Recently, I attended the CRM Evolution 2010 conference and had the pleasure of watching a presentation entitled, “Driving superior client engagement: Merrill Edge Advisory Center case study,” by Aaron Tellier. Mr. Tellier is the Director of CRM Strategy within Merrill Lynch’s Global Wealth & investment Management group. During Aaron’s presentation he discussed five processes and/or categories that he and his team used when segmenting their existing customer base – Retain, Repair, Confirm, Expand and Advocate.
During his presentation, it became very clear that this simple and intuitive approach to customer segmentation can be employed within nearly every commercial organization who seeks to grow their existing customer relationships.
Retain
The first step is to determine which customers are worth retaining. At the opposite end of the spectrum, it is just as important to determine which customers should you “divorce.” There are many ways to determine which customers should be retained, but none of them are without a certain amount of risk. For example, if your organization uses ‘revenues generated‘ as a measure, you may divorce a customer who has directly only generated a relatively small amount of revenue but, upon closer inspection, using social network analysis for example, you may determine that this customer advocate has actually helped generate significantly more revenue for your organization based on the endorsements that she or he has provided to their network.
Whichever measure that you use to determine whether or not you take steps to actively retain a particular customer; the key is to be consistent with its application. It is also important to consistently look for ways to augment that measure so that it grows with your business.
Repair
After you have determined which customers you want to retain, the next step is to evaluate the state of the relationship - from the customer’s perspective. Are they about to divorce you and how can you repair the relationship? Your organization needs to put specific programs in place for those customers who you determine are worth retaining, but require TLC in order to repair the relationship.
Confirm
For those customers whose relationships are on a solid footing, it is important to confirm their continued commitment to your organization. In this phase, you are creating programs that are focused on ensuring and increasing customer satisfaction. The goal is to build additional goodwill towards your firm so that the client sees you as a valued partner and will be receptive towards your eventual (timely & relevant) cross-sell / up-sell offers.
Expand
The next stage is to look for meaningful ways to expand your relationship with your customers. In this phase you are using your knowledge of them to offer products/services that are timely and relevant to their expressed or implied needs. It is also important to consistently make these “recommendations,” where appropriate, across any and all of the touch points that you have with the customer. This is an iterative process whereby updated, contextual customer information is used to further personalize any service or sales offerings.
Advocate
While this may be the last phase or segment, it is important to know that you cannot stop once a client reaches this level. Customers – like any of us in our personal lives – can fall into and out of love at any moment, so we have to continually work at addressing their needs. . In this phase, we are attempting to capitalize on our relationship in the effort to build customer advocates. Advocates are the customers who are willing to put their personal brand on the line for our product/service. These are unpaid brand champions who are willing to recommend us to their network of influence and in this respect start to move from advocates to evangelists
It is important to note that these customer advocates may not be the clients who are personally generating the most revenue for your firm. Some may actually generate relatively little in the form of direct revenue; however, when you assess their total value you may find that they are influencing significantly more revenue to your firm than a few of your “higher value” clients because of their advocacy.
In conclusion
It is true that there is no one-size fits all approach to customer segmentation. And I am not advocating for that. A business is a living organism that, even within the same industry sector, has different needs and pressures that affect its thinking. However, it is also true that many can over think customer segmentation and, in the process, become locked in inaction as they attempt to come up with the perfect segments. That is one of the reasons why I like Merrill’s approach; it is relatively simple, making it easy to apply to different parts of their business, yet powerful enough to significantly impact their results. And in the end, isn’t that what you are hoping to do?
