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Developing Customer Contact Strategies

By
  • Melinda Nykamp, Carla McEachern
Published
  • July 01 1999, 1:00am EDT
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In previous columns we've talked about the fact that organizations cannot really manage customers ­ customers manage themselves. But, we can influence customer choices and behaviors based on their experience with us at every touchpoint. One of the keys to success in customer relationships is the design and execution of a customer-focused contact strategy. To be most effective, your contact strategy should be segment specific, multidimensional, actionable and measurable.

Segment Specific. Very few organizations today can capture and maintain significant market share with a one-size-fits-all approach. Channels, merchandising, branding and marketing strategies are tailored to different customer segments and their related needs and interests. Customer segments should be defined based on a combination of variables, including: historical purchase, promotion/response and channel usage; demographic, lifestyle and life stage from purchased overlays or capture at the point of contact; and attitudes and other characteristics captured from surveys or direct contact.

Ideally, an organization will be structured so that a segment manager owns the customers within their segment and understands product, service, timing, pricing, channel and media preferences for their customers. Responsible for the overall profitability and loyalty for their segment, they can focus on the value delivered to their customers through products and the service experience, and the value received from the customer in the form of company profits. The contact strategy each segment manager defines should be designed to increase customer value and long-term loyalty.

Customer value can be analyzed in various ways including current spending and profitability, lifetime value, share and potential. Each will allow further classification of customers within each segment based on what they currently contribute and their long-term potential. The contact strategy can then be customized to maximize profitability, share and potential. These measures of value will also help to define appropriate levels of personalization, frequency and retention activities.

Multidimensional. A customer contact strategy is not just about mailings and special offers. Your contact strategy should consider all the types of interactions you have with your customers, including: inbound and outbound; advertising, marketing, research, sales and service; and mail, telephone, Internet and person-to-person.

Some of these contacts will clearly be promotional in nature, but other types of contact are equally important and should not be left to chance. Many organizations now recognize customers at the end of the year or during the holiday season. However, for high-value customers in each unique customer segment, a simple "thank you" or recognition mailing, e-mail or phone call is beneficial in driving long-term customer loyalty. The same is true of brand reinforcement or service- oriented pieces for those average-value customers still learning about the value the company can provide through products, services or even peace of mind.

Actionable. A contact strategy should be clearly documented for each customer segment. This strategy must assume that customers will migrate between segments over time and that their contact streams will change based on their behaviors. Ideally, your strategy for each segment will incorporate both contacts directed at the entire segment and more individualized contacts triggered by individual behaviors. However, with many customer segments and a multitude of contact combinations, contact strategies can quickly become extremely complex.

Therefore, we caution you to keep your plans manageable and actionable. Reduce the number of potential combinations in your contact series. While a customer "segment of one" is a commendable goal, the reality of that approach often proves impractical and uncontrollable if you have more than six to eight distinct customer segments.

Requiring extensive data collection and application at every point of contact may be impractical in some of your channels, such as point of sale. Therefore, it's important to give all of your plans a reality check against the current situation, and the practicalities of your business model.

An actionable contact strategy clearly spells out the processes that support all contact management, can be supported across all contact points and cannot impede other aspects of your business.

Measurable. It is also important that at the end of the day you can measure the impact of your contact strategies on each customer segment. Segment-specific contact strategies are not easy to implement and, typically, require significant time and expense. Measures of success are required to ensure ongoing support.

You may find that you are making a major impact on some segments but others have proved unmovable. These results can guide your modification of contact strategies to those segments, or sub-segments, that are underperforming or not reacting as hoped.

Companies can have a more meaningful interaction with customers based on a multidimensional, segment-specific contact strategy. An actionable and measurable strategy will drive increased customer value and long-term loyalty.

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