It's How They Want to Buy…Not How You Want to Sell

The Challenge: Companies that focus on what they want to sell — not how customers want to engage — miss the boat on opportunities to drive initial and ongoing sales.

Dunnhumby recently released results of its Customer Centricity Index (CCI) study which measured how well retailers are responding to the needs and wants of their customers — through the eyes of their customers.

The findings are important for all businesses wanting to better connect with customers:

• Companies with higher CCI scores tended to have higher long-term comparable sales growth over a two-year period.

• True understanding of what drives a customer to a brand is an insight that differentiates category leaders from competitors.

• A strong customer experience that meets customer needs had the strongest impact on customer centricity and highest CCI scores/rankings.

• Price was important to customers but was less about "lowest price" and more heavily tied to perceived value.

• Companies that provided the opportunity to give feedback and have interaction were rated higher.

One company that took on the challenge of developing a customer focused business strategy is United Airlines. Starting in 2010 during their merger with Continental they began to build richer customer profiles to increase sales opportunities.

United groups customers by behaviors, such as customers who have been price sensitive. They then use these insights to create more relevant offers such as sending frequent business travelers an offer to purchase an airport day lounge pass, etc.

The company overlays demographic and lifestyle data on customer records and groups them into customer types. United tries to include basic demographic information in each member profile such as age, household income, and net worth, and interest-specific elements such as members who enjoy playing golf.

United's new policies include customer centric actions such as these:

• When a customers is about to reach a milestone, a local representative delivers a hand-written thank-you card to the customer as they scan their boarding passes upon boarding.

• Segmentation that accurately groups customers by behaviors creates more relevant offer opportunities.

Since the initiative was launched, United has been able to convert 4 percent of its non-members to the MileagePlus program, resulting in tens of millions of dollars in additional revenue.

Key Takeaways:

• Show customers that you are "involved" in their buying experience with actions such as a reminder notice about a product or service based on previous behaviors, a thank-you note, a preview of an upcoming sale, a birthday incentive, etc.

• Show customers you are listening by conducting ongoing Voice of Customer-driven assessments of your business and marketing strategies to ensure alignment with customer expectations.

• Increase the frequency of database updates so they reflect the ongoing changes in customer’s needs. Update information regarding preferences, demographics, behaviors, sales purchase history, etc.

Free Shipping and Returns: Cost, Value, and ROI

The Challenge: It’s no secret that online shoppers don’t like to pay for shipping. With carrier rates on the rise, ecommerce businesses are fully aware that there is no such thing as “free shipping”, it is an expense that has to be factored into pricing one way or another.

Many successful ecommerce marketers offer free shipping, and even free return shipping, as part of a “no hassle returns” policy. Zappos is famous for offering free shipping and free 365 day returns as part of their efforts to deliver a “wow” experience. The reward and ROI Zappos receives in exchange for this policy; 75% repeat buyers, even though their products are priced higher than competitors in order to cover the costs associated with delivering that excellent customer experience.

Studies on the Benefits of Offering Free Shipping

Compete.com shows a comparison between two similar retailers and the difference between Patagonia, offering everyday low shipping and The North Face, offering free shipping for holidays.

The numbers also indicate that offering free shipping increases search traffic as well as conversions for The North Face.

The Find is an online shopping comparison site where retailers can list products and offers, including free shipping. Their Quick Promotion tool showed 23% traffic increase for retailers running Free Shipping promotions.

A ShopRunner/Harris Interactive study of over 2,800 online consumers provides the following results from offering free return shipping:

• 81% of shoppers are less likely to make additional purchases on websites that charge for return shipping

• Consumers who paid for return shipping at a given retailer decreased their purchases 75% to 100% within a two-year period.

Takeaways:

Evaluate Costs Involved in Offering Free Shipping: The question for your business is whether or not shipping costs can be factored into your margins, or if it means raising the price. Free shipping does not always have to mean a reduction in your bottom line. Consider these 10 Ways to Offer Free Shipping.

• Test Different Offers: A/B testing of different offers will provide insight into how your customers react to different models. Also compare sales and returns over time to see how the conversion rate and the bottom line are affected. A ProImpact7.com survey shows that 72% of website shoppers abandon the checkout process because shipping rate was higher than expected. The word expected is key. In many cases offering a flat rate or lower shipping might achieve the increased conversion rate you are looking for without decreasing your profit margin.

• Consider the Increased Lifetime Value of Satisfied Customers: Increased customer satisfaction often leads to repeat customers, so the lifetime value of your customer can be another factor in the equation for free shipping and returns. BusinessNewsDaily reports that companies who offer free shipping on returns can see between a 58% to 357% increase in sales in the next two years.

Is Social Media Damaging Your Brand?

The Challenge: Companies who do not monitor what customers are saying about them online—can wind up using social media for damage control rather than for profit.

In a report by Stanford University it was reported that

• 90% of executives claim to understand the impact that social media can have on their organization, however, only 24% of senior managers and 8% of directors surveyed actually receive ongoing reports.

• Approximately half of the companies do not collect this social media information at all.  

If you are not allocating time for brand reputation management, you will never fully know what your customers are saying to you—and more damaging, saying about you to others.

• In a study by JD Power, over 60% of surveyed consumers said they want companies to listen to what they say about them online and to respond.

• And an Aberdeen study on Brand Reputation Management, it was noted that companies that take the time to stay on top of their reputation management are more likely to have a higher customer retention rate.

While many companies have been put in the position of rapid damage control after negative social media chatter, Reebok recently demonstrated their ability to respond quickly, make adjustments, and move forward when consumer voices were raised in protest over a product spokesperson, Rick Ross, after he rapped about drugging a woman and having sex with her without her knowledge.

A well orchestrated campaign by the feminist group, UltraViolet included an online petition signed 50,000 times in 24 hours, a video viewed over 17,000 times, ads on Facebook, and messages to Reebok’s Twitter page. The group called out Reebok regarding its contradictory position of a controversial spokesperson versus its marketing of products to young men and boys and marketing to women and investing in women’s athletics.

As a result the company rapidly severed ties with Rick Ross.

The lesson for all businesses is to truly understand your customers and put in place the ability to listen in every element of the media mix, and react with speed when the voices of your customers are raised--in any medium.

Takeaways:

• It is far easier to cultivate high brand reputation ratings than to do damage control. Create dedicated staff positions to monitor social media on a daily basis to find out what is being said about your business.

• Your monitoring should include searches on all media; search engines, all social media comments on your page(s) or through hash tags, rating sites such as Yelp, and customer complaint sites.

• If a problem arises, don’t delay in acknowledging the situation. Respond honestly and authentically. Do not engage in “corporate speak”.