Providing Lifetime Value to Your Customers
Chances are, there's not a manager or leader who would say that they weren't committed to providing great customer service. And they may be able to produce graphs and charts that point to high levels of customer satisfaction.
But can they say that they have such a trusting, personal relationship with their customers that it gives them a real competitive advantage? Their organizations might offer excellent customer service, just like many others, but do they go beyond "the extra mile" and offer "customer intimacy"?
In this article, we look at what customer intimacy means, and we explore how organizations can become customer intimate. But developing genuine customer intimacy can be a costly endeavor, requiring dedicated buy-in from the top to the bottom of an organization. So, we also highlight the challenges of pursuing this strategy.
What Is Customer Intimacy?
Customer intimacy is one of three core elements of The Values Discipline Model, which was developed in the early 1990s by strategy experts Michael Treacy and Fred Wiersema. The three elements are:
- Operational Excellence: providing good products at the lowest total cost.
- Product Leadership: developing new and better products through differentiation and innovation.
- Customer Intimacy: continually customizing products and services to meet the customer's needs.
Customer intimacy can be thought of as an advanced form of customer-centric business. It involves learning as much as possible about your customers, either as individuals or as very small segments of your market, and meeting their specific needs.
By learning more than anyone else about these customers, you can tailor-make a product for them, or cherry-pick a bundle of products and services, that meets and preferably exceeds their expectations.
So, what does customer intimacy look like in real life?
Imagine that you manage an outlet of a large retail chain, where you are regularly tasked by head office to implement centrally designed sales promotions. For example, every store recently ran the same campaign, involving fun recipes for customers to try cooking at home.
It was a success in some regions, but it flopped in many busy urban areas. The feedback was that, in those areas, customers favored pre-packaged meals that are quick and easy to prepare, but still healthy and nutritious.
Recognizing this, the head office responded by giving its marketing team full access to the data collected at every point of contact between the customer and the store. It then allowed those team members to work with individual store managers to customize promotions, so that they can provide the goods or services that are most relevant to their customers.
The company also introduced inventory management systems that use this data to automatically reroute or reorder the right products to the right places at the right time. The store's cash registers were then programmed to print out promotional vouchers along with receipts, offering discounts that are relevant to the customer's buying habits. It even rolled out entirely new products for regions where the demand for them was highest.
As a result of this decentralization, and the freedom that you now have to tailor your offerings to your customers, your customers are much more engaged and satisfied, and they now shop at your store more frequently.
As you can see, adopting customer intimacy can take a lot of thought and effort. But the payoff is that you build a personal relationship with your customers. The more insight you have into their needs and wants, and the better you meet them, the more loyal they will be.
Strategy expert Joe Weinman has suggested that customer intimacy is evolving into what he calls "collective intimacy," as a result of the digital revolution and Big Data. You can read his explanation of collective intimacy in this Forbes article.
Is Customer Intimacy Right for You?
Changing a company's nature or culture isn't cheap or easy. But customer intimacy can create a more sustainable and profitable model for some. Ask yourself the following five questions to decide whether it is for you:
- Is your company finding that delivering a high-quality product and good customer service aren't enough to create a strong brand any more?
- Is the profit margin on your product already so small that you can't reduce prices any further? Does that create a situation in which you want to offer more value to your customers, but you don't know how?
- Do your customers tell you that they'd like an all-in-one solution to a problem, instead of the product that you currently offer?
- Are you frustrated that you have access to plenty of data, but your organization doesn't use it to create meaningful change?
- Are you trying to use social media to get your brand's message out there, but finding it difficult to get your voice heard and to build relationships?
If you answered "yes" to most or all of the above, then switching to a customer intimacy model may be a solution.
Four Steps to Customer Intimacy
Customer intimacy is more than just aiming for customer satisfaction. It goes beyond that and requires buy-in at every level of an organization to be successful. Here are four steps that you can take to encourage such a transformation within your organization:
1. Empower Your Team Members
Give your people the tools, training and resources that they need to give the customer exactly what he or she needs or wants. You need to inspire and encourage them to deliver an outstanding experience at every point of contact with your customers. Our article, Customer Experience Mapping, has tips and techniques for doing this.
You can boost your people's engagement with the project by recognizing and rewarding those who go the extra mile. Make sure that you recruit people who share your commitment to customer intimacy. Everyone should be taught to recognize a customer's lifetime value to the organization, rather than just look for the next transaction.
2. Use Data Effectively
Learn as much as you can about your customers. Talk to them, visit them, and analyze their activity on your website. Encourage your people to help you to monitor trends in your industry. Once you have all the relevant information that you can find, you need to make sense of it and interpret it effectively.
3. Narrow Your Customer Focus
It might seem harsh to say it, but not all customers are equal. You need to be pragmatic and focus on those customers who you believe will provide a return on an intimate relationship.
As in any relationship, intimacy requires knowledge and understanding, and an investment of time and effort. This investment costs, so you need to identify those customers or market segments that have the highest value to your organization.
When you have identified the segments that you want to serve, appoint teams or account managers who will take responsibility for each. Provide them with deep training on their particular single segment, rather than giving everyone the same broad overview.
4. Explore Outside Partnerships
Work with other companies to find a solution, if you believe it to be in the customer's best interests. For example, e-commerce giant Amazon.com® sells products from other, smaller retailers on its website. This enables it to offer a greater range of products than it could stock on its own, and it means that customers don't need to leave the website to get what they need.
If you do not serve customers directly, use the principles of customer intimacy to think about how you could better serve "internal customers" such as your colleagues, stakeholders and shareholders. Although there aren't necessarily the same opportunities for collecting and analyzing data, it will benefit your working relationships if you can find ways to make their lives easier.
What Are the Challenges of Customer Intimacy?
Customer intimacy can only be achieved if your whole organization embraces it. The customer's needs must drive everything from product development and manufacturing to administrative and back-end operations.
Leaders and managers may need to decentralize some decision making, so that their team members can learn and adapt quickly to customers' needs.
You will also need to capture data and develop insights about your customers at every stage of their journey with your organization, not just when they buy something. That means digging deeper than creating customer personas to help you to visualize your core market. Ideally, you will learn things about your customers' behavior that even they aren't conscious of. For example, your data might reveal that a customer makes his highest-value purchases at a certain time of the year. You can anticipate this, and offer deals or product advice that fit with this pattern.
And your organization needs to be agile enough to respond to the data that you collect by changing your procedures and goals, where necessary.
There may be times when finding the right solution for your customer means that you join forces with another company. In fact, you may need to maintain an "ecosystem" of partners to provide a range of production and delivery services broad enough to satisfy their needs. Identifying suitable outside partners, and coordinating schedules and communicating with them, can be time consuming.
It can also be risky to focus on and invest in a single customer or small market segment. It means that you lose the security of having a diverse portfolio of clients. If the market shifts and an alternative product becomes more popular, it may be extremely costly for you to change your strategy or reposition yourself in the market.
Customer intimacy is one of the three elements of Michael Treacy's and Fred Wiersema's Values Discipline Model.
It's a highly customer-centric strategy, in which an organization strives to build a lasting personal relationship with its customers, by continually customizing its offerings to meet their exact needs and wants.
It can be a risky, high-cost strategy, as it requires a whole organization to buy into putting the customer's experience before the bottom line. It also focuses a lot of time, attention and resources on individual customers, or on small segments of a market.
You can take four steps to develop customer intimacy: empower your team members, use data effectively, narrow your customer focus, and explore outside partnerships.
It's essential to have a corporate structure that allows you to collect, analyze and act on data. The ability to understand or anticipate your customers' needs will encourage them to forge a long-term relationship with you, because of your dedication and unique ability in meeting those needs.
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