At a time when customer engagement is at the front and centre of every company’s strategy, what is it that the winners in the marketplace are doing right? In a chat organised by BE, consulting firm Bain’s founder of customer strategy and marketing practice Rob Markey unravels the various facets of the new-age customer journey in an interview with Devndra Chawla, MD and CEO, Spencer’s Retail. (Edited Excerpts)
The focus on retaining customers should be as important as getting new ones. How can Net Promoter Score (NPS) help in that goal?
Growth in number in the net number of customers is always a good thing. But we want to get the right customers, who will have a very high customer lifetime value. Our objective is to grow the business with a sustainable aid. And to do that, we need a balance of acquisition, retention, growth, share of wallet and improvement of profitability. NPS allows you to identify those things that are most impactful for creating promoters as promoters stay longer, buy more and tell their friends. The Net Promoter System overall helps you to identify which customers you want to keep and whether you are improving or falling behind.
How exactly does it work?
We collect feedback from individual customers and with that feedback we go directly to the individual employees. The important thing is when a customer provides feedback that indicates that their relationship is addressed, be it an unresolved or broken issue. Even when they are happy, they have a lot to say – that they are highly invested etc. – we follow-up with those customers with a live interaction. Ultimately, you are enhancing the relationship with the company and that customer, while also identifying issues that needs to be addressed.
What distinguishes these successful companies, which have the highest NPS?
A number of things distinguish a loyalty leader from the rest. The first is that, they are all very good on the basics. They deliver reliable products that the customers value…at the right price. There is a low-error rate and when there are problems and inevitably there will be in any business, they would cover very well. They make it easy to return things, they make it easy generally and all of them, they are easy to get, service when you needed. They make everything reasonably effortless. Now if that’s all they did, there wouldn’t really have earned the enthusiastic recommendations of customers.
So, they also do two other things, they differentiate their products, they have products that deliver value that competitors don’t or – maybe and/or they deliver their products in an unusually good way. Well Starbucks…it’s just a cup of coffee but they have remarkable consistency in the coffee. I say coffee; but of all the drinks they make, across all their stores around the world and that is hard to achieve. They also have trained their employees to be very interactive and very good at dealing with the customers and in many cases to recognize individual customers and take that little instant of recognition to connect with the customer.
There is. Enduring loyalty leaders also have the founder’s mentality. Even after the founder – let’s list out some of the enduring loyalty companies that – they don’t just rise out of the couple of years and then fall. Chick-fil-A, run by the founding family, privately owned. Enterprise Rent-A-Car, still privately owned, privately run by a family, run by children and grandchildren.
How does founder’s mentality connect with customer loyalty in the Indian perspective?
Yes, this is an interesting observation. I do work all over the world and I spend time not only in India but in other developing economies. One of the interesting things that I have observed is that it feels like more Indian companies are adopting that promoter system and pursuing loyalty-based strategies than in other developing markets. What’s interesting about that to me is that when you are in high growth markets, there is a tendency to focus on new customer acquisition. I’m always reflecting on why… and it occurred to me that many of them are owned or run by the founding families. That many of them do actually have the founder’s mentality and how long-term focus on value creation than publicly traded manager teams often have the luxury of doing.
Is it because in India, private equity and VC form a smaller part of the percentage of the capital markets?
I think private ownership affords you the ability to take a longer view even if it is private equity ownership.
A whole series of major demographic changes are taking place like the explosive growth of teenage and young adult. With the ever-growing mobility of the population, is stability of consumers a thing of the past?
There never was such a thing, it’s a myth in our memory. The difference between various generations and the difference in the baby boomers generation…and generation X and Gen Y, between Gen Y and millennial – It just doesn’t add. I think it’s an ever-shifting landscape for consumption and for consumer behaviour. And for marketing.
There has been an expansion on platforms that has led to consistent growth in marketing expenditure. How can companies get maximum bang-for-the buck in such a scenario?
We are in the middle. 30 years back when I started my career, marketing was done in mass campaigns, in television you would do a mass direct mail campaign, you would do newspaper. Compared to today, it really wasn’t targeted. Most companies really lacked the ability to understand customer at the individual level. From 1990 to today, the technology and capability to target more has evolved from almost zero to what people are calling personalization. The idea that the landscape is shifting for marketing, is not new. What’s new is the set of channels and platforms. There has already been a shift and it will continue to build the idea of identifying a customer who is likely to have a need for a product research because of their behaviour on the product. That’s a new capability that will continue to evolve and it will continue to draw marketing and spending. There are a variety of tools available today to measure the efficacy and they are evolving so quickly that it’s hard to pick one.
What are the most advanced marketing companies doing in terms of enhancing analytical skills, to stay ahead in the game?
We are currently seeing a massive emerging, marketing skills and capabilities. They are deploying analytic techniques that are reliable and statistically valid. Its importantly to develop machine learning, and machine learning algorithms. So again, looking back 20 years ago…the best ones were doing very fine segmentation in customers and prospects. And looking at customer lifetime value as the basis for investments. And now we are deploying people with advanced skills and statistics modelling even higher maths to identify the potential for increased spending and the next best action taken. The companies that are really there are the ones that have been most successful at recruiting talent.