Digital customer growth: Engaging customers in digital channels

This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organisation without prior written approval from Avaus.

TOM NICKELS WWW.AVAUS.FI

LEADING ENGAGING CUSTOMERS DIGITAL CHANNELS IN

- GROWING VALUE THROUGH PERSONALIZED EXPERIENCES

IMAGE BY CHERRYGARCIA / FLICKR

AND

TOM NICKELS WWW.AVAUS.FI

Sales or revenue is the foundation upon which every business is built. All sales come from your customers. All companies face challenges of growing and retaining customers as interactions and relationships move to the digital space. The only way to differentiate and create value for your customers is by delivering a better customer experience than the competition. To do this, you must listen to customers and interact with them as individuals. Digitally. This requires many changes within the company: new services and distribution channels, new ways of organizing, better data management, new flexible technologies and new metrics.

digital customer

growth

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Digital customer growth - a framework A business model based on customer experience How to build a strong customer experience Using digital transformation to build a customer centric organisation Creating a roadmap for digital customer growth

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DRIVING BUSINESS

We combine strategy, analytics and design with technology and outsourcing services.

Focus areas: •  Digital transformation •  Customer growth •  Digital sales and B2B Lead

management •  Business model & service innovation •  Business process efficiency

100 SPECIALISTS

OFFICES IN HELSINKI, FINLAND AND WROCLAW, POLAND

REVENUE 10+ MILLION € (2012)

SOME GREAT COMPANIES WE WORK WITH:

Digital customer growth – a framework

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FOUNDATION

Customers have changed forever

Google, Amazon,

Apple and Facebook set

new standards

for what consumers

expect from companies

But most old companies are stuck with

their legacy

Slow decision making Legacy IT systems

Old distribution channels Wrong competencies

Company politics Fear of cannibalization

UNIQUE PRODUCT

COST ADVANTAGE

CUSTOMER INTIMACY

BASES FOR DIFFERENTIATION

COMPETITIVE

CREATING A

ADVANTAGE

It’s difficult to differentiate based on price or product characteristics. It might work for a while, but usually competition catches up. However REALLY KNOWING YOUR CUSTOMERS and serving them based on their individual needs will set you apart.

Without a good product companies are not in the game. But the core product has already some time ago become just a hygiene factor for producing a great customer experience.

In the beginning - companies created the product

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LIFESTYLE THEN COMPANIES

STARTED TO ATTACH A

TO THEIR PRODUCTS BY INVESTING IN BRANDING.

What does it say about me if I wear Nike or drink Coke?

Now there was a context for the product, a context that

added some value to customers.

”We have these products, where do we find customers for them?”

“We have these customers, how can we serve them while making a profit?”

It becomes easier. Educational. Fun. Something to share with friends. It multiplies the value of the product.

PRODUCT

SERVICE

CONTENT

COMMUNITY

Shoes Clothes Sensors Apps Devices

Set goals Find routes Track activities

Sharing Events Challenge friends

Workouts Music Voice prompts Training tips

services & content

NOW COMPANIES ARE ADDING MORE CONTEXT THROUGH

Customer needs are fragmenting. At an increasing pace. No company alone in any product category can produce solutions that satisfy the range of needs now on the market. The ultimate way to add context to products is by opening up and allowing others to build upon your product and make it suitable for a whole range of users and needs. In most businesses this war is just starting.

The next battle-field for context - is the battle between ecosystems

This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organisation without prior written approval from Avaus.

ANY BUSINESS

IF YOU CAN ADD SERVICES AND CONTENT TO LIGHT BULBS YOU CAN DO IT IN

CONTEXT

NEEDS AND MOTIVATIONS

PREFERENCES HABITS

LIFESTAGE ATTITUDE

TIME PREVIOUS BEHAVIOR LOCATION CUSTOMER LIFECYCLE

= RELEVANCE

THE HEART OF CUSTOMER INTIMACY IS

BUSINESS MODEL

RELEVANT CUSTOMER ENGAGEMENT

ORGANISATIONAL CAPABILITIES

Customer experience Loyalty Sales

Identify Listen Customize Interact

Data & information

Experience design

Organisation & processes

Technology

RELEVANCE

Grow sales and profitability per customer

Treat each customer as an individual

Move from product centric to customer centric organisation

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2

3

A business model based on customer experience

2

BUSINESS

The business logic of customer growth

Customer growth

Customer experience

Customer loyalty

Sales

Customers Revenue per customer

Retention

Recommends Buys more

Will not switch

Useful Easy

Pleasant

Aktiivisten asiakkaiden

määrä

Keskiostos Ostouseus

X X = 1 000 000 20€ 6 120 mil. € Purchases per year

Customers Average purchase

Segmenting customers based on purchase frequency

1. Sporadic customers 2. Regulars

4. Passive

3. Best customers

1 5 18 0 Purchase

frequency per year

1. Sporadic 2. Regulars 4. Passives 3. Best

1 5 18 0 Frequency

Customers

Avg purchase

Sales

400k 400k 200k 600k

20€ 20€ 20€ 20€

8 m€ 40 m€ 72 m€ -

120 m€ Total revenue from all customer segments

How much revenue and profits do different segments bring?

1. Sporadic 2. Regulars 4. Passives 3. Best

1 5 18 0 Frequency

132 m€ Total

1 5,5 20 0 Growth in frequency

Sales growth 12 m€ = 10%

What is the best way to grow sales?

All Store Telesales Internet

… Customers Purchases Loyalty

CUSTOMER BASE - FEBRUARY 2012

•  Total number of customers: 852030 •  Marketing permissions: 754044 (88%) •  New customers this month: 5713 •  Average purchases per customer: 2,3

Existing customers New customers

Share-of-wallet

12 MONTH TREND

Products per customer

Revenue per customer

Customer life time value

How to build a strong customer experience

ENGAGEMENT

3

Step 1

Identifying customers

UNIDENTIFIED

IDENTIFIED

HOW DO WE IDENTIFY THE CUSTOMER?

CHALLENGE:

THE

THIS IS WHAT YOU SEE, BUT IT IS NOT REALLY ME A LOT OF THE CUSTOMER INFORMATION COMPANIES CURRENTLY USE ISN’T REALLY FOCUSED ON GETTING TO KNOW WHO THEY ARE AND WHAT THEY NEED.

AND ABOVE ALL IT DOESN’T TELL MUCH ABOUT WHAT THE SITUATION – THE CONTEXT – OF THE CUSTOMER IS RIGHT NOW.

RELEVANCE THE HEART OF CUSTOMER INTIMACY IS

IS THIS IMPORTANT TO ME IN LIFE?

IS HELP FROM THIS COMPANY RELEVANT IN THE NEAR FUTURE?

IS THIS SOMETHING I NEED RIGHT NOW?

PERSONAL CONTEXT

IMMEDIATE CONTEXT

RELATIONSHIP CONTEXT

Web searches

Location

Weather

Call to CC

Expressed needs

Attitudes

Social connections

Lifestage

Area of residence

Visit to webpage

Products/ services in use

Purchase history

Customer lifecycle

Contact history

Purchase

REAL-TIME

DAYS TO MONTHS

YEARS Preferences

REAL-TIME BEHAVIORAL DATA

CUSTOMER PROFILE DATA +

Contextual marketing is about understanding not just who someone is but where they are, what they are doing, and what they are likely to do next. It’s about combining the right information about a customer and the context to deliver the right services and communication at the precise moment it offers the most value.

understanding context

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Good data is like the ears of a sales man. Without it you

have no clue what the customer needs.

Integrate traditional customer profile data with real-time behavioral data from all channels in order to

UNDERSTAND the need and REACT to the context .

DATA INVEST IN

Step 2

Deepen customer insight

MARKET NEED CONTEXT

IN WHICH MARKET SHOULD WE INVEST? SEGMENTING ON A MARKET LEVEL. FOR INSTANCE CORPORATE CUSTOMERS VS CONSUMERS.

WHAT SHOULD WE OFFER? SEGMENTING BASED ON DIFFERING ATTITUDES AND NEEDS. FOR INSTANCE TASTE, CONVENIENCE, OR COST.

HOW SHOULD WE TREAT A SPECIFIC CUSTOMER? SEGMENTING BASED ON THE SITUATION OF THE CUSTOMER. FOR INSTANCE VISITED WEB-SITE, ORDERED SPECIFIC PRODUCT OR IS AT LOCATION X.

VALUE

HOW CAN WE GROW LIFETIME VALUE? SEGMENTING BASED ON CUSTOMER VALUE. FOR INSTANCE HIGH-VALUE, CHURN-RISK VS UNPROFITABLE CUSTOMERS.

Different approaches customer insight

RECOMMENDATION ENGINE

TRANSACTIONAL / VALUE

BEHAVIORAL PROPENSITIES

ATTITUDINAL NEEDS

DEMOGRAPHICS / GEOGRAPHY

LIFECYCLE

Personalisation / Targeting

Value management

Proposition development

Useful Sometimes useful Not useful on its own

THERE ARE MANY WAYS TO IDENTIFY CUSTOMER CONTEXTS – USING ONLY ONE IS NOT ENOUGH

CO

NTE

XTU

AL

IND

ICA

TOR

BUSINESS NEED

Most valuable customers: Retain Most growable

customers: Grow

Marginal customers: Business as usual

Unprofitable customers: Dismiss or lower cost

Cost to serve

Image: Peppers & Rogers group

Customer value segments

Current value Potential value

value Segmenting customers based on

behavior Segmenting customers based on

PROPENSITY WHICH CUSTOMERS ARE LIKELY TO BUY SOMETHING, LEAVE OR DO OTHER SIGNIFICANT THINGS?

THROUGH PREDICTIVE MODELLING TARGETING CAN BE MADE MORE EFFICIENT. THIS HAS A POSITIVE EFFECT ON BOTH THE BOTTOM LINE AND ON THE CUSTOMER EXPERIENCE.

Developing customer

STRATEGIES

Retain high value customers

Broaden the relationship

Acquire the right customer

Improve margin of unprofitable custmers

Understand me and provide me with reasons to stay

(e.g. Loyalty recognition, Next best action)

Provide me compelling reason to purchase more

(e.g. Next best action, Behavioral triggers, Remarketing)

Understand me and make relevant, competitive offers

(e.g. Exclude high defectors, Debt risk, Matching customer type)

Can I be satisfied with less (e.g. Identify, Communicate, Steer to self-service, Raise prices)

BUSINESS CHALLENGE CUSTOMER ISSUE

€

ENGAGEMENT Interactions

CUSTOMER VALUE Money spent

€ €

€

PERSPECTIVE ANOTHER

ON CUSTOMER VALUE

Step 3

Customize your offering and

communication

Different needs and motives drive the development of customer offerings

AtoB ”I need a car to get from one place to another”

Status ”I have money and power, and I want to show it to others. Everybody admires my car.”

Convenience ”I need to be able to trust my car. It always functions the way I wish.”

Lifestyle ”The car goes along with my lifestyle. I have my own personality and I want to experience it through my car.”

Green values ”I appreciate ecological values. My car does not pollute the nature.”

Prospect > New customer > Developing customer >

Stabilized customer >

Good customer > Recommending customer >

Customer acquisition > Welcome >

Up-sell and cross-sell >

Strengthening the service

experience> Strengthening

loyalty > Customer

recommends >

Abandoning shopping basket

Resigning Passivity…

Passivity Churn…

Recognizing interested customers

Welcome program

Analytics based actions

Targeted campaigns

Triggered added sales

Guidelines on how to use products and services

Rewarding, consideration Activation of service

use

Potential customer

Saving the customer relationship

Recommending program Ensuring satisfaction

Renewing contracts

Communication

triggered

manual

automatic

scenario

Service messages

Newsletters

Tempting the customer back

Managing lifecycle

Knowing when a product or service is relevant to the customer is one of the hardest things to

do. But one that potentially pays of big time.

Identifying the right customer behavior that SIGNALS THE MOST PRESSING

CUSTOMER NEEDS and triggering communication based on that may increase

relevance and sales SIGNIFICANTLY.

WHEN?

TIMING HAS A BIG EFFECT ON RELEVANCE

Image: www.smallbizwithkids.com

READY TO BUY

The different situations of customers and prospects should be recognized. Some are just doing initial browsing, while others are seriously thinking about buying. To optimize sales results we need to distinguish between customers in different phases of the buying cycle. Automated lead nurturing programs can be used for customers that are not quite ready yet. That allows us to focus scarce sales resources on customers most likely to buy.

FOCUS SALES EFFORTS ON THOSE THAT ARE

Image: Marketo – The definitive guide to lead scoring

”Lead scoring is a sales and marketing methodology for ranking leads in order to determine their sales-readiness. You score leads based on the interest they show in your business, their current place in the buying cycle and their fit in regards to your business.”

Scoring leads in order to find customers that are ready to buy

SIMPLE REACTIONS TO CUSTOMER ACTION WILL MAKE THE CUSTOMER FEEL THAT YOU RECOGNIZE HIM – IT HAS A CLEAR FEEL-GOOD FACTOR TO IT.

(and it affects sales)

Example of Dialogue Model: New members

Business goals / aim • Activate customer • Ensure customer satisfaction

Customer experience • ”I get benefits from” • ”Great offers and benefits” • ”Let´s check out the newest products”

Description: • After joining the customer is encouraged to utilize her membership

• Also strive to gain more customer knowledge through updated profile

• Updating or changing profile information is a added sales trigger

Rules: • Trigger valid for all new members that have not yet used their card

• Once the card is used, the goal of the communication flow is met and this flow is ended

• Communication will also be stopped if the customer does not activate within 360 days

• Product offerings should include only products that are not often updated

MAKE COMMUNICATION MORE RELEVANT BY

ADAPTING IT TO THE NEEDS AND CONTEXT OF

THE INDIVIDUAL CUSTOMER.

PERSONALIZE

NEW SERVICES NEW PLAYERS FOCUSING ON ADDING VALUE TO THE

CUSTOMER CONTEXT ENTER OLD MARKETS.

+

”runtastic Roadbike is your comprehensive bike app for your smartphone. The integration of heart rate, cadence, and speed sensors lets you get more precise tracking and analysis of your biking”

my network THIS IS

What value can it bring to products and services I use?

How can companies facilitate that value?

REMARKETING RELEVANCE TAKING REALTIME RELEVANCE ONE STEP FURTHER - KEEPING UP

WITH THE CUSTOMER CONTEXT ONLINE

Web user

CLICK

Company website

User leaves

Popular sites

User returns

”Remarketing is a feature that lets you reach people who have previously visited your site, and show them relevant ads when they visit other sites.”

- Google

MOBILIZE.

”The world’s finest department store

brings the greatest international brands to

iPhone.

In-store, navigate your way around 4,000 of

the world’s most premium brands over 1 million square feet and

7 floors.”

Using digital transformation to build a

customer centric organisation

4

CHANGE MANAGEMENT

Capability 1

Customer centric leadership

”Newsweek has announced that it is going bringing an end to the magazine’s 79 year history in print.”

DIGITAL ONLY

After iPhone changed the game Samsung was able to convert its

portfolio to smartphones while Nokia failed to do so.

Market demand can steer you in any number of directions, but a vision of a future should provide the compass

for making the big bets.

What is at stake? Successful vs

unsuccessful change

Probably the most important strategic change in Nokia's history was made in 1992, when the new CEO Jorma Ollila made a crucial strategic decision to concentrate solely on telecommunications.

Nokia’s first bold move

Will Nokia’s next move ever pay off?

"If we did not act, we faced a draconian future where one man, one phone, one carrier was the

future," he said. "That's a future we don't want.”

Google: we created Android to stop an

Apple-dominated future

Four dimensions of managing digital customer growth

1. Managing Customer Experience

2. Managing Customer Insight

3. Managing Customer Lifetime Value

4. Managing Customer Centric Culture

Are you actively developing and delivering consistent positive customer experiennces in all channels?

Do you have an accurate view of customer needs and behaviour that is based on data and facts?

Do you know the value individual customers bring and are there systematic programs in place to increase that value?

Are all employees committed and motivated to create value to customers and serve them based on their individual needs?

Capability 2

Data quality

In 2002 digital data surpassed non-digital for the first time. By 2007 94% of all information on the planet was digital.

The volume of information

is growing exponentially

All companies are now in the information business Make existing products and services more valuable to your customers by building in more data and information. In B2B this is obvious. Sharing data is a key way for adding value to products and services. But it applies to B2C as well. Apps for smart phones. GPS for cars. Smart TVs. Recipies on food packages.

*Source: Temkin Group Q1 2011 Consumer Experience Survey

customer experience

Amazon is the grand master

of using customer insight to improve the customer

experience.

And results are impressive.

Amazon is the most recommended company*

with 82% of customers saying they would

recommend it.

Information drives a superior

This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organisation without prior written approval from Avaus.

LIGHT BULB

IF SOMEONE CAN REINVENT THE CUSTOMER EXPERIUENCE OF A

THE ANYTHING CAN BE REINVENTED

GENERIC LED BULB 5,95 €

PHILIPS HUE 59,95 €

Philips Hue is a great example of a product where information information adds context to product usage. Contexts adds customer value. By increasing customer value Philips can charge a price premium for a product that otherwise would be generic. Information thus has become a key driver for profitability.

Information drives value

VS.

10-fold

price

premium

Geckoboard

Real-time information has become one of the most valuable management tools around. We need to know what is happening right now – are customer buying, are competitors responding, are we making profits – in order to make smart decisions.

Demographics Inbound contacts

Campaigns and responses Web history External

datasources

Marketing database

Purchase history

360 degree view of

customer

Data collection Data cleansing Data enrichment Data security Data usage

Dat

a so

urce

s D

ata

man

agem

ent

Dat

a re

posi

tory

Using data to drive insight and interactions

Managing data

Capability 3

Customer experience design

avaus.fi website 76

“ I've learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel. ”

BIG EMOTIONS

Maya Angelou, american poet

CREATE

Apple. Zappos. Net-a-Porter.

simplicity drives convenience convenience drives value

value drives profits

THE HOME BUTTON

”Being simple isn’t as simple as it used to be. IKEA is growing, and growing fast. Today, it takes strategy to be

simple, but it must be that way. It can be hard to find simple in a complicated world but it is the IKEA way.”

Hansi, Ikea employee on Ikea.com

Nowadays, customers don’t want just function. They want pleasure — good products that are aesthetically appealing.

Starbucks is to the age of

aesthetics what McDonald’s was

to the age of convenience.

Image: homedsgn.com

This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organisation without prior written approval from Avaus.

PHYSICAL PRODUCTS

AESTETHICS DRIVES DESIGN OF

DIGITAL SERVICES

BUT AESTETHICS IS AS IMPORTANT IN

MAPPING THE CUSTOMER JOURNEY WILL HELP TO DEVELOP THE SERVICE EXPERIENCE IN MORE DETAIL

Capability 4

Customer centric organisation and processes

continuous

process

Introducing digital activities should not be seen as an individual project

Digital is a continuous process…

…bringing new ways of working, communicating and marketing, serving customers

Digital first Change your mindset for marketing to ”digital first”. Calculate

the ROI for marketing. Digital channels are (almost) always more efficient than traditional channels.

” Give people a purpose, give them big exciting things to do.”

Inspire people Terry Leahy set an inspiring vision for Tesco’s entire staff: 1) Become the leader in grocery retail 2) Create a new concept for consumer goods retail 3) Go international. All of them came true.

Sir Terry Leahy, former CEO of Tesco

All marketing activities should be connected to sales. Sales data tells you what your customers value. It will show you what works and what doesn’t, and which marketing investments are worth making.

Marketing & sales as one

All N

ames

Pros

pect

&

Re

cycl

ed

Lead

AWAR

ENES

S

Enga

ged

Opportunity Customer

Sale

sLe

adMarketing Sales

Collaboration with sales

Becoming a digitally transformed organization or function does not happen over night. Change happens step by step. Start with the basics, like managing data and communicating in digital channels. Connecting web data from the customer interface with your own data assets, and using that insight for business decisions comes after a year or two.

crawl – walk – run

Capability 5

Flexible technology platform

REACT IN REAL-TIME RELEVANT TIMELY INTERACTIONS ARE POSSIBLE ON A GRAND SCALE ONLY THROUGH AUTOMATING PROCESSES.

Example: technical architecture

Capability 6

Customer centric culture

Change is fundamentally about people

CULTURE DRIVES THE MOST INNOVATIVE COMPANIES FORWARD NOT STRATEGY

“I think there is a world market for

maybe five computers.”

Thomas J. Watson Sr., then-president of IBM, made an apparent misjudgment of the PC market’s potential. Under Watson’s leadership, IBM — which invented the PC — didn’t have a vision as to how big the market could become and let others, especially Microsoft, get the lion’s share of the value creation.

This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organisation without prior written approval from Avaus.

VOLUME AND DISTRIBUTION

OF INFORMATION driven by digitalisation

SPEED OF CHANGE

SPEED OF CHANGE

ACCELERATE

THE

MORE INFORMATION = FASTER CHANGE

DIGITALISATION CAUSES

TO

industry dynamics

may change almost

over night

This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organisation without prior written approval from Avaus.

game changers Are you ready for

being introduced in your industry?

Make mistakes - success comes from learning, learning comes from trial and error Mistakes are a requirement for learning. They will point you in the right direction. Organizations where people are punished for mistakes will lead to fightened organizations. Fear makes people passive. The biggest success stories include a lot of sidesteps that later proved to be mistakes. But which all had their part in pointing those companies in the right direction.

The path towards customer centric culture

Creating a roadmap for digital customer growth

5

ROADMAP

Strategy and hands-on execution in parallell

CUSTOMER STRATEGY INSIGHT

AUDIT CONCEPT DESIGN

CHANGE MANAGE- MENT

CREATIVE DESIGN

DATA STRATEGY

REPOR- TING &

ANALYSIS

CUSTOMER MANAGEMENT

PLAN PILOT

EXECUTE AND EVALUATE

PILOT

IT ARCHI- TECTURE

EMPLOYEE ENGAGEMENT &

TRAINING

CAMPAIGN MANAGE-

MENT

TECHNICAL DEPLOYMENT

CONTENT PRODUC- TION

TECHNOLOGY SERVICES

DATA MANAGE-

MENT

Strategic design

Hands-on execution

Vision Roll-out Optimize

STRATEGY DESIGN TECHNOLOGY ANALYTICS

CROSS COMPETENCE TEAMS

PROCESS MGMT

Piloting and implementation

Customer insight

Defining customer strategy

Customer definitions and selections, Customer

lifecycle

Moments of truth, Offering, Service channels

Culture, Business processes, Development

areas and roadmap

Vision and objectives, KPI’s

Why? Who?

What? How?

avaus.fi website 109

Example: Digital transformation program

2012 2013 2014

Three year roadmap for Digital Customer Growth

1. Data and technology

2. Customer dialogue

3. Customer processes

4. Service innovations

5. Organisation and culture

New website

Resource and channel optimization

Development of new digital services

Key data management

Mobile services

Online customer service As is analysis

Production of digital contents

Online sales development

Direct customer dialog

Knowledge management

New working methods New job descriptions and

organization

Process automatisation

The winners are those organisations that can learn new things and unlearn old things at an ever increasing speed.

Thank you!

Tom Nickels Senior advisor / Avaus Consulting

+358 40 5443348 / tom.nickels@avaus.fi