The customer can be momentarily satisfied with their last transaction (product or service): it delivered a promised benefit. But that is, by definition a transactional experience, and often devoid of any emotional richness.
In working through these distinctions with our clients, the notion of customer value (or customer lifetime value, aka “CLV”) can be the polar opposite of whether the customer feels valued.
From a financial or marketing perspective, a company’s approach to customer value is formulaic: extract maximum value from the customer. The metrics take many forms: ROI, ROAS, narrowly targeting, and upselling to name a few. But this “share of requirements” approach (i.e., siphoning off more revenue from the same customer) is entirely transactionally driven. There is no “emotional stickiness” created with the customer from a single transaction, or even from multiple successful transactions.
From the customer’s perspective, feeling valued creates an emotional connection which is deeply internalized and an incredibly powerful sticky magnet for retention.
As a CMO, how would you answer this question from the customer: “Does this company appreciate my business?” If you don’t know, consider path-to-purchase or other in-depth insights work. Test new programs. Test reward structures. In what ways can your company demonstrate to the customer that their business matters – that they themselves are valued?
Even highly satisfied customers can be quickly dislodged by a competitor who can, for example:
- Offer products at a lower price
- Offer products with more features/benefits
- Offer products that appeals to more users
- Offer products that have more use cases
- Deliver products in less time
- Leverages variety-seeking behavior or changing tastes
In email automation and drip campaigns, we have learned that with more personalization comes better response – and a greater likelihood of consumers responding to offers. But everything now comes through as personalized (except for the occasional misfire, like “Dear {FirstName}”), which slowly erodes that competitive edge. But all of this plays in the transactional space, devoid of motivation or emotion.
In our client work on customer value, we have noticed that measures related to the customer’s perception of his/her worth to the company is a far better predictor of customer retention than “shallow” measures of satisfaction or willingness to recommend. One measure (NPS), in particular, is especially weak in this area. Correlations with purchasing are always the lowest. This really should come as no surprise, since it is a thin ‘report card’. Management teams gain some comfort by following the herd who also uses NPS, but it provides little actionable insight into the underlying value equation.
We urge CMO’s and marketing leaders to think about longer-term results and to focus on the customer’s perception of their relationship, rather than the transactional value extraction approach embraced by many marketing organizations today.
As Peter Drucker famously noted, the purpose of business is not to make a profit; it is to create a customer.
