Over the past four months, I spoke with service leaders across industries to understand their challenges to segmentation. Many were concerned about executing a chosen strategy:

Would it require extensive – sometimes impossible – resource investments?

Would they need complex CRM or routing technologies?

Is it even possible to deliver segmented service without rep specialists or tiered staffing models?

Much of the time, these concerns are valid. Segmentation can be expensive. Take, for example, a segmentation approach that tailors service to customers’ value to the company. High-value customers are often routed to better-skilled (or even dedicated) agents, offered personalized web features, and bumped to the front of call queues. To provide this level of high-touch service, resource investment is surely required.

So what happens if you’re constrained by budgets? Are you out of luck if you don’t have the time or money to put into a scheme like that?

Here at the CCC, we’ve highlighted three low-cost, creative ways to deliver segmented service:

1. Segment in real time. Train your reps to segment customers in the moment through personality-based segmentation.

For example, Bradford & Bingley developed four customer profiles based on customer resolution preferences. By listening to hints and clues in conversations, the company taught frontline staff to diagnose customer issues in real time and provide distinctive resolution paths.

2. Use proactive alerts. Take segmentation responsibility away from reps through delivery of proactive contact to different customer groups. Proactive alerts that address different customers’ needs can preempt follow-up calls.

For example, Aon Hewitt noticed that they received frequent calls from retirees to check if their pension check had been dispatched. The company sub-segmented the retiree population to identify customers who would value proactive information of the check dispatch. Targeted messages to these customers helped the company reduce such inbound calls by more than 50%.

3. Leverage knowledge management. Make it easier for reps to address segment needs by building out your KM capability. An easily-accessible and frequently updated knowledge bank can help all reps (including generalists) understand and address differences between customer issues across segments. They can then provide in-the-moment customized service—without specialist training.

CCC members, join us for our upcoming webinar, “Segment Smarter: A Look at B2C Customer Segmentation Strategies,” to learn how your peers have implemented various segmentation strategies.

Related Resources:

• Specialist vs. Generalist Staffing Models
• Knowledge Management Maturity Assessment
• Select an Appropriate Segmentation Scheme

New Year’s observation: If there’s anything longer than the line at the (bar) (buffet line) (dessert table) in December…it’s the line at the (gym) (health club) (Weight Watchers’ meeting) in January.

‘Tis the season to resolve.

If your quest for the new year is to drop a few holiday-induced L-B-S’s…the best advice I’ve ever heard is, “Write down everything you eat during the course of the day.”  Turns out that simply training your brain to become hyper-aware of how many unnecessary calories we each consume every day is the “trigger” to kickstart a whole new mental process, that ultimately makes you eat less, and lose weight.  (BTW, 45 minutes a day on the treadmill ain’t gonna kill ya either, pal!)

But if your resolution for 2012 is to create an even greater customer experience at your company, here’s a small piece of friendly advice that will similarly trigger a new mental process for you and your entire team. It’s a matter of eliminating one simple phrase from your everyday vocabulary.  It’s not a phrase that sounds harmful at any level (in fact, when you use it, you probably think you’re doing something positive). But if you stop using it (although it’ll be hard at first), many amazing things will happen.

Stop saying, “the customer.”

I mean, we say that all the time.  We ALL do.  We all talk about how important it is to listen to the customer. To treat the customer with respect. To reduce the effort the customer has to put forth to resolve their issue.

But here’s where we need to re-wire our brains. ‘Cause there’s no such thing as THE customer.

Your company has thousands of customers. Or millions. And they are each very different. They have different interests, experience levels, language issues, expectations. And the more we allow ourselves to think about them as if they are one thing, one amorphous mass, one chain-gang of humanity…the further we get from creating the kind of customer experience that defines excellence in todays world:

A tailored, customized interaction that meets the specific needs of that one person, and their issue(s).

So, we need to stop thinking about thousands of different people (our customers) as one thing (THE customer) and start thinking of them as individuals who are as different from each other as — let’s say — your grandmother…and that weird dude with the gigantic gauged earlobes who works at the music store. Both of whom may very well be your customers.

Now, the fact that you have thousands of different people as customers doesn’t mean you need to create thousands of different service experiences. But certainly “one size fits all” isn’t the right approach either.

That’s where customer segmentation comes in. Instead of just segmenting customers based on how you see them or how they appear to the company (higher-or-lower value, users of different products) it’s important to segment customers based on what matters to them (personality needs, issue urgency, level of interest in what your company provides).

I saw a great sign during this past year in the break room at the Houston-based call center of Southwest Airlines (one of the great low-effort service companies in the CCC network).  It reads simply…

Behind every customer, is a person.

Here’s wishing that 2012 is the year you and your company refocus on the people you serve, instead of just THE customer.

HOW ABOUT YOU? What are you resolving to do differently in 2012?

Related CCC Resources:

• Customer Segementation (B2B and B2C Findings)
• How Cisco Increased Web Stickiness through Customer Segmentation
• Personality-Driven Service (Training Resources)

Note: this is the second post in a three-part blog series on business-to-consumer segmentation. In this post, we will address the importance of setting goals for segmentation. Read the previous post on common B2C segmentation schemes and stay tuned to learn how to resource against segment needs.

Effective customer segmentation helps B2C companies achieve a number of service goals, such as:

• Increase revenues by driving customer retention
• Improve the customer experience
• Reduce costs by reducing call volume and/or callbacks
• Strengthen customer relationships
• Identify and maximize cross-sell and up-sell opportunities

Given all these potential benefits, it might be tempting to jump right into a segmentation scheme.  Sounds like it could only help an organization, right?

Not so fast.

Our latest research on B2C segmentation finds that many companies dive into segmentation without first defining the goal of their efforts. As a result, many fail to see the ROI of their programs – or worse, they segment customers incorrectly (and actually harm the customer experience) or increase their own costs to serve.

Progressive companies realize that effective segmentation begins with a well-defined goal. Before selecting a segmentation scheme, it is crucial to understand what you hope to gain from segmenting your customers.

Companies can use the SMART framework to help define a goal and establish criteria for success. A good goal must be:

• SPECIFIC: Select a goal that is specific and clear to service leaders, as well as frontline staff, to ensure that everyone strives for the same actionable objective.  (Moreover, don’t just set that goal – help staff internalize it as well)
• MEASURABLE: Define specific criteria that you will use to measure success.
  
• ACHIEVABLE: Make sure that the goal is reasonable. It might be difficult, for example, to find a segmentation scheme that is equally successful at increasing cross-sell opportunities as it is at reducing callbacks.
  
• RELEVANT: Ensure that the goal is aligned with the interests of internal stakeholders, such as sales or marketing teams. Oftentimes, segmentation is a cross-functional endeavor – and goals need to be aligned for the enterprise-wide initiative to succeed.
  
• TIME-BASED: Give the goal a start date and an end date. A deadline will make it easier to evaluate segmentation success.

It is important to remember that one singular segmentation scheme can’t accomplish every goal. For example, a strategy that offers better service levels to higher-value customers might be successful at driving revenue objectives, but the same strategy might not succeed at reducing costs since high-touch service often requires training and recruitment of dedicated staff. CCC members, you can learn more about how various segmentation schemes align with various service goals.

B2C readers, does your existing segmentation strategy change as your goals change?

Related CCC Resources:

• Set SMART goals for segmentation
• Train frontline staff to internalize goals
• Segmentation for Consumers

Note: this is the first post in a three-part blog series on business-to-consumer segmentation. In this post, we will address the five most common B2C segmentation strategies. Stay tuned in the coming weeks to learn more about the importance of setting goals for segmentation and resourcing against segment needs.

This fall, we introduced you to CCC’s latest research initiative on business-to-consumer (B2C) customer segmentation strategies. CCC members, the wait is over—we’re happy to announce the publication of this new research on our website.

Though segmentation has traditionally been a sales and marketing tactic, we find that many customer service organizations also started to segment customers to differentiate support offerings. B2B service organizations led the way, but B2C companies are not far behind.

To address complex customer needs and deliver personalized service in a scalable way, B2C companies often choose to implement service-specific segmentation schemes – or they find opportunities to differentiate service within the constraints of segmentation schemes predefined by sales or marketing teams.

Companies usually select a segmentation scheme that aligns with service-specific goals since schemes are not equally effective at attaining all goals. For example, a segmentation scheme that aligns high-level service with customers that provide the highest value to the company will be most effective at driving revenue goals by encouraging retention of high-value segments.  The same scheme might not be equally effective at reducing costs, since high-touch service often requires training and/or hiring of dedicated staff.

We find that most B2C service organizations segment according to customer:

• Needs: This scheme categorizes customers according to similar needs, priorities, or desired outcomes for support interactions.  This scheme is most effective against customer experience goals, such as reducing complaints or facilitating low-effort interactions, because it aligns service offerings with customers’ support needs, not just similarities in surface-level characteristics.

• Lifecycle with Company: Customers often require different service levels at different points in their lifecycles with a given company. For example, a new customer might require high-touch service during on-boarding to help ease his or her transition to the company.
• Life Stage: This scheme addresses common needs of customers in similar life stages or facing similar life events. For example, some companies offer high-touch service to youth customers to strengthen relationships with these groups and maximize their future value to the company.
• Value: This scheme groups customers based on their current value to the company. “Value,” in this case,” is defined by customer profitability, product holdings, or loyalty.

• Potential Value: This scheme is often paired with the value-based approach to tailor service to segments with high anticipated future value (defined by future potential profitability or loyalty to the company). The goal of this scheme is often to maximize the future value of these high-potential customer groups.

CCC members, learn more about the benefits and drawbacks of each of the five segmentation schemes – as well as the extent to which they are successful at achieving common service goals.

B2C readers, which of these methods have you tried?

Related CCC Resources:

• Is B2C Segmentation Right for Your Organization?
• Set SMART Goals for B2C Segmentation Strategies
• Segmentation for Business Customers (B2B)

Why B2C Companies are Segmenting

Though segmentation is often used by marketing or product development teams, we find that many customer service organizations have also started to segment customers to differentiate the service offering.  B2B companies were first to do this, but B2C companies have started to follow suit. The reasons for this shift reflect broader changes in the service landscape:

• Customer service is increasingly viewed as a competitive differentiator and this trend is expected to intensify over time. According to a 2011 report written by the Economist Intelligence Unit, 55% of global business leaders believe that service will trump quality as a key differentiator in 2020.

• Advances in technology, thanks in part to increasingly effective CRM systems, have made it easier for companies to gather customer data and understand preferences.

• Service organizations must manage a growing customer base with increasingly complex needs. By tailoring service offerings to different segments, companies can optimize service to customers while maintaining profitability.

Sure, these reasons help explain why companies often choose to segment their service offerings – but what about the how?

Different Approaches for Segmentation

Our research has found that segmentation models used by service leaders across industries tend to fall into a few categories. Here is a preview of the strategies we’ve seen so far in our research:

• Value-Based Segmentation: Companies use this strategy to create a targeted service proposition for highest-value customers to drive revenue growth and retention. “Value” in this case can be monetary or non-monetary. It can be defined by customers’ product holdings, current balances, purchase frequencies, or loyalty levels.  Though traditionally used in financial services, this model has become more common in other industries.

• Potential Value Segmentation: Value-based segmentation schemes align highest-level service with highest-value customers, but often neglects those with the potential to be high-value. To ensure sustainability of the value-based approach, many companies tailor service to high-potential customer groups.
• Needs-Based Segmentation: Good segmentation schemes do not just consider surface-level characteristics, but also focus on addressing customer needs. Companies that utilize this scheme align customer experience with customer purchase patterns, product usage behaviors, and engagement preferences.

• Lifestage Segmentation: Since customers in similar life stages often face similar problems, companies can benefit by addressing common needs across a customer’s life cycle. For example, recognizing that its youth customers needed more guidance on managing their finances, a U.S. national bank developed a customized online portal to explain product offerings to this customer group.

Does your organization use any of these segmentation strategies? If so, tell us about it below. If not, what strategy do you use?

CCC members, stay tuned for our final research findings on B2C segmentation, due out next month!

Related CCC Research

Customer Segmentation Topic Center (B2B)

Segmentation to Passively Guide Customers (Cisco)

Learn how McAfee identified new areas for support differentiation

With this in mind, we’re excited to announce a new CCC project: Developing an Effective Consumer Segmentation Approach in Customer Service (B2C).

Over the next two months, we will consider how Business-to-Consumer (B2C) service organizations make the decision to segment or not to segment their customers and we will map the benefits and drawbacks of different segmentation schemes.

A few musings we have so far:

• Segmentation has become increasingly important for contact centers in recent years, primarily due to advances in technology and more complex customer needs. To address these issues, it is important for companies to offer differentiated service. Have you noticed this trend in your organization? Do you implement a segmentation strategy?

• Not all organizations segment their customers exclusively for service delivery. Some might adopt schemes created by marketing or sales departments, while others might opt out completely. If you do not segment, why not? Is this something you’ve considered in the past or might be willing to consider in the future?

• Some recent service segmentation schemes include life-stage segmentation (customized service based on customers’ life stages), value-based segmentation (service based on customer’s value to the organization), potential-based segmentation (service based on both current and potential customer value), and preference-based segmentation (service based on customer preferences & behaviors). Does your organization utilize one of these strategies? If so, why? If not, what strategy do you use?

This is where you come in!

As with all CCC projects, our research is guided by insights and best practices from our members. We would love to hear your opinions to make sure that we are on the right track.

Please take a moment to leave your thoughts below. CCC members, you can learn more about the research and find information on delivery timelines on our web site.  If you would like to participate, do not hesitate to e-mail us and we will be happy to schedule time to discuss further!

Related CCC Research

Customer Segmentation Topic Center (B2B)

Segmentation to Passively Guide Customers (Cisco)

Learn how McAfee identified new areas for support differentiation

Many of your customers are already visiting your Web site to resolve their issues. But, how many of them are able to really find solutions? Our research indicates not many.

While many companies believe that the challenge lies in getting customers to the Web site, CCC research finds that the problem is actually in getting customers to stay long enough to problem solve.

So, if customers come looking for answers on your Web site, why do they abandon it so soon?  This happens because often, Web sites focus on providing ‘everything to everyone’ and are not designed to guide the right customers to the right self-service channel. Companies need to realize that different customers have different channel preferences and that Web sites need to be redesigned to guide customers to their preferred channels.

Let’s examine how Cisco improved its Web self-service and drove call volumes down by 79%.

While looking at its Web metrics, Cisco realized that on an average, customers stay for only 30 seconds on its Web site. Probably not enough time for anyone to solve an issue! To ensure the right customers are guided to the right channels, Cisco segmented its customers on behavior-based factors to determine channel usage and issue resolution preferences of four customer segments.

Armed with the knowledge of segment-wise channel preferences, Cisco redesigned its Web site using segment-resonant language and de-prioritized low-preference channels.

The segmentation-based channel prioritization enabled Cisco to maximize the Web site as a channel for customer service with 84% of contact volume occurring in Web. What are you doing to increase Web stickiness at you organization?

CCC Members: We have pulled out the key insights from Cisco’s practice in a more detailed summary here. You can also listen to CCC’s presentation of the Cisco case by accessing the full Webinar replay here.

By Kirsten Robinson

It’s no secret that the millennial generation is a game-changing force. Recently, we talked about millennials in the workplace, and the generational differences managers need to recognize. But now that you know your employees…do you know your customers?

Our sister company, Iconoculture, recently conducted a study on millennial consumers, their attributes, and how market research and marketing teams can reach them effectively.  We think service professionals should know these things too.  Here are some key takeaways from the webinar:

Who is the millennial consumer?

The millennial consumer—most commonly thought of as born between 1982 and 2000—can’t be confined to one box. They embody a variety of identities at one time, which are constantly in flux—the “me of the moment.” Some other attributes at a glance:

• They stand out to fit in—fitting in with their tribe of friends, while maintaining individuality.
• They choose to adapt over adopt—they may not be the first product adopters, but when they get their hands on a device or service, they find ways to adapt it to their personal needs.
• They are some-conventionals—millennials are interested in traditional values, just not in the “traditional” sense; they twist values to fit themselves.

Nancy Robinson: “The definition of this group is so fuzzy because it’s a generation we’re still watching in process. There’s already a big difference between today’s 32-year-old and today’s 16-year-old. It’s a smaller group to watch, within a smaller timeframe. Millennials are still in the process of emerging and going through those same stages. And they’re not going through those stages in a predictable way.

They really are that kid who thinks, this looks great, it doesn’t have to be super flashy, but it looks like it’ll work, and it better work. They’re very forgive-me-not in that respect. If it doesn’t work, it’s never their fault—they think that there’s something wrong with the product.”

How can you appeal to Millennials?

• Tap into customization. Millennials are all about personalization—they need to feel like products were made for them. Even product upgrades don’t have to represent a major change; they’re interested in small, incremental changes.
• Be accessible. Millennials are convenience consumers. But, the convenience needs to be fun, and the right fit for the right moment. They want to know what the product is, how quickly they can get to it, and how soon it can be theirs. It’s not about being impatient—it’s about access.

Nancy Robinson: “What’s interesting about Millennials is they are equal opportunity information gatherers. They still pay attention to print, particularly magazines, as well as listening to the radio. It’s less about the channel and much more about the content. But they’re looking across a variety of channels. You never just want to jump into one boat, because that one boat will sink. You want to be invested in a variety of approaches to them, and you want to keep those approaches fresh.”

CCC members, learn more about the millennials in our research on customer channel preferences.

• The Voice of the Employee is important to pay attention to. [1to1 Media]

• Will the future of service include a social media caste system? [NYT]

• Is editing customer reviews acceptable? Maybe if you’re correcting their grammar and spelling.  [BNET]

• Be kind about your customers- how you talk about them speaks volumes.  [HBR]

• Get Satisfaction’s app turns Facebook pages into active sites for customer support.  [Washington Post]

• Reverse Groupon? Listening to what customers say to give them the discounts they want.  [WSJ]

(This post was originally written for the Sales Challenger blog, which focuses on critical topics for sales professionals.  We think, however, that there is relevance here for our B2B customer support readers, particularly on the topic of segmentation strategy.)

It’s hard to get key account programs right. First, companies must figure out which customers to elevate to key account status (a challenging task in and of itself)—but most organizations stop there. Key account selection is often a ‘once-and-done’ event, and customers that have been designated as key accounts remain in that position for years.

Despite changing markets and performance, most companies treat key accounts as tenured positions. There are a variety of reasons for this—a fear of jeopardizing relationships and revenue. Account Manager loyalty that skews their relationship assessment. The feeling that they just can’t “give up.”

The reality is that keeping low-performing customers in your key account program wastes more time and profit than it brings in.

What’s the solution? Firing, or de-selecting key accounts.

Though it sounds like a risky strategy, there are ways to accomplish key account de-selection without putting revenue at risk.

TNT created a strategy for assessing key accounts in order to vigorously evaluate whether they are deserving of that level of time and money investment. The company does so by putting accounts in an “incubator” for a year, to test on a trial-basis whether that account will deliver profit. Any accounts that miss the mark are downtiered (or not elevated to key account status in the first place).

You can follow TNT’s example, too—when thinking about the key account de-selection process, some things to keep in mind are:

1. Early Communication of Mutual Expectations. This step is critical to preserving good relationships with customers. Make sure to clarify both parties’ goals and objectives as accounts enter the incubation program.
2. Routine and Ongoing Account Reviews. Institutionalize annual portfolio reviews, as well as joint reviews of progress toward goals. This enables the establishment of mutual understanding and a continuous focus on alignment.
3. Unbiased Stakeholder Input. Avoid biases by using an independent leadership panel to assess key accounts. TNT’s panel is made up of seniormost sales leaders involved in sponsoring the company’s global account program—the head of Global Accounts, the head of the Incubation Team, and the leaders of each of TNT’s segments.
4. Consistency and Discipline Around Metrics. Evaluating all key accounts against the same criteria allows for a fair, consistent assessment of their performance.

CCC members, you might also be interested in reviewing this information on determining the optimal account management strategy for your organization.