A Recipe for Customer Success Instalment 3
IN THIS INSTALMENT...
Elsi and the team present their findings from the customer analysis to the Sue-Chef team
The team have constructed a picture of the customer base. Which group of customers
will Elsi highlight as most valuable? What type of benefits do the team recommend?
Find out all the insights including the importance of paying attention to each layer of
the CX Pyramid.
The Sue-Chef team has decided to apply a customer lens to their first-party customer data, to gain some insight into what customers are experiencing as they interact with the Sue-Chef ordering and delivery processes. They are favouring a Customer Delight / Customer Intimacy strategy to bolster their profitability in the face of intense competition that has increased during the covid restrictions. Elsi and her team have been interviewing management and analysing several years of sales transactions and are due to present their findings at a larger meeting that has been organised in a room overlooking the large fresh produce market at Flemington, where Sue-Chef buy many of their ingredients.
“This is where we source in-season ingredients that are not already under long-term supply contract with growers,” explained Jeff as he and Elsi looked out over the teeming chaos that was the early morning wholesale produce market, with forklifts and workers moving a wide array of boxes and pallets around the market floor.
“We have menu designers and buyers inspect the produce supplies regularly, so if there is a particularly good item, or price, we can add it to the boxes in pipeline,” Jeff continued. “This flexibility allows us to surprise customers with the freshest and more exotic ingredients from time to time, and they tell us it stops our meals from becoming too predictable.”
“OK, let’s get started. Hopefully you can hear over the noisy trade in purple cauliflower below,” said a sunny Elsi.
The group is larger today, adding several of the managers who had been interviewed in the past couple of weeks, including Customer Service, Product Quality Assurance, and the Digital Development Manager.
“We have some initial insights from the analysis of your input and data that we are excited to discuss with you all, but to provide context, and to explain why we adopted the approach we did, I have asked Dave, one of our customer loyalty experts, to present the key concepts, so we all use the same concepts and terminology.”
“Hello,” welcomed Dave. “It’s good to meet the makers of our favourite Sicilian meatball dinner kit, a real hit with the kids at my place, even when Dad cooks it!”
“Let me start by stressing that customer loyalty is an outcome, not a thing, and as an outcome it can be measured, managed, improved and yes, removed,” started Dave. “Increasing customer loyalty is a process that takes time, not a single ‘killer’ transaction, because it is based on trust, and customers need time and experience before they choose to trust you.”
“We use this simple pyramid to illustrate the progression needed to build customer loyalty, a progression important to Sue-Chef as customers can freely choose to purchase from a competitor or simply stop buying.”
“You have to start at the bottom, and you cannot skip steps,” said Dave pointing to the projection screen. “The bottom of the pyramid requires you to be reliable in meeting customer needs, honouring your brand promise and demonstrating that you can be trusted. Some companies build impressive customer loyalty by just achieving excellence at this level - think Aldi’s always low prices, or Federal Express with their ‘when it absolutely must be there the next morning’ promise.”
Make it Easy
“But when your competition is matching you in reliability, and if you have established trust, you should move to the next layer and offer a personal relationship to your customers,” continued Dave. “Personalisation makes it easier for individual customers to do business with you, reducing effort and demonstrating you value their business enough to make the effort. Customers, being human, do like to be noticed. This further reinforces trust if done and timed well, otherwise it feels creepy. Beyond pure efficiency, being ‘easy to do business with’ requires you to capture more data about the customer and use it wisely. It raises switching costs for the customer. To start buying from a competitor who does not know as much about them requires they train another supplier in what they want, and they give up ease until they do.”
“It is partly because they help capture customer data that Loyalty Programs fit in this layer of the pyramid,” emphasised Dave.
Programs and their role in building customer loyalty
“So how should we think about whether a program is the right choice in our situation, and if it is, what kind of program to build?” enquired Jeff.
“Classic accumulation programs, like frequent fliers and coffee card programs, work best when there is an uneven distribution of value in your customer base. Think of the Pareto Principle, with a small percentage of high-value customers making a disproportionally large contribution to sales,” Dave continued. “High value customers are most likely to enrol in the program and they will receive the most rewards, directing program investment to the customers you want to retain the most. If your customer value distribution is relatively flat, think again about using a program as the loyalty mechanic and work out how to attract lots of light buyers cheaply.”
“Customers think of two dimensions when considering engagement with a program. They implicitly understand there is value in their loyalty, but also their data, and they look for a value exchange,” pointed out Dave, “so they balance how long it will take them to earn a reward with how valuable and desirable the reward is. If the reward is attractive, like a free flight, you can require more, prolonged effort from the member. Program tiers encourage continued engagement and mark progress for the member. If the reward is relatively low value, like a free coffee, the time and effort to achieve it must be modest and complications like program tiers will be counterproductive.”
“That makes a lot of sense - that’s why I don’t join complicated programs with average rewards,” added Sue. “It also explains why the grocer’s programs have no tiers and offer me so many bonus points, to make rewards closer. I want discounted groceries much quicker than the free family holiday on Qantas.”
“You’ve got it,” nodded Dave. “We will work harder if the reward is worth it. If not it better be easy, or we lose interest.”
Make it Enjoyable
“Finishing the pyramid, is the ‘Fun’ layer, where the emotion in brand engagement is reinforced, to increase loyalty and encourage customers to advocate for you, putting their own social credibility on the line. Hard to achieve but awesome if you get there with your customers.”
To find out what happens next, download the full instalment.