customerexperience

How to avoid unprofitable customers

Not all customers are profitable to a business. There are those who only ever buy products at a discount. There are customers who return products repeatedly. And those who utilize customer service disproportionately. (It turns out the customer isn’t always right!) Even though it goes against our instincts, there are customers that companies should not want – they should either be “fired” or, better yet, never become customers in the first place.

Some examples:

  • Years ago, Best Buy classified its customers as “angels” or “devils.” According to The Wall Street Journal, “The devils are its worst customers. They buy products, apply for rebates, return the purchases, then buy them back at returned-merchandise discounts.” They changed their policies to make them less vulnerable to exploitation, adding a 15% restocking fee and selling restocked goods over the Internet instead of in-store.
  • Hubspot had two main customer segments: people who run small businesses (1-10 employees) whom they called “Ollie Owner,” and marketers at companies with 10-1000 employees (“Mary Marketer”). At a certain point, the company realized that the Mary Marketers were much more loyal and profitable then Ollie Owners. They didn’t “fire” their Ollie Owner customers, but rather, focused their marketing and service efforts on pleasing Mary Marketers.

How can your company avoid unprofitable customers?

  • Analyze existing data to identify and focus on customer groups that are likely to be profitable. Consider behavioral segmentation, looking at purchase recency, frequency and value, as well as customer lifetime value.
  • Approach discounting with care, looking for ways to incentivize good customers rather than encouraging unprofitable ones. One option: make discounts part of a loyalty program.
  • Develop personas for both profitable and unprofitable customers. Those “negative” personas can help guide marketing and product offerings, making sure you appeal to the good customers and not the unprofitable ones.
  • Pamper your high-value customers. Provide an amazing customer experience to your most profitable customers. Consider having explicit customer tiers like airlines do with frequent flyer status – those who are most profitable can unlock extra bonuses and services.
  • For some companies, it may make sense to screen customers and/or have minimum purchase levels.

Let’s discuss how to find your most profitable customers. Email me at info at bureauwest.com.

Sources: “Case study: how audience-driven products built a unicorn,” GTMonday, 3/4/24; “Best Buy hopes to exorcize devil patrons,” Ars Technica, 11/8/04

Posted on by Jay Zaltzman

The customer trust gap

90% of business executives think customers highly trust their companies while only 30% of consumers actually do (according to PwC’s 2024 Trust Survey). That “trust gap” is a problem: when customers trust a company, they are more inclined to make repeat purchases, less sensitive to price changes, and more likely to recommend the brand to others. More trust equals higher profits.

How can companies actually increase customer trust? Consider the following actions:

  • Customer service: This is your frontline in the battle for trust. Ensure your customer service is responsive, empathetic, and solution-oriented. A positive service experience can turn a disgruntled customer into a loyal advocate.
  • Listen: Engage with your customers across multiple platforms. Whether it’s social media, email, or in-person interactions, make sure you’re listening and responding to their needs and feedback.
  • Care: Demonstrate that you value your customers beyond the transaction. Personalize interactions, celebrate their milestones, and make them feel part of your brand’s journey.
  • Transparency: Be open about your products, pricing, and policies. Customers appreciate honesty and are more likely to trust brands that are upfront about their limitations and strengths.
  • Social proof: Encourage satisfied customers to share their experiences through reviews and testimonials. Real stories from real people carry more weight than any marketing message. Share these testimonials widely to build credibility.

One example of a company that enjoys customer trust is Chewy.com, a pet retailer. Chewy has distinguished itself through its exceptional customer service. For instance, when customers experience the loss of a pet, Chewy has been known to send sympathy flowers to grieving customers who reach out to return pet food. This gesture not only includes a full refund but also encourages customers to donate the food to shelters, showcasing a deep understanding of customer emotions and needs.

Another example: Subaru. Known for its transparency and commitment to safety, Subaru has built a reputation for reliability and proactive customer service. This level of trust is further reinforced by the company’s consistent efforts to address customer feedback and concerns, which enhances its relationship with consumers.

Find out how to increase trust among your customers. Email me at info at bureauwest.com.

Sources: “PwC’s 2024 Trust Survey: 8 key findings,” PwC, March 12, 2024; “Translating trust into business reality,” PwC, September 23, 2022; “How Business Can Build and Maintain Trust,” Harvard Business Review, February 7, 2022

Posted on by Jay Zaltzman

Getting inside customers’ brains

I was just listening to a podcast from Hidden Brain about how habituation impacts our enjoyment and engagement with things in our lives. Habituation is the brain’s tendency to tune out or discount the familiar and favor the new. For example, research has found that travelers experience the most joy during the first two days at a vacation spot. They might still enjoy themselves on the following days, just not as much as they did when the experience was brand new.

It occurred to me that companies can utilize an understanding of habituation to market more effectively and to also improve the customer experience, to get customers to keep coming back and even recommend the company to their friends.

Make marketing more effective by combatting habituation:

  • Vary marketing messages. Tell stories. Use humor. Tug at heartstrings. Find fresh angles to present your core value proposition. This will increase interest from prospects and may also provide existing customers with new reasons to love your brand.
  • Use a mix of content formats. Different formats keep your audience on their toes, eager for the next surprise. Consider a quirky video one week and an intriguing infographic next. That kind of variety can reignite interest and keep your brand top of mind.

Overcome habituation for better customer experience:

  • Feedback and innovation. Keep learning about your customers. What delighted them yesterday might not work tomorrow. By staying ahead of the curve, you’ll ensure your marketing and customer experience remain fresh, engaging, and effective.
  • Consider personalization. Personalized emails, tailored recommendations, and bespoke offers make your customers feel seen and valued. This individual attention reduces the risk of habituation because each interaction feels unique and relevant.
  • Surprise your customers. Incorporating unexpected rewards or gestures can significantly enhance the customer experience. Surprise discounts or little freebies with a purchase are moments that stick with customers, breaking the routine and creating positive associations with your brand.

Let’s discuss how to keep your brand fresh in customers’ minds. Email me at info at bureauwest.com.

Sources: “Making the World Sparkle Again,” Hidden Brain, 6/24/24; “Stop Habituation with Learning Code 4,” LinkedIn, 6/21/24; “The big idea: this simple behavioural trick can help you get more out of life,” The Guardian, 2/19/24

Posted on by Jay Zaltzman

How will AI impact your organization?

Image: https://pxhere.com/en/photo/1449225

The news about artificial intelligence has been coming fast and furious over the past six months.  The list of things AI can do is reason for excitement as well as some worry.  But either way, it’s coming.  Organizations that learn how to utilize AI will benefit, but those who don’t risk falling behind.

  • Shameless plug: I’m offering a 60-minute webinar, “Intro to AI for Business” and a full-day workshop, “How Your Company Can Benefit from AI.”  Details at the end of this email.

How can organizations benefit from AI?

  • Encourage employees to familiarize themselves with AI.  Learn the basics of what AI is and how it works.  Use AI chat bots such as Chat GPT and Bard.  Find out what platforms are offering AI-powered services for your industry and get demos.
  • One caveat to the above: have a policy about acceptable ways for employees to use AI, and in particular, what data may and may not be shared on an AI platform.  Be aware of data confidentiality considerations – these differ by platform.  For example, information shared with ChatGPT is used to train it further.  However, OpenAI announced it will soon launch ChatGPT Business which will enable organizations to keep their data confidential.
  • Customer experience: the fact that AI can analyze vast amounts of data with ease can provide opportunities for organizations to serve their customers faster, better or in a more customized fashion.  For example, could your organization use AI to handle customer questions more quickly?   Or anticipate their needs with tailored recommendations? 
  • Innovation: organizations can use AI to analyze the behavior and needs of customers and prospects and come up with new products and services.
  • Marketing: AI can help organizations target their marketing more effectively, as well as help reduce the time needed to create marketing materials.
  • Productivity: AI sharply decreases the time to accomplish knowledge work tasks.  This raises concerns about layoffs, but the benefit could also be used to increase productivity and to enable employees to have the work-life balance so many organizations say they aspire to.

Of course, the above is just a partial list, and each organization will have their own specific opportunities and challenges when it comes to AI.  I’m here to help with the following options:

  • Intro to AI for Business: 60-minute webinar that explains what AI is and how organizations can benefit from AI, as well potential pitfalls to be aware of.  Includes time for Q&A.
  • How Your Company Can Benefit from AI: A full-day, in-person facilitated workshop to brainstorm ways your organization can best utilize AI, including a review of the relevant AI-powered platforms currently available.

Email me at info at bureauwest.com and let’s discuss how I can help!

Sources: Bureau West research; “OpenAI previews business plan for ChatGPT, launches new privacy controls,” TechCrunch, 4/25/23

Posted on by Jay Zaltzman