to a special VIP line which jumps them to the top of the queue and even routes them to your best support agents. If you have a Chase Sapphire Reserve credit card and call the number on the back of your card, you get connected to an agent immediately without going through that IVR nonsense. Starwood Hotels even gives their Platinum Premier Elite customers a personal Ambassador who handles tasks from booking a reservation to giving sightseeing recommendations.
Provide easy and convenient support.
Numerous studies show that customers go to the company’s website first, not to look for a phone number to call, but for an answer to their problem or question. Providing your customers self-service resolutions will reduce friction, decrease costs, and provide a better customer experience.
There are technologies that integrate your telephony system with your CRM so your agents know who is calling before connecting with them.
Anticipating issues and then proactively actioning against them provides customers the ultimate convenience. For example, United proactively provided a $100 credit before my flight because the outlets on the plane weren’t working. Good waiters at restaurants fill your glass of water before you even ask.
Personalize their experience.
Analyze your consumer’s purchasing history and habits to make shopping easier for them. Netflix has a great recommendation engine that proactively shows you other movies or shows you may like based on what you’ve recently searched or viewed. When you explore a movie or show, there’s also a match score based on what it thinks you'll like or don't like. Scores below 55% — either because Netflix doesn’t have enough data to deduce how compatible the program is, or because the data suggests you won’t enjoy it — won’t be displayed.
Provide surprise and delight moments.
Thank your customers with acknowledgement or even a gift when they reach milestones with your company (ex. 1 year since signing up, 100th order, etc.)
Go above and beyond to extend your reach to celebrate personal life milestones like their birthday. Sephora asked me for my birthdate when I signed up for their Beauty Insider program, and every year I look forward to my small bundle of makeup goodies.
Lastly, the key is to communicate these value propositions to your customers so they understand why it’s compelling to keep doing business with you.