A well-defined strategic direction, aligned with corporate strategy, is fundamental to successful digital transformation, serving as a guiding North Star for all stakeholders.
This alignment involves continuous evaluation of market conditions and customer expectations, robust planning processes, establishment of key performance indicators (KPIs), and a comprehensive understanding of the customer journey. By mapping each stage of the customer experience, companies can identify critical intervention points, create tailored strategies addressing specific needs and pain points, and anticipate future trends, ensuring they remain relevant and competitive in the ever-evolving digital landscape while maintaining consistent brand messaging across all touchpoints.
The cornerstone of any successful digital transformation and experience-led ambition is a well-defined strategic direction that aligns seamlessly with the overarching corporate strategy. This alignment ensures that every digital initiative supports the company's long-term goals and values. Leaders emphasize the importance of a clear strategic vision that guides all efforts towards enhancing customer experience. This vision acts as a North Star, ensuring that all stakeholders are moving in the same direction and that resources are optimally allocated to the initiatives that drive the most value.
Strategic alignment also involves continuous evaluation and adjustment of strategies to respond to the ever-evolving market conditions and customer expectations. This dynamic approach allows companies to remain relevant and competitive, adapting their strategies to leverage new opportunities and mitigate emerging threats.
What are the tasks at hand?
A strategic direction involves not just setting goals but also defining the pathways to achieve them. It encompasses market analysis, understanding competitive landscapes, and recognizing the unique value propositions that a company can offer. For instance, companies focusing on customer experience management need to continually align their strategies with the evolving expectations of their clients and their customers. This means not only keeping abreast of technological advancements but also anticipating future trends and preparing to meet them head-on.
Moreover, strategic direction includes robust planning processes that ensure all initiatives are aligned with the company's mission and vision. It requires the establishment of key performance indicators (KPIs) that are closely monitored to track progress and make necessary adjustments. This alignment helps in maintaining a consistent brand message and experience across all customer touchpoints, which is critical for building trust and preference.
Naturally, strategic direction also involves a thorough understanding of the customer journey – or more precisely: journeys. By mapping out each stage of the customer experience, companies can identify key moments of truth where strategic interventions can create the most significant impact. This understanding allows for the creation of tailored strategies that address specific customer needs and pain points, ultimately enhancing the overall experience.
Value-based segmentation
Effectively collecting and activating customer data is essential for a business to stay competitive in an expectation economy where customers’ demand for better products and services are getting higher, requiring the businesses to deliver a seamless customer experience. By utilizing 1st party customer data, businesses can uncover valuable insights that enable a greater CX, evaluate business initiatives, and test marketing and sales activities.
On the journey towards becoming more data-driven, segmenting customers by their value has proven to be a great tool for showcasing the value a business can generate by investing in data & analytics. Value-based segmentation is a powerful way of utilizing valuable insights from the customer base. The actionable segments inform and lay the foundation for the marketing strategy, by prioritizing and optimizing personalization and marketing activities.
Value-based segments uncover:
Who are our most valuable/loyal customers?
What is the value-gain by moving customers from one segment to another?
Where in the value-chain is the highest potential business gain?
These insights describe the customers’ purchasing motivations, which in turn can be used to convert prospects to customers by orchestrating and funneling them through a personalized CX. Likewise, the segments may, among other things, also be used to create audiences and validate or redefine personas. The methodology used for the value-based segmentation presented here has the advantage of not needing a large amount of data sources, only requiring customer data that most companies already collect.
Here are three usual components that potentially feed into the segmentation model:
01
Business value (existing value)
The business value metric measures the direct value that a customer adds to the business. Often, this value is based on transactional data and is aligned with how the company measures revenue i.e., average purchase size, periodic product usage, requiring revenue (up-sells/cross-sells/add-ons) or potentially derived estimates such as RFM or CLV.
The methodology for measuring the business value may vary depending on the overall business objective as well as the data available, e.g., types of transactional data. If the business does not have any direct transactional data, there are other ways to reflect a customer’s business value e.g., by using CRM data or similar sources.
02
Engagement value (in-direct value)
Marketing engagement is used to reflect and differentiate customers by their in-direct value based on the assumption that if the customer is more engaged, it increases the is potential for a purchase. Even if customers have low transactional value, high engagement with marketing content reflects an interest in the brand and thereby an opportunity to convert them into buying more.
Data from marketing channels and the scores can be based on interactions with the content e.g., opens, clicks, reads etc. Customers’ consent may also be incorporated in the model. The wider the range of consents a customer has given, the more engagement opportunities the marketing team has. But it also reflects an active choice (active opt-in) from the customer to be kept in-touch with the brand which also makes a customer valuable.
03
Cost to service & cost to acquire
Acquiring and nurturing customers is a costly affair. The cost to service/cost to acquire is a measure to assess the actual cost and profitability of meeting customers’ needs.
Including this component in value-based segmentation as an additional measure adds the dimension of overall customer profitability, which marketing teams may use to determine the “worth” of directing marketing efforts towards a given customer.
Use existing data to move forward
The segments can be used at the strategic level to define and evaluate the marketing strategy by analyzing the relative gain and loss of customers moving up and down the funnel. Segments can also be used on an operational level where they serve as an enrichment layer in the activation strategy enhancing 1:1 personalization.
The segments are prioritized, reflecting the value that the customers in each segment add to the business. Customers will enter the funnel and over time flow between the segments or churn entirely. This can happen in any segment, but with varying consequences for the business.
The value-segments and the prioritization of them are also used to inform and evaluate the marketing strategy and especially the CX and CRM efforts. At an operational level, the value-based segments can be used to prioritize and adjust the activation strategy accordingly. For instance, in an omniOMNI-channel re-activation flow the timing is segment-dependent, reflection the differences in average tenure, general level of engagement etc., which thereby further personalizes the activation.
