Should companies focus on customer acquisition or customer retention?

The choice between customer acquisition and retention is a false choice.  I recommend instead employing a diversified and balance customer lifecycle management approach with customer acquisition, onboarding, development and retention elements.

Customer Acquisition, Development and Retention are very connected and have many downstream and upstream implications.  For example, many Customer Retention challenges are embedded in downstream poorly designed Customer Acquisition and Onboarding programs.  Therefore, focusing on any one element and not the others can produce underwhelming results.

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Does customer behavior speak louder than words?

I found this note on “Don’t listen to what your customers say, watch how they behave” by Rita Gunther McGrath very thought-provoking. Please note particularly:

“I am often asked by companies with whom I work whether focus groups, surveys or customer panels are useful in learning what customers want and more importantly, what they will pay for. Sure, these techniques are helpful and sometimes can lead to useful insights. But it is usually a huge strategic mistake to base investment decisions or innovation projects on data gathered through these means. Why? A benign explanation is that we are all massively unaware of what really does drive our behavior. A less charitable explanation is that when people are asked questions, they tend to respond the way they think the person asking would like them to (which is one reason why doctors always double the number of drinks per day patients report consuming).”

See also a similar perspective from Russ Ackoff: There is no point in asking consumers -who do not know what they want – to say what they want.

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Are customers loyal to your brand or to your points?

I found the following observation by Niraj Dawar very instructive.  Please note particularly:

“From a brand manager’s perspective, the question is what is a consumer loyal to — are they loyal to the brand that you’re selling or are they loyal to the points? If they’re loyal to the points the moment you stop those points your product will stop selling,” Dawar cautions. “Or the moment a competitor offers an equivalent amount of points on a slightly different program, the consumer will switch.”

There’s a better way to attract customers, he says. Companies that can make product “easier to buy, easier to find, easier learn how to use and then eventually dispose,” tend to retain its customer base for longer periods of time, Dawar says.

“It’s in the interaction. It’s in how the customer buys rather than what we sell them,” he adds.

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When sales and marketing goals go wild

In his Harvard Business School working paper, Max Bazerman argues that:

The harmful side effects of goal setting are far more serious and systematic than prior work has acknowledged.

Goal setting harms organizations in systematic and predictable ways.  The use of goal setting can degrade employee performance, shift focus away from important but non-specified goals, harm interpersonal relationships, corrode organizational culture, and motivate risky and unethical behaviors.

In many situations, the damaging effects of goal setting outweigh its benefits.”

Sales and Marketing goals, in particular, often produce similar harmful side effects as evidenced by the following cases:

The first case describes a retail practice of “walking the [empty-handed] customer” out of the store to facilitate meeting a “market basket” goal:

“With the ever-present risk of bringing down a store’s Market Basket average, several employees said, upper management instructs store management that staffers who think they won’t be able sell $200 worth of add-ons should tell the customer the computer is not in stock

“It’s called ‘walking the customer,’ because we let them leave the store empty-handed.” said Ms. Shah, who works in a Staples store in Fountain Valley, Calif.”

The second case outlines how sales goals [quotas] can actually reduce profits by producing certain counter-productive gaming behaviors:

“While [sales] commissions may spur effort in unequivocal ways, the quota [...] can sometimes result in agents gaming the system. “Those who have already made the quota in a current compensation cycle may have an incentive to postpone additional sales,” says Nair. “Alternatively, those who perceive they have no chance of making the quota in the current cycle have a perverse incentive to postpone their effort to the next cycle.”

In any case, managers should systematically anticipate, discover and counter-measure the harmful side effects of goal setting.

For a third such case, see also: When Persistence Backfires

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The Umpqua Bank Local Spotlight

I found this The Umpqua Bank Local Spotlight concept very inspiring.  Please note particularly:

“To support businesses in our community, we sell their goods in select Umpqua stores and pass on all the proceeds. There is no cost to the business, and they don’t even have to be an Umpqua customer. Watch the short film above to see how Local Spotlight helped Northwest Wools.”

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The BBVA Innovation Center

Frank Piller directed my attention to this fascinating Case Study of Open Innovation at BBVA.  Please note particularly:

“We work with our own employees, as well as clients, universities and business schools, and third party developers,” he says. “This collaboration helps us to understand first-hand what is changing, what our customers expect from us and how to respond to their needs.”

The approach can be seen in action through last year’s Innova Big Data Challenge which attracted developer talent from across the world to compete for EUR90,000 in prize money by using BBVA transaction data to create new services, applications and insight into consumer demands.

“The result was amazing,” says Gallego. “The Challenge generated 144 high quality apps from 19 different countries, showing us new ways of working we hadn´t thought of before. In fact, some of the winners of Innova Challenge have been hired by the BBVA Big Data team because of the skills and merits displayed during the contest.”

Posted in Big Data, Consumer-Driven Innovation, Crowdsourcing, Customer Co-Creation, Customer Collaboration, Innovation | Leave a comment

Does exceeding a customer promise pay off?

I found this research on the pay off of exceeding a customer promise very insightful.  Please note particularly:

“The bottom line, Epley says, is that exceeding a promise may not be worth the effort you put in. “Invest efforts into keeping promises, not in exceeding them,” he says. And this advice also holds true for businesses, which should prioritize resources to make sure they do not break promises, rather than trying to go above and beyond.

To test this idea further, Epley and Gneezy asked participants in a follow-up study to imagine they had bought concert tickets for row 10 and then either received worse tickets than promised (row 11, 13, or 15), better tickets than promised (row 9, 7, or 5), or exactly what was promised. Participants were more negative about receiving worse tickets but were no more positive – nor more likely to recommend the company – when they received better tickets than promised.”

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