Stating that all customers are not created equal is hardly an oversimplification. But just like the pigs in Orwell's Animal Farm, some customers are more equal than others. Some customers are worth a great deal, some may become more valuable over time, some may be valuable for a brief period but may be easily lured away, and some are never likely to become valuable. Repeat buying power and willingness (even desire) to speak about experiences-two bases of customer loyalty behavior-are everything.
No company has unlimited resources to equally service or support all of its customers. At minimum, companies need to segment their customers to determine how much longer each customer will remain with them, how much revenue each will contribute, how much and what kind of services a customer should receive, and what efforts will be needed to keep one that is new or at risk, or regain one who is already lost. Also, if a company is changing its focus, perhaps from a product focus to a service focus (such as beginning a new customer management or frequency marketing program), decisions will have to be made about which customers they want to retain.
Just as companies are becoming smarter about keeping the customers they want, or "firing" less attractive customers through stepped-down services, they have to invest more up front in learning which potential customers will be the most valuable over time. This goes beyond segmentation. It is more like pre-segmentation. Consider gaming:
The business of gaming in Las Vegas, Atlantic City, numerous riverboats, Indian reservations, and offshore is built not on a house of cards, but a house of numbers. Take the Rio Hotel and Casino in Las Vegas. It has 100,000 square feet of casino floor, 2,375 slot machines, a buffet that feeds 10,000 people, and four pools. The Rio serves 50,000 cocktails a day. The 5,200 electricians, slot technicians, laundry haulers, blackjack dealers, show performers, and custodians, toiling in three shifts, make the Rio run like a plush, yet high-tech, gaming factory.
The Rio's purple and teal colors are everywhere, and the round-the-clock carnival atmosphere has all the feeling of a tropical party. Almost seven million customers per year play poker, slots, craps, pai gow, baccarat, keno, roulette, and black jack; but the real game at Rio is how they use data to keep, and attract, the customers they want.
Those players who gamble a thousand dollars a day with the Rio, whether they win or not, receive the designation "hosted guests." These are the kinds of customers the Rio works hard to acquire. Their level of play accords them VIP status, with more "comps"' (free dinners, show passes, and other gifts) than other guests. Each hosted guest has an individual staff host assigned to check on them and provided any needed services. The host is actually a highly paid, personal customer service representative. It's an important position, which casino operations like the Rio consider pivotal to their success. The hosts cultivate relationships with the players; and VIP players are encouraged to call their hosts before arriving at the casino, so the host can have show tickets, restaurant reservations, and suites set up per the player's profile.
There's even a higher echelon of gaming customers: those players who have a million dollar line of credit. They get the best suites, and virtually everything plush the casino has to offer. They're nicknamed "whales," and with good reason. At the Rio, this means a suite with 7,000 square feet of space, and bathroom sinks with gold-plated faucets. These players gamble in the Rio's secluded back room, called the Salon, where they may play baccarat and roulette with $100,000 chips.
In an industry like gaming, where the level of customer migration is very high, it is imperative that casinos not only keep the players they want, but also put extra effort into targeting the right customers in the first place. They do this in a number of ways, including geo-demographic profiling for their acquisition. For the high rollers they've lost, many of the casinos also make an extra effort to get them back as well, and can treat them as "educated" prospects, individuals who know the basic value proposition but need updating on current attractions and services.
Advanced companies have begun applying sophisticated acquisition research and targeting models, seeking customers who:
- Need less direct motivation (incentive) or indirect motivation (promise of support and committed resources) to purchase
- Have demonstrated more resistance to claims and attempts to lure them away
- Are less price-sensitive
- Are more accepting of occasional value delivery lapses and are less likely to accept alternatives if their brand/service is unavailable
- Will demonstrate more positive attitudes about 'their' brand
In the retail automotive industry, for example, potentially loyal new customers take less time making their purchase decisions, consider fewer dealerships, are less price-driven, and rely less on magazine articles and other media and more on previous experience and personal, peer-to-peer recommendation.
Noted customer experience management expert Professor Adrian Payne has conducted studies among marketing executives that show that 80 percent of companies spend too much of their marketing budget on customer acquisition (Acquirers); about 10 percent spend too much on retention (Retainers); and about 10 percent are Profit Maximizers, which balance acquisition and retention. Tough economic times demand that all companies better allocate their budgets, so that they will not only get customers, but get the right customers, those who are the most profitable and best fit, for their businesses. In other words: ready, aim, fire.