Web Exclusive - November/December 2017

Man vs. Machine

To Ensure Good Customer Relationships, Don't Forget the Human Touch

By Deborah L. Vence


Companies that only depend on marketing technologies to strengthen their customer relationships risk losing big.

This, according to research from Bain & Company, a global management consulting firm based in Boston, which indicated that the rush to invest in new technologies—designed to boost the return on investment (ROI) of a single purchase or channel—often misses the basic and more important goal of identifying target customers, what they're worth to the firm and how they behave.

A survey of about 500 companies by Bain & Company was detailed in a new brief, "Customer Lifetime Value: A Better Compass to Guide Your Marketing Automation," which found that marketing leaders exhibit a few characteristics that set them apart from the bottom 25 percent of companies.

For instance, the leaders are:

  • 3.5 times more likely to embed employees in marketing who specifically focus on understanding the customer's journey.
  • 1.9 times more likely to align their strategy with customer needs rather than channel needs.
  • 1.9 times more likely to scrutinize customer lifetime value in addition to more traditional last-touch metrics such as ROI, customer acquisition cost and click-through rate.

Laura Beaudin, who leads Bain's Marketing Excellence work, stated, "Marketers know there is tremendous financial benefit in creating more promoters among their customer base. These are people who spend more with the company, stay longer and generate more referrals. But the care and feeding of these valuable customer relationships still requires a human touch."

Marketing leaders go beyond acknowledging that customer lifetime value matters; they focus their spending and staff resources accordingly. They adhere to three key steps:

  • Build smart, targeted segmentation based on a customer's overall value. Gaining a thorough understanding of the variations among customers enables marketers to gauge how much to invest in each one. Bain's research found that even minimum viable data, such as demographics, frequency of purchase and average purchase size, is sufficient to reach customers effectively. Applying a lifetime value lens also helps to identify the individual customers who merit the highest and lowest levels of investment.
  • Use technology to develop a deeper understanding of customers' priorities and how best to address them. After a company has built a smart segmentation scheme, the next task is to determine how best to connect with target customers at a personal level. Marketers have to understand an individual's needs and wants throughout the entire journey—from product awareness to research to purchase across hundreds of online and offline touchpoints and various channels. New technologies can help marketers fill out the picture of how people behave before they make a purchase.
  • Develop data-driven hypotheses about which technologies to use in order to acquire and retain customers. Once a company has identified which high-value customers to address, defined their lifetime value and drawn a profile of their priorities, the marketing leaders then can make informed hypotheses on which media levers to test first. Knowing people's shopping history, location, media preferences and some of their expressed views would be enough information, for example, to push marketing messages to certain websites on their cell phones during their morning train commute.

"As marketers adopt increasingly powerful artificial intelligence tools—whether for one-to-one or segment marketing—they will want to direct those tools and related ROI metrics to deepening customer relationships," said Brian Dennehy, expert vice president in Bain's Customer Strategy & Marketing Practice. "Marketers who utilize their machines and metrics as well as their minds to improve customer lifetime value create an even greater advantage—the ability to prioritize enduring customer relationships over immediate channel results or a single transaction value."

What's more, there is value in using rewards as part of maintaining customer loyalty, too. A February 2017 Bain & Company brief, "Turning Rewards Into Loyalty," stated that "Successful rewards programs reach a high return on investment by building loyalty through customers who stay longer, buy more, cost less to serve and recommend the company to others—all combining to increase the customer's lifetime value."