This is a great overview of the impact of customer loyalty is on a company's growth. What's best is the author provides an actionable plan for creating repeatable processes to measure and grow customer loyalty for an organization. Highly recommend for any customer facing teams or customer-centric organizations.
Those three advantages— staying longer, spending more, and referring new customers— mean that loyal customers are highly valuable to your company.
While the 80/ 20 Rule might not precisely hold true, the findings are clear and consistent: whether it’s consumer- packaged goods or other products and services companies, top customers deliver a hefty percentage of a company’s revenue.
They found the top 20 percent of those same companies’ customers generated 105 percent to 113 percent of net income.
It’s possible because not every customer is profitable. The customers who are highly profitable compensate for the customers who are served at a loss.
The Harvard Business Review found that it costs five to twenty- five times more for companies to secure a new customer versus retain an existing one.
Bain & Co., which shows that when companies improve their customer retention rate by as little as 5 percent, they see an increase in profit of 25 percent to 95 percent.
loyalty boosts competitive advantage by repelling your competition.
Referral is one of the three identifiers of loyalty. Loyal customers tell their friends, family, colleagues, and even strangers about their positive experiences with your company.
Retain your customers and put an end to the hamster wheel of constantly having to attract new ones just to keep your existing level of revenue.
Your company’s advantage stems from knowing your loyal customers well enough to develop targeted marketing messages, product updates,
Loyalty Improves Employee Engagement Customer loyalty may be primarily externally focused, but it also provides an opportunity to rally your employees and improve their engagement.
Will This Help You? The companies that benefit most from implementing a system for customer loyalty generally fall into three categories in terms of their relationships with their customers.•Your company is experiencing high customer turnover, and you want to stop the bleeding.•Your company attracts customers, but their enthusiasm is lackluster. You want to increase the lifetime value of your existing customers.•Your customer turnover is low, and customers keep buying. Your company is looking for new ways to grow.
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My experience and research have established that a consistent, well- executed process for customer loyalty will improve profits, provide a competitive advantage, and boost employee engagement across any industry.
The First Factors that Unlock Loyalty
Factor 1: Prioritize Emotional Connection with Customers You boost loyalty when customers feel connected to your company. Their sense of connection develops when customers feel seen, heard, and valued. Seen, heard, and valued are three distinct components that lead to loyalty.
Customers feel seen when you interact with them as individuals,
Customers feel heard when their voice matters. Whether they have a complaint or compliment
Customers who feel valued believe a company cares about more than merely the money they spend. When a company’s behavior leads customers to sense that their patronage matters, they feel valued.
One Zappos employee even got on a plane to personally deliver fine jewelry that belonged to a customer and was accidentally shipped to the company along with returned merchandise. When customers feel seen, heard, and valued, they get invested in their relationship with your company. The feeling of seen, heard, and valued is a vital component of successfully cultivating loyalty,
Factor 2: Create a Process with Clear Goals Your message of connection comes to life in your company when it’s paired with a systematic process. The feeling of being seen, heard, and valued has to be translated into specific goals so your employees understand their role in the process.
A good specific goal is one that a) your employees clearly understand and b) is the right objective for this moment in your company.
Factor 3: Break Your Goals into Measurable Steps Not only do you need a goal that everyone understands, but you also need to make sure people know how that goal applies to their unique role in your company. If your team doesn’t know what they’re supposed to do next or how to do
Completing a series of clearly defined, bite- sized tasks is how your company moves to the finish line.
Invite employees into your vision for better customer relationships. Give them a way to be successful with customer interaction, complete with information, training, and sufficient support for their efforts. These activities require time, energy, and effort so your team of employees and partners can be successful with your customers.
Factor 4: Apply Tracking and Metrics You can’t measure your process without data. Cultivating loyalty requires tools to track and measure progress. Once you have those tools in place,
Factor 5: Add Celebration Celebration happens when you mark moments of excellence with activities that notice and reward those moments. Celebration comes in a variety of forms.
You can reward customers for their interaction with you. You can celebrate employees for reaching customer goals. Celebration brings creativity and fun to your company.
Celebration for loyalty is distinctive because it’s applied systematically.
Some companies skip this step or celebrate customers on an ad hoc basis. Sometimes those one- off celebrations can be brilliant. An ad hoc approach might work
Regardless of your personal preference, customer loyalty requires both emotion and rational thinking.
Why Doesn’t Everyone Cultivate Loyalty?
New clients are vital to any company. But customer retention can be challenging when companies focus too much on customer acquisition and fail to invest in customers after they buy.
Companies emphasize efforts to sell to new customers, rather than retain existing customers, in part because selling to a new customer is easier to track. It’s binary. You didn’t have the customer, and now you do. It’s simple to attribute the sale to a specific moment. You can ring a bell, bang a gong, or send a company- wide email to mark that moment. That definitiveness is appealing.
Once a customer comes on board, there are many points of interaction with your company. It’s harder to identify exactly how, when, or who is responsible if those interactions go well or poorly. Since a customer’s decision to buy again (or not) after the initial sale can be attributed to multiple departments, companies tend to drift toward the easier path of focusing on new sales rather than retention and upselling efforts.
Another reason companies prioritize efforts to sell to new customers is that in many companies, salespeople are the rainmakers.
What I often hear from business leaders is some version of, “Customer retention is everybody’s responsibility.” On some level, that’s true, but it misses a fundamental reality: a job that belongs to everybody belongs to nobody.
thinking. “Building a great business comes down to having a brand that customers love,” Suster says. “A brand isn’t built on marketing campaigns. It’s built on customers. The problem with scaling so quickly that you disappoint customers is that you can’t rebuild trust. Companies that undermine customers’ trust rarely return to greatness.”
Cultivating loyalty begins with defining your best customers, the people who love what your company offers and are most inclined to engage in a long- term affiliation.
There are three distinct kinds of loyal customers. Each has its own characteristics that you must understand so you can find the group who will see your company as one of the top brands in their lives.
Loyal customers are not all created equal. Lucrative Loyals Sought- after customers who are emotionally connected to your company are your “lucrative loyals.” Lucrative loyals are ultra- dedicated. They:•Buy consistently and are highly profitable.•Feel a genuine connection when you earn their loyalty.•Care about their experience as customers.•Engage by referring prospective customers.•Provide testimonials and communicate inside and outside your business, such as via social media.
Limited Loyals Limited loyals are moderately invested in their relationship with you, primarily because a threshold exists for them to exit. Limited loyals may be long- term repeat customers, but they lack engagement and connection. They may not even like the company that has earned their loyalty.
Lazy Loyals Lazy loyals are repeat customers who buy from you on a transactional basis. They buy repeatedly purely out of convenience. They don’t have any real sense of loyalty to your company compared with your competitors. You’re just the easy choice. These customers are loyal in a sense, but they’ll leave you without a backward glance.
In most companies, the majority of customers are average. An unexpectedly high number at any given company are probably one- time buyers.
Given how valuable lucrative loyals are, you’ll want to clearly identify them as quickly as possible.
Limited loyals and lazy loyals will stay with you as long as it’s convenient for them. There’s not a lot you can do to keep them if they’re customers of convenience— unless your customer experience motivates them to upgrade.
The key is designing a customer experience for lucrative loyals that’s well- executed and sufficiently inviting.
When you aim your customer experience toward your lucrative loyals, you’ll still attract other customers.
Begin with data that helps you understand individual customer’s purchase history. When you can tie spending to individual customers, you can find your lucrative loyals.
Start with the low- hanging fruit: repeat buyers.
Next, track referrals. It’s not always easy to know when a customer makes a referral, but it’s always in your best interest to understand when that happens.
Referral codes and other online tools help customers make referrals and help you catalog them.
This process requires the companies to create a habit of asking new customers if they were referred.
A third opportunity to identify lucrative loyals is to capture customer interaction.
You should also monitor internal customer support channels, such as service calls, email, and technical support tickets. Even when customers call to complain, they’re engaging with your company. Another way to examine engagement is to track which customers open your emails, click through your emails, or use promotional codes you generate.
In fact, research by McKinsey & Co has shown that 70 percent of a buying decision is based on how people feel in their interaction with you. The feelings drive the purchase. The Journal of Marketing Research also found that brands that inspire higher levels of emotional intensity receive three times more word- of- mouth recommendation compared with less emotionally connected brands.
Companies that cultivate loyalty successfully begin by defining the emotional connection for their unique group of lucrative loyals. Companies discover what makes those loyal customers feel appreciated by the company. They determine how to create the emotional connectedness that makes those customers feel seen, heard, and valued. This is the heart of loyalty.
The smart of loyalty occurs when companies weave emotional connection into a consistent, systematic process for engagement that can be tracked, measured, and assessed.
Emotional connection includes being crystal clear about what you do and how you engage. It means managing expectations by drawing boundaries at the outset of your customer relationships and then authorizing your team to enforce those boundaries.
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interaction. Customer experience is not a department. Instead, it’s the sum of every point of interaction between a customer and a company.
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How your company manages its customers’ experience will distinguish you from your competitors.
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The hotel sent the (likely automated) email, asking for information about the reason we were visiting. They took the time to read our email and add the key data to our profile. The information popped up to remind the front desk to congratulate us as we checked in. Housekeeping was notified to put the bubbly in our room so it was waiting for us yet still icy cold when we arrived.
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Customer experience also includes:•Aligning customer interaction with your company’s strategic vision, mission, and values.
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Walker, a customer experience consulting firm, estimates that customer experience will overtake price and product as the key differentiator for brands in 2020.
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Cultivating loyalty is a team effort. It requires the people inside your company to be on the same page for customer experience. To achieve synchronicity, you will benefit from a singular articulation guiding everyone’s activities.
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That singular articulation means customers experience consistency from their first interaction with your company.
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A bullseye isn’t a strategic vision. It’s a working premise for customers.
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A bullseye message must be accessible.
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A bullseye message does more than guide customer interaction. It guides the entire customer experience. It can even help remind you which customers you’re aiming for, and that can prevent your company from going after the wrong customers.
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Customer engagement has to start with who you are. When you reverse the steps, you can end up defining yourself according to your customers, instead of the other way around.
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Knit the Bullseye into Your Company Once you have your bullseye message, make sure it’s drilled into every facet of your company.
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Consider the bullseye as a guide for customer communication.
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Embed the bullseye message into your team with a training protocol
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team members will need to use it consistently to guide customer interaction. This takes repetition over time. You want it to become so engrained in your team that it’s second nature. You can’t overshare your bullseye.
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The bullseye message guides employees to make small and large decisions.
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It’s not enough to create a bullseye. It must be regularly activated within a company to be effective.
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With your bullseye in place, you know exactly what guides your customers’ experience. Everyone in your company aims together toward loyalty. Now it’s time to use your bullseye to create a tailored customer experience that speaks to the heart of your lucrative loyals.
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Kara Nortman says, “Find your most loyal, most addicted customers. Then build a great, repeatable business winning them, serving them, and getting them to come back with a high rating versus going after a huge market where you’re just okay.”
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Several elements contribute to the whole picture of a customer’s significance to your company. That complete picture is quantified by:•Customer lifetime value.•Referrals.•Engagement.
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He’s the author of Customer Centricity: Focus on the Right Customers for Strategic Advantage. Fader also happens to be one of my favorite professors from Wharton, and I credit him with sparking my first interest in long- term customer value. Somehow, his class managed to make grocery store scanner data compelling.
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customer’s average sale amount.•The number of additional sales you expect from them.•How long you expect to keep them as a customer.•The profit margin associated with their purchases.
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important component of customer lifetime value, your ability to accurately predict a customer’s future actions is where customer lifetime value shows its magic.
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Referral Extends Customer Value There’s more to customer loyalty than customer lifetime value or spending alone. Referrals add another layer to overall customer value.
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When calculating customer lifetime value, a company should take into consideration the value of new customers that an existing customer brings to the business.
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Engagement Is Part of Customer Value Engagement happens whenever a customer interacts with your company. Engagement can include social media, chats with customer support, and more. Loyal customers are highly engaged. That’s
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To target loyalty, create a persona that’s a detailed description of one person who represents a composite of your lucrative loyals.
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With a targeted approach, you can win over prospects quickly and efficiently. The more finely honed your communication, the easier it will be to find and convert high- value customers.
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customer welcome is an opportunity that’s often overlooked. Make your welcome special. Let it be a moment that thoughtfully sets the tone for the relationship you want to build with your customers.
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First, acknowledge your new customer’s decision to choose your company. Your customer had options, and they picked you. Show customers you appreciate their decision. Second, share a clear expression of who you are and what you stand for as a company. The experience of being a customer is different from the experience of being a prospect. Your welcome should be a clear transition out of the sales conversation. It reinforces why your customer chose you and projects the care you have for their experience. Take a moment to consider your own
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loyalty. Since a proper welcome is rare, a well- designed welcome program will differentiate your company from your competitors.
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Consider how you can uniquely express the value
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This welcome is about launching a relationship by saying, “We’re glad you’re here.”
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The more you can articulate what makes your company special and build it into your welcome, the more it will resonate for the customers most inclined toward loyalty.
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A good welcome will feel personal and sincere to the recipient.
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The welcome is a great way to share the distinctive personality of your company.
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To create loyalty, these interactions are designed to reinforce customers feeling seen, heard, and valued.
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Design Your Onboarding Sequence for Immediate Success
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Your onboarding sequence should both give your customers the information they need and also build the customer relationship you want with them.
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For example, if your onboarding sequence is a series of ten email messages, tell customers they will receive a series of ten email messages. Sharing a clear map of the onboarding sequence manages expectations as you launch the business relationship, which, in turn, builds trust.
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If you sell complex business solutions, you’ll want to build a multifaceted onboarding sequence that might include a combination of automated email messages, online resources, and training, whether virtual, live, or both.
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Reaffirm the connection with the person who made the purchase and the folks you’ll be interacting with, if those are different people. When you add moments of intentional connection into your customer onboarding sequence, it becomes easier to build relationships. It also creates a competitive advantage. Building the relationship is the aspect of onboarding that most businesses, including your competitors, will likely fail to deliver.
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Ask yourself:•How can we include specific moments to reestablish our customer’s feeling of being seen, heard, and valued?•What’s the next relationship- building interaction we want customers to experience after our welcome?
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Share a little bit about who you are as a company and the people behind your products and services.
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Talk about your values and goals.
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You can educate them by sharing stories that illustrate how successful clients engaged with your company.
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the behavior you want customers to practice. If you want customers to value the benefits of loyalty, show them how it’s done. For example, if you want customers to provide testimonials, you should demonstrate how to share testimonials and explain why they’re mutually beneficial. Some companies don’t explain how customers can act like lucrative loyals, and then they get frustrated when customers don’t upgrade their relationship. Be clear and specific to make it easy for customers to choose action.
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Identify Your Inflection Points Once your customer completes their onboarding sequence, they begin a pattern of ongoing interaction with you that lasts the entire length of their customer relationship. These moments are called inflection points.
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Over time, as customers use your products and services, they’ll have needs. When customer needs arise, you’ll find inflection points. When you can predict those inflection points and reach out proactively, you improve the customer experience and boost loyalty.
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Find the Inflection Points for Business To identify inflection points, think about the experience of being your customer from the customer’s perspective.
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Something as simple as a postcard from your dentist reminding you of a semi- annual cleaning is an inflection point.
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To identify your business’s inflection points, consider the moments when a customer might need a little more to prompt additional engagement. In this context, “more” could mean:•Information.•Services.•Reminders.•Help.
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Then, map a timeline of those key moments and create an internal process to engage appropriately in those moments.
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Being specific about your expectations for inflection points helps everyone on your team. You provide prompts and measurable goals for team members to reach out to customers. You give team members a structured way to make sure they follow up about important elements of the customer’s experience.
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The Risk of Neglecting Inflection Points Your system can and likely should employ a combination of tactics to engage with customers across inflection points. Some tactics may be automated, such as sending a tailored email message or helpful resource. Others may be personalized, such as a business review meeting or phone call. The products and services you provide will shape which levers you use for each inflection point. Generally, companies use a combination of mass/ automated and personal/ tailored outreach. With today’s technology, it’s easier to use an automated approach to deliver a personalized message. That’s a good thing and potential pitfall.
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Successfully managing inflection points means having a plan for communication and action. Don’t wait for customers to start a conversation after onboarding. Waiting can mean you risk losing momentum in the relationship, which leaves a lot of money on the table. This is true for a few reasons.
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Like any relationship, too much or too little are both problematic. You’re going for the Goldilocks balance of just right. “Just right,” in this context, means you know the inflection points and have an action plan to manage your customers’ path from one inflection point to the next.
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The Risks of Waiting for Customers
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way. It’s important to be proactive in identifying and addressing problems for customers so you can catch small issues quickly. A company that proactively resolves a problem for a customer, and resolves it well, is more likely to retain that customer.
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When a customer does something and your company identifies it and responds, that’s recognition. Recognition lets a customer know their action is appreciated, but the action originates with them, not you.
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Without a system for recognition and celebration, individual people in your company apply ad hoc tactics to customers at random. These tactics might work, or they might not. With ad hoc tactics, you don’t have a strategy, consistency, or a way to measure your progress. You might think one action was a homerun when it wasn’t. You might completely miss the grand slam.
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Recognition Grows Loyalty Recognition is an ongoing process of making customers feel appreciated when they take some kind of action. Recognition moments become part of your standard operating procedure for customer experience.
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Creating a system to recognize positive customer actions is all upside for your company. By design, recognition doesn’t mean big gestures. It means small gestures that build trust over time.
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Celebration is triggered when companies identify something about their customers that they want to glorify.
Very few companies do celebration well, so it’s another opportunity to differentiate your customer experience from competitors. Crafting a celebration program is also fun. You get to show your company’s personality in ways that your lucrative loyals will particularly relish.
Like many elements of cultivating loyalty, your celebration strategy can evolve over time. Start with a small, simple way to celebrate customers that you can activate consistently.
In fact, they can be free. One of my clients has successfully used a personal phone call from the CEO to the company’s most loyal customers to celebrate the anniversary of their first purchase.
And while you can be strategic with your random acts of celebration, they must also be authentic. In this case, Morton’s made an authentic and genuine delivery to a loyal customer.
Every customer connection has the potential to create ripples. Whether it’s through word- of- mouth or social media, your loyal customers will talk about their experiences with you. When you do something amazing, they’ll tell other people over and over again.
When you divide your customer base into smaller groups, or segments, you’re better- positioned to deliver a solution that’s tailored for each key segment’s needs.
“The biggest mistake people make is treating their customers as averages. Companies say, ‘This is our average engagement.’ ‘This is the average number of times a consumer comes in a month.’
This is especially true when companies create customer segments without clear goals. It’s hard to hit the target if you don’t know where you’re aiming. Focusing on your loyalty goals will streamline your segmentation strategy and achieve better results.
Focus on lucrative loyals first. Once you’ve had initial success, then add more segments. As you identify new customer segments and identify your goals for each segment, implement customer experiences that are adapted to each segment.
As customers deepen their relationship with you, segmentation means they get access to benefits reserved for customers who earned elevated status. Experiential segmentation can include just about any advantage. Consider offering these perks:•To make sure your best customers save time, give them preferential access to your team with direct access to dedicated support and additional avenues for upgraded customer service.•Offer your high- value segments ways to sign up early for your events, conferences, and other limited- access perks. Then give them VIP access and experiences.•Ensure that high customer lifetime value segments get personal outreach. Use automated engagement for segments with lower customer lifetime value for your company.