Delight doesn’t fly: Digital customer engagement for the future

Direct mail legend Charles Stryker recounted a famous story in 2014 about data that every leader managing digital customer engagement should know.

Years ago, the US Postal Service discovered they were spending millions of dollars a year to deliver mail to deceased people. Charles was hired to help them get a handle on their address records and create a “Do Not Mail” list. The work involved A/B testing to ensure he made correct assumptions about the data. To test early iterations, Charles sent direct response mailers to groups of people known to be dead, and similar groups that he could prove were alive. The results were astonishing.

The dead people responded at nearly twice the rate of the living.

Multiple tests produced the same results. Researchers eventually determined what happened: successful mailers went to households where the husband of the family died, and their elderly spouses were taking great care to go through the mail of their deceased partners. The widows wanted to make sure there wasn’t anything important in those letters—and probably were emotionally connecting with their husbands through that simple task.

As we think of today’s complicated digital journeys, where we seem increasingly dependent on algorithms and attribution models for targeting and measurement, are we forgetting the real, human element of customer experience? The human element is fundamental to delivering a 360-degree experience. We must understand both people’s expectations, and how high the bar has been set for customer engagement.Real customers, engaged with your brand: Enter data authentication. In a cookieless future, data authentication is key to creating customer relationships and understanding the intent of collected data in downstream systems.

Digital customer engagement: Amazon set the pace; everyone else is behind in the race

Today, brands must consider Amazon the gold standard for customer experience. You buy almost anything in the world available for sale on Amazon, do so quickly with one-click ordering, pay seamlessly, expect ultra-fast shipping, track your orders, easily return products, and get relevant product recommendations. The more you buy from Amazon, the better it knows you. The experience of being an Amazon customer is so powerful that over 200 million people have paid $139 a year to belong to Amazon Prime to get free next-day shipping, and each subscriber spends an average of $1,400 per year. More eye-popping Amazon stats: 175 million people subscribe to Prime Video, 55 million subscribe to Prime Music, and the company controls up to 85% of the e-book market through its Kindle reader and store. What’s the secret sauce? Data gravity: the notion that the more data you have, the more you’ll attract.

Through purchases, streaming choices, music listening, and reading habits, Amazon learns a lot about us. Using that digital customer engagement data, Amazon personalizes our experiences so that we’re willing to give them even more information. This becomes a virtuous cycle. After a while, the cost of switching to another provider seems too high. To acquire all that granular data, there’s a value exchange. For $139 per year, you get unlimited free shipping, which JP Morgan estimates to be worth about $1,000. With Prime Video, you get one of the largest libraries of video and music content in the world, and Amazon keeps its content pipeline fresh by funding original content – to the tune of $13 billion in 2021 alone. The result of the data gravity effect? Amazon’s revenue for the twelve months ending June 30 was nearly $486 billion, netting more than $33 billion in net income.

The data gravity effect: When less is more

In the post-cookie world, brands should rethink their approach to customer data collection by amassing less, but more meaningful data. Of course, not every company has 1.5 million employees, thousands of data engineers, and endless amounts of customer data. But every one of your customers wants exactly the type of customer experience they get at Amazon. They want BOPIS options at their favorite retailers. They want a Dunkin Donuts App that remembers their favorite breakfast sandwich and how they like their coffee. They want Uber Eats to show their highest rated meals from their favorite restaurants, make it easy to order them again, discounts for their loyalty, and—more than anything—to be rewarded for coming back.

This kind of digital customer engagement is incredibly important for the younger generations of consumers. Looking at just the U.S. population, more than 200 million people are deeply digitally embedded Gen Xers, millennials, and Gen Zers. While Gen Xers might have gotten their first iPhone at the ripe old age of 42, they became the first generation to massively adopt technology, and are now the demographic with the most disposable income. Millennials, the first digital natives, became young adults during the social media revolution, dated using Tinder, and used Facebook when it was still considered cool. The oldest Gen Zer was born after the founding of Netflix. Generation Z consumer behavior: What brands need to know Gen Z consumers are beginning to flex their economic muscles, bringing different perspectives and expectations than previous generations. Brands need to adapt.

In short, most consumers today bear almost no similarity to older generations when it comes to digital customer engagement and the way they consume media, purchase products, socialize, and interact with brands. They’re used to heavily personalized advertising and marketing, and their expectations of what “good” means have been driven by the world’s largest companies with the most access to technology and data. This is the reality for every company trying to provide a customer experience today. Digital natives: How to win the trust of Gen Z and Millennials73 percent of digital natives are involved in B2B product or purchase decision-making, and about one-third are sole decision-makers. Learn how to win their trust.

The shifting paradigm for digital customer engagement

Only a few years ago, brands had a difficult, but simpler, remit: build the brand and the consumers would follow. Absolut Vodka was about as undifferentiated a product as anything on the market, but great packaging and a clever ad campaign made it a power brand. It thrived because the world worked on the principles of Byron Sharp, who posited that a marketer needed two things to succeed: availability in the consumer’s mind and availability of the product on the shelf. For decades, most brands had the perfect formula for creating demand: produce a great piece of content in video or print and create massive awareness through advertising. Brands that succeeded in creating availability in customer’s minds (mindshare) and had enough presence on store shelves (retail availability) tended to grow.The battle for consumer hearts and minds was waged with brand advertising and scaled product distribution. When the customer got to the store shelf, the biggest factor beyond price for choosing Tide detergent over Wisk was brand loyalty that one-to-many advertising campaigns created.

That system is dying rapidly, as mass media channels become fragmented into thousands of websites, apps, streaming media channels, and experiences we don’t even understand yet.As a marketer, you can’t buy eyeballs like you used to .This changing paradigm is largely responsible for average CMO tenure shrinking from 44 months in 2017 to only 40 months today. CMOs must be prepared to insert themselves along steps of the consumer journey and capture each tiny piece of digital exhaust that consumers’ gadgets and gizmos throw off, helping to inform their understanding of how they engage with a brand. This is key to building a customer 360 view for modern digital customer engagement. Connected business benefits: Intelligent customer service, happy customersConnected business benefits include happier customers and happier employees – that’s the philosophy of intelligent customer service.

Forget about delighting customers. Instead, solve their problems.

But today’s consumer not only demands personalized engagements across channels – but they also want them to be effortless. Back in 2013, Gartner surveyed 97,000 consumers to understand how customer service interactions with brands impacted loyalty. The results were surprising. Many brands made gigantic investments trying to “delight” their customers, spending as much as 20% more in operational costs, but people didn’t care. Customers just want their problems solved. The study also showed that customer satisfaction scores (CSAT) turned out to be a weak indicator of loyalty – up to 20% of “satisfied” customers planned on moving on to another brand anyway. Also, customer service interactions themselves were four times as likely to drive disloyalty than loyalty, mostly because only unsatisfied customers end up talking to a service rep.

Brands must rethink their approach to digital customer engagement to reach the high bar of digitally native consumers. Nothing has changed since that study, except that we now understand that the delight strategy doesn’t work – customers just want an easy way to solve their problems and move on.What drives loyalty? The simple things:

1. Not making someone repeat themselves
2. Being able to check out from a hotel without visiting the front desk
3. Having self-service options

As we explore what customer 360 really means, we need to look beyond typical customer interactions in advertising, marketing, sales, and service. We need to think about the mechanics of how customers and brands interact in processes like booking a hotel room, returning a product, renting a car, or approving a B2B purchase. We must change our definition of customer engagement to be more comprehensive.

[This post was originally published on The Future of Customer Experience]

Data Management is the Backbone of Enterprise Agility in CX

Moving from next-best-action to next-best-dollar requires richer data, actionable intelligence, and pervasive automation

As Heraclitus reminds us, “No man ever steps in the same river twice, for it’s not the same river and he’s not the same man.” This is arguably even more true since Heraclitus uttered the phrase, given the rapid and abrupt changes we have seen in the world lately and their impact on global business. The global pandemic humbled many retailers that were slow to adopt to digital, as digital-only interactions grew to 72% in a short period of time. Suddenly, “buy online, pick up in store” wasn’t just a nice-to-have convenience feature for customers – it was a requirement for doing business in the height of the pandemic.

Did anyone predict the how rapid and dramatic the rise in global inflation would be? Businesses across the world had to radically alter their pricing and delivery models; as input costs rose, global supply chains tightened – all while consumers were tightening their own belts due to the corresponding rise in prices.

The framework for managing through this is broadly called “enterprise agility,” or an organization’s ability to quickly adapt to market changes. Do you work in an agile business? If you are not sure, think of how well your company would do if your cost of goods surged by 25% in a single month, or how you would react if one of your key markets closed overnight due to a geopolitical conflict, or if the government’s response to a pandemic shut down your business. Of course, all of this has happened recently, and many businesses discovered just how agile they really are.

Amid rapid change, marketing always seems to lead the way. Whether it’s figuring out how to message a price increase to customers, changing a product roll out based on regional market changes, or reacting to the sudden unavailability of a product based on a supply chain shortage, companies need to account for how their customers will react to change, and manage customer experience delivery as appropriate. Product, Sales, and Marketing are the three-legged stool in most organizations – and only one can move fast enough to react immediately to crisis. Changing and introducing new products is time consuming. Changing a sales organization that has been trained, hired, and has set annual targets can’t happen overnight. What can change? Marketing budgets, campaigns, website messaging, webinar content, search keywords, etc. Marketing is the only part of the organization that can turn on a dime.

When times change, and the CEO picks up the bat phone, he’s calling the CMO first. So, what does the agile marketing organization require?

Let’s take an example: A popular outdoor retailer runs a promotion for a new hiking shoe that is a “collab” with a trendy brand — and it goes viral. Suddenly, a sneakerheads worldwide go crazy and start buying. This company, used to a steady and reliable seasonal buyer, is now flooded with orders, running out of stock, and confronting a flood of new customers. While most brands beg for such a moment, it is the ultimate test of business agility, and a critical moment in time. You can win lots of new loyalists – or quickly become a flash in the pan.

What are the three foundational elements needed to succeed?

Data

It starts, of course with customer data management. First, you need the scaled ability to capture first party data with consent. Every new sneakerhead coming to the website and mobile app must be encouraged to authenticate and start engaging with the brand. This involves offering a give-to-get for new customers (free shipping on orders, or a discount) and, more importantly, a scaled mechanism to capture that user’s permission to message her in the future. The experience must be seamless and explicit, as well as completely transparent.

For returning customers, you must have the ability to unify everything you know about them on the surface (SKUs viewed, lifetime value for commerce, loyalty points and status) but also go a level deeper. What is the true value of a customer? How many times do they return an item, and by what method so they return items? How often are they willing to pay full price? This data is only accessible by connecting the backend (financial ledger and supply chain) data to the profile. With a limited amount of a new item, you want to sell out – but you also want to reward your most loyal and truly valuable customers. This uplift is only possible by connecting the backend of business data to the frontend of customer engagement – call it ERP to CDP.

Intelligence

If a company has managed to create a unified data model across the systems I described above, and has, using data science, created models that can predict true customer value, and is able react to changes in behavior and market conditions – you still need to scale intelligence. In other words, given the above requirements, every customer cannot be evaluated individually, and every decision cannot live with a data science team. How strong is your organization’s ability to implement a machine learning framework that updates customer segments based on new information? In the background, ML models need to be continually tuned to changes in engagement across channels, understand how pricing and availability for specific products change behavior, and overlap segments to understand how different buyers of the same product react to campaigns, creatives, and different outlets for marketing and advertising. Lifetime value scores need to be calculated against ever-changing baselines – LTV can change based on product and customer mix over time, making yesterdays big spenders tomorrow’s regular shoppers. Going beyond marketing and advertising, what type of intelligence is required to create success in the call center, or an ecommerce site, or a sales call? Models are only as valuable as their ability to create value in the endpoint of a specific application.

Automation

After intelligence comes automation. How do you action the insights you have aggregated? Low value customers need to be suppressed from the campaign for the popular shoes. When a certain colorway or size becomes unavailable, customers with those preferences must also be suppressed – or encouraged to pre-order. Customers who are the most loyal need to be notified to “buy now” or invited to use their loyalty status to get placed in the front of the line. They need to be put into the call center queue first and, when they visit the website, have a one-click option for putting the right-sized shoes into their shopping cart, with their shipping preferences already pre-filled. When loyal customers come into the store and can’t find what they are looking for, the point-of-sale system must give the retail associate a next-best-offer or action that has a high probability of success. This is the new battleground in marketing – the ability to utilize intelligence at scale to render the right decision across both offline and online channels, in near-realtime.

At some point, every organization comes across a situation that tests their agility, and the customer experience team is often on the front lines. Your customer profiles need to get progressively richer, starting with marketing and advertising interactions, including cross-CRM data from sales, service, and commerce touchpoints – but also go deeper to leverage insights that can only be derived from the backend: ERP data. Intelligence must go beyond data science-provisioned models and scale with machine learning, such that the customer profiles can be frequently updated as lifetime value and propensity scores change based on realtime inputs. To adapt to a fast-moving market, driving that intelligence into the action surfaces of business must be as automated as possible.

This next phase of customer data management, that brings the backend of agile business process together with the frontend of customer engagement, is not about the next-best action or offer. It’s about finding the next-best dollar.

[This post originally appeared in The Future of Customer Engagement on 12 April 2022]