Customer Strategy in Action - Pharmaceutical Case Study

The idea of creating a customer strategy for your business may sound great, but can it really impact the bottom line? Here's a real-life example:


The situation: A pharmaceutical organization faced declining profits for one of its product lines. The product was no longer covered by patent, and monthly sales had plummeted. The organization had cut costs - including marketing and sales spend, making it difficult for them to serve all of the customers in their supply chain. Even though customers had a positive perception of the product, sales had declined to the point that the organization was considering discontinuing the product altogether.


The solution: Because of the streamlined sales and marketing teams, our initial step was to determine which of the five customer groups to focus on first. The team assessed the customer supply chain to determine which " customer layer" provided the greatest opportunity to impact sales in the shortest amount of time. Each customer group was assessed in terms of reach to other customer types, current and potential sales, and openness to having a relationship with the organization. Based on our findings, we began with the distributors for this product.


Once we had determined to begin with the distributors, we took a look at the types of customer data the pharmaceutical organization had on these customers. While there wasn't much data available, we were able to fill in gaps by interviewing the distributors themselves and the sales reps that called on them. We created a qualitative, proxy-based value model and needs segmentation that formed the basis for a customer strategy. Based on the output from the model and the segmentation, we were armed with two core pieces of insight: 1) which distributors provided the greatest strategic financial value and 2) how those distributors wanted to work with the pharmaceutical organization.


We started by aligning the streamlined staff with those distributors that could provided the greatest strategic financial value. A core account team was created that included sales, marketing, customer care and medical technology. Each was given clear direction on their role in the relationship. For example, we assigned a single-point-of-contact in customer care for each distributor. That meant that top distributors could call one person and have all their needs met and questions answered. This was a big shift - previously, the distributor would have had to make several calls to several different areas. In addition, each sales rep was given a handful of distributors that he or she was responsible for. Training, clear metrics and performance measures were set for each member of the account team to ensure the shift was successful.


We used the output from the needs segmentation to guide the customer experience and strategy for each of the top distributors. Our research identified some foundational needs that were not being met. We built a plan to begin addressing these problems first so that the pharmaceutical organization could rebuild trust with its customers. We also found that there were some common needs shared by the top distributors, and that there was a sub-set of the distributors that were open to having a deep relationship with the organization. Recommendations were developed to address these needs as well.


The result: The pharmaceutical organization was able to maximize its streamlined resources by focusing on those customers that could provide the biggest impact. Within 3 months of implementing the strategy, the downward trend of sales leveled off. The following quarter, the product posted a profit - the first one in over a year. As a result, the organization was able to being exploring ways to replicate this process with other customer types in the supply chain.

Three Steps to Increasing Customer Retention

Customer retention is more important than ever to organizations, given the current economic situation. Here are three areas that each organization needs to look at to improve its customer retention levels.

1. Foundational requirements: these are the "pay to play" requirements for your organization and industry. What things must an organization deliver on in order to be (and stay) in business? For example, the foundational requirements of a restaurant may be to:
   
   a. Ensure that the customer's meal order is prepared correctly
   b. Deliver the meal to the table in a timely manner at the right temperature
   c. Provide prompt and courteous service
   d. Have clean eating areas and restrooms
   e. Ensure that the bill is correct.
   
   Any restaurant that consistently did not deliver on these basic, foundational requirements would soon find itself out of business. What are the foundational requirements for your organization? And, how well is your organization consistently delivering on them?


2. Branding and positioning: how is your organization different from the competition? What does your brand convey to the marketplace? What type of experience promise do you make and deliver to your customers?
   
   Using our hypothetical restaurant example, the restaurant may be the only Mexican restaurant in town, which differs it from the Italian, Japanese and pizza restaurants. The restaurant may further position itself as a healthy, authentic Mexican-food restaurant that delivers food quickly in a relaxing, family environment. These attributes then become the basis for the Mexican restaurant's marketing program, the menu, decor and ambiance in the restaurant, and the planned experience (authentic food, relaxing family environment) for its patrons.
   
   Take a look at your organization's branding and positioning. Are they clearly understood by both your employees and customers? Are they consistent across all customer touch points and interactions? Do your customers "believe" them, or do they have a different image of your organization?


3. Customer relationship management : finally, once an organization has consistently delivered on the foundational requirements and determined its branding and positioning, then, and only then, can the organization begin to build relationships with its customers. And, only if the customers give the organization permission to do so.
   
   Think about it: if you went to a restaurant that couldn't get your order right, had dirty tables and restrooms, and rude wait staff, would you want to have some a relationship with that restaurant? Would you even want to go back?
   
   That's why it is so important to get the foundational requirements right. Many organizations overlook this - it is just not sexy to say that you're allocating part of your budget to keep the restrooms clean, for example. But, if these are the things that are causing your customers to defect, then these are the top priority things your organization should fix. And, if your customers - or even your employees - are confused about who you are, what you do, what you stand for, and how you are different, they are not likely to want to invest the time and energy to have a relationship with your organization.
   
   By building customer relationships, an organization can change the rules of the game and transform the industry. I firmly agree with Don Peppers and Martha Rogers that the only true source of competitive advantage is customer data and how that data is used to create customer strategies and experiences. Any other perceived source of competitive advantage - a product, service or offering; a unique brand positioning; or even a patent - can, eventually, be copied by a competitor. However, your customer data (and insights gleaned from that data) is the one thing that your organization has that your competitors do not. I'm not talking about data that can be purchased, although that type of data can provide some additional insights about your customers. I'm talking about the behavioral, motivational, and needs-based data that allows your organization to truly understand each customer. Using these insights to build lasting, relevant relationships with your top customers increases customer retention.
   
   Our Mexican restaurant, for example, can begin to capture information about food requirements, seating preferences or life events of its top customers. They could then use this information to revise the menu or even create a "custom" birthday experience complete with preferred seating and a tailored menu based on a customer's favorite meals. Credit card numbers could be stored (with approval) to streamline the payment process for those customers that want to minimize that part of their experience. Special marketing promotions based on the primary reason(s) a patron visits could be sent out: for example, for those patrons that are motivated by the authentic food, they could send out a twitter update about a new menu item; for those that like the health benefits, a different campaign could be created. How the Mexican restaurant leverages its customer insight is unlimited.
   
   What data does your organization capture today about its customers? How is that data being used to transform the relationship you have with your customers? Are there ways your organization could begin creating customized interactions based on that data to maximize customer retention? How will you test and measure the impact to ensure the greatest impact?

Feel free to share your experience increasing customer retention levels.

Recognizing and Acting on Customer Differences

Each one of us is unique in his or her individual way. These differences between one person and another add the "spice" to life. Why is it, then, that most organizations don't recognize these differences and use this information to create customer strategies, experiences, and marketing activities that resonate?

Case in point: a co-worker and I are virtually identical - demographically. We are both female, the same age, married, without children. We both own a convertible sports car and our own home. Our income, credit-worthiness, and interests are very similar. Each of us travels extensively. We subscribe to some of the same magazines. We even live in the same town. To most organizations, we would be considered "the same" and marketed to identically. However - we are very different from one other in how we prefer to interact with organizations and buy their products.

I prefer to do everything online. If I can purchase something or pay a bill electronically or manage my finances without ever speaking to someone, I am happy. I feel that it is quicker and more convenient. My co-worker, however, prefers to conduct all business transactions in person. She likes to go to the bank to make a deposit or withdrawal, and doesn't even have an ATM card. She will wait in line at the airport to check in. And, she will drive to a store to purchase an item so that she can have that human interaction. Some of the organizations she conducts business with, such as her bank, have suggested that she work with them virtually. She has declined, because she feels that the "human touch" is more important and helps her feel that the organization values her business.

Understandably, organizations try to push their customers to the least expensive channel in order to conduct business. However, the organization that recognizes even simple differences between customers and uses those differences to make every interaction profitable for the company and relevant and satisfying for the customer will be the one that maintains and grows their customer value. Every organization - regardless of industry and regulations - is capable of customizing some aspect of their product or service based on 1) customer preferences, 2) customer value, and 3) channel in order to maximize customer value.

(previously published on quaero.com on March 9, 2009)

Customer Experience Management – Challenging to Execute Across All Touchpoints

Customer Experience Management focuses on building a consistent, integrated, relevant customer experience across all touchpoints that leverages customer insights to help enable an organization’s customer strategy. It is much broader and larger than just coordinating marketing messages out to customers. Many organizations are considering or implementing Customer Experience Management initiatives. However, as most of these organizations have found out, this is not an easy task. Consider the following real-life example:

This week I flew on United from Redding, California to Philadelphia. On Monday, I was 700 miles away from reaching 1K status in their mileage program – a status that not many of their customers reach, because it requires a minimum of 100,000 miles flown on United in a calendar year. Due to weather conditions in San Francisco, my flight was delayed by 5 hours. The woman at the check in counter proactively reached out to me, discussed alternative connecting flights, and, together, we booked a back-up itinerary in case I missed my connection. Because of my status, she went out of her way to find a red-eye (my only option) that would give me the upgrade to First Class so I could be at the client site somewhat rested.

Because we were delayed so long at the Redding Airport, the woman who helped me initially finished up her work hours and a new person was assigned the gate. Just before we boarded the plane, the new gate agent called me up to the gate and explained that because of weight limits, they were bumping me from the flight. I looked around at the many non-business travelers sitting at the gate, and asked the gate agent if he had looked at my profile. (Yes, I know, very similar to the “Do you know who I am?” question, but I said it nicely.) He had not. I then explained to him that I was a Premier Executive member, 700 miles away from reaching 1K status. He looked my information up in the system, apologized, and then put me back on the flight.

My red-eye was delayed and eventually cancelled due to mechanical issues. I received an email notice of the flight cancellation prior to the announcement made to the passengers sitting on the plane with me. It included a revised itinerary for me the next day. Before I had even gotten off the plane, I was on the phone with United’s Premier Executive customer service line, where the agent I spoke with quickly addressed my question, changed my flight to better meet my needs, seated me in an acceptable seat, and put me on the stand-by upgrade list. However, she could not email me a voucher for lodging – for that, I would have to stand in the extremely long customer service line at the airport.

On Thursday, I traveled on United back to California. I went online to print out my boarding pass. When I logged on, I was greeted with a “Welcome to 1K Status” message, and my profile had been updated to reflect my new status level. However, when I printed my boarding pass, it still said Premier Executive. At the airport, I was told by a less-than-friendly gate agent that I could not pre-board because my boarding pass did not say 1K. I had her look up my information and, together, we saw that it said I had over 100,000 miles (the requirement for 1K). She informed me that even though the computer system said I had the miles for 1K, because it was not printed on my boarding pass, she could not let me pre-board. Eventually, she relented and let me pre-board.

The point here is not to bash United (I’ve had similar experiences with other airlines as well, and I’m sure you have your own set of horror stories), but to demonstrate the disconnection between all of the touchpoints I interacted with this week:

Gate Agent #1 in Redding: used customer data to proactively prioritize treatments based on the value of the customer, worked directly with customer to develop solution that best met customer needs

Gate Agent #2 in Redding: had access to customer data, did not use it initially to guide customer treatment, but quickly revised treatment once data was viewed

Email Status Alerts: used a variety of information to keep me up-to-date on status of flights throughout the day. In some cases, these status updates were more updated than what the United gate agents had, and I found myself giving them and my fellow passengers the correct information.

Telephone Customer Service Agent: used customer data to develop flight plan that best met my needs

Airport Customer Service Agent: didn’t look at customer data, no usage of customer data to prioritize service

Online profile: had latest update of my behavior, activity and data; used to create a relevant web page to reflect – and congratulate me – my new status

Web-based check in: did not have a complete picture of my profile and customer data, resulting in an incorrect boarding pass

Gate Agent in Philadelphia: had access to customer data, used customer data, but did not modify her behavior or treatment – until pushed – based on that customer insight.

As organizations move toward a customer experience model, they need to take into account all of the customer touchpoints, determine “business treatment rules” for each, and provide front-line employees with the flexibility to use both the business treatment rules as well as known customer data to create an experience that meets the overall experience objectives of the organization AND the needs of the customer. In many cases, this requires an organization to invest heavily in front-line employees, since they are the “face of the company” to the customer. An Infoserv research report determined that 40-80% of customer satisfaction and loyalty is determined by the customer-employee relationship (http://www.infosurv.com/employee_satisfaction.htm). Roles, responsibilities, expectations and measures of these employees need to align with the customer strategy and resulting experience. Organizations that ignore this vital touchpoint risk failing in their customer experience initiative.

(previously published on quaero.com on February 20, 2009)

Align Customer Strategy and Experience for Maximum Impact

Many organizations have begun to look at their customer experience with an eye toward increasing the efficiency of their marketing, sales and service efforts while minimizing costs. This can be very effective.

However, organizations that want to maximize their customer experience management activities need to look beyond a “one size fits all” mentality when it comes to the customer experience and incorporate customer intelligence and strategy into the delivery of the customer experience.Customer intelligence provides the insights and understanding of how your customers are different from one another – what their wants, needs, motivators and behaviors are as well as how profitable they are to your organization. Armed with this information, the marketer or experience manager can then determine the following:

1. What strategy should the organization have for a specific customer or group of customers? How does this strategy translate into specific goals and objectives? For example, for one group of customers, the strategy may be to direct those customers to less expensive touchpoints because they have low profitability, and, based on their behaviors, are unlikely to purchase additional products or services. The goal may be to decrease the cost to serve for these customers by 25%. For another group of customers, the strategy may be to increase their profitability through a variety of experiences aimed at cross-selling products that other customers like them had found useful. The cost to serve for these customers may increase, but so would their profitability.
2. How should resources (time, budget and staff) be allocated against these goals?
3. What is currently preventing the organization from realizing these goals? Are there “pain points” or “disconnects” in the customer experience that negatively impact the customer’s experience (and subsequent value to the organization)? Which are most important to the customer and how can they be addressed? How do these priorities vary by customer group?
4. What type of experience should these customer groups have to reach the goals and objectives set by the strategy? What customer needs, feedback or insight backs this? How will this experience vary by customer group and strategy? Which touchpoints will be impacted and how?
5. Finally, how will success be measured? Is it possible to set “behavior milestones” at the customer level that show positive impact? Can you leverage customer input and social networks to learn how well you are addressing customer pains?

By using customer intelligence and building a strategy for groups of your customers, you will be able to modify the customer experience to meet the needs of your customers and reach your sales and marketing objectives. This results in a relevant customer experience – far more impactful than a one-size-fits-all experience – that drives business results.

(previously published on Quaero.com on January 22, 2009)