10 Ds of customer differentiation

Mar 28 2014 by Andy Hanselman Print This Article

As we all know, the fight for customers is a tough one Overcrowded markets, greater transparency, ever-increasing customer expectations, reduced loyalty and greater promiscuity means it's getting more difficult to find, attract and keep customers.

We're often told to 'segment' our markets, but how? By size, age, sector, location? Even businesses with a very focused approach to identifying and targeting the customers they want to work with come up against this question.

So here's a different way to look at your potential and actual customers, one that I hope will provoke a bit of debate, discussion and – hopefully - get you doing something!

You may see there's a theme emerging here. So without further ado, I give you the 10 Ds of customer differentiation.

Let's start with:

Disinterested' Customers aren't interested in what you have to offer. That's fine, as long as you can find enough customers who ARE interested! Our definition of marketing is "finding, attracting and keeping the customers you want, while maximising your profits". So

customer focused businesses identify and focus on the customers they WANT to work with – they 'choose' em or lose 'em' and they don't try to be all things to all people.

As a result, they don't waste time, energy and resource on customers that they don't want or who aren't interested. That's an important lesson.

Detached' Customers are those customers that you have won, but have no real loyalty. They are reasonably happy with what you have to offer and may well come back for more. But equally, they may not.

There's no relationship or 'buy in' with these customers: they have no loyalty to your brand and they're never going to be passionate about what you do. The result is customer churn and the constant fight to attract new business. Truly customer focused businesses identify these customers and work hard to build on the relationships they've started to create.

Delighted Customers on the other hand, are those whose expectations you have exceeded, be it through the level of service you provide or the effectiveness of your product.

Delighting customers is not about giving things away for nothing or just doing things for free. It's about the personal touch, making them feel valued and creating a 'wow' reaction. (Scarily, in some sectors, this simply means doing things on time, on budget and with a smile).

This makes commercial sense too. The Ipsos Loyalty Report highlights that "in a business to business engagement, 'delighted' customers are five times more likely to plan on repurchasing than merely satisfied customers"

The downside of customer delight is that by definition, delivering it means that you have raised your customers' expectations. This is not a bad thing, but it means that you have to consistently deliver a great experience and help create ....

Devoted Customers. They have high expectations of you and consistently get what they perceive to be a great experience, so there's no reason for them to go elsewhere.

They come back for more, spend more and tell other people about you.

This doesn't happen by chance. It grows out of a culture that actively creates consistently great customer experiences. It's also about building systems and processes to support this and giving your people the skills, tools and permission to deliver them.

Zappos are masters at this – they completely focus on delivering a consistently great experience and build long term customer relationships. The same is true of Amazon, Apple and First Direct.

Research indicates that it typically costs six to ten times more to sell to a new customer than it does to an existing one. It never ceases to amaze me how many businesses seem obsessed with chasing new customers rather than putting time and effort into maximising existing ones.

So forget CRM, it's MCR you want to focus on - Maximising Customer Relationships. That means proactively giving to and getting the best from your customers, so maximising your profits. The 'getting the best from' is the payback. It's the repeat business, the loyalty, the recommendations, referrals, and ultimately, the increased spend.

Disappointed' Customers have had a poor experience and you failed to meet their expectations. This might be 'poor' when compared to previous 'great' experiences with you, or poor when compared to their experience of your competitors.

Either way, customer focused businesses deal with disappointment. They establish processes and mechanisms that find out what their customers really think. They also empower their people to spot and solve customers' problems. Ritz Carlton Hotel staff are allowed (encouraged) to spot problems and have the discretion to spend up to $2,000 to make a customer's experience a better one.

So forget customer satisfaction forms, create a dialogue with your customers to find out what they think and to spot problems quickly – then act on their responses.

Disaffected Customers are typically a result of ignoring this advice. They are the disappointed ones you didn't spot or sort out. Now, not only do they ignore your marketing messages and efforts, but many are quite happy to spread the bad word about you, both via word of mouth and 'word of mouse'.

Avoid creating disaffected customers at all costs. Deal with disappointment and do it quickly. And watch out for them online, in forums, on ratings sites and social media.

A recent by Trustpilot survey suggests that nine out of 10 consumers are influenced by negative reviews online and nearly eight out of 10 are deterred from making a purchase altogether by poor reviews.

How businesses respond to negative reviews is the critical thing here. Some 15 per cent of customers say they are more likely to do business with a company after reading a response to a negative review that was resolved. In other words, it's not just about dealing with disappointment – it's being seen to be dealing with it.

Dormant Customers don't currently buy from you but have done so in the past. So they represent opportunity! Why don't they buy from you anymore? Have they just drifted away because you haven't contacted them for some time? Have they forgotten about you? Has your original contact moved on? Have your competitors moved in?

Go on, get in touch, re-introduce yourself, re-engage them, get them back. But remember, don't shout at them, create dialogue, not diatribes.

Draining' Customers. Every business has these. They cost you time, money and resources. They just aren't profitable. They might have unrealistic expectations, or they don't pay on time (if they pay at all). Yet despite this, research from KPMG suggests that half of businesses can't identify their most profitable customers, products or services. Can you? Do you know where your profits come from?

Think in terms of 'value for time' as well as value for money. It's not just about how much a customer spends, but the time and resources you need to devote to deliver this. It's about profit, not turnover. Your challenge is to either make these customers profitable or reduce (or eliminate) your reliance on them.

That means you will inevitably have some Dumped' Customers, ones you have consciously got rid of. And that's fine, as long as you've done it consciously and rationally.

In fact, ask yourself whether you should dump a few more! If customer focused businesses 'choose 'em or lose 'em', proactively developing relationships with the customers they want to work with, then they shouldn't be afraid of saying 'no' to those they don't want.

Which leaves us with your iDeal Customers. These are the ones you want! Customer-focused businesses concentrate on specific customers to understand their needs, their problems and their preferences. They have proactive process for targeting and attracting these customers and ensure that the right messages get through to these customers via the channels that work for them.

They also establish a 'dramatic difference' - an unmatchable bundle of products, services, skills, methods and practices that differentiate them from their competitors. It's stuff that their competitors aren't doing – even better, it's stuff their competitors can't do!

Customer focused businesses recognise that this dramatic difference is only any good if the customers want it, recognise it and are prepared to pay for it. Even better, they are prepared to pay more for it.

So, to summarise:

  • Disinterested customers:Stay away, don't waste your time.
  • Detached customers: Get them on board by exceeding their expectations.
  • Delighted customers: Keep delighting them, and do it consistently.
  • Devoted customers: Keep doing it and maximise the relationship.
  • Disappointed customers: Spot problems and deal with them.
  • Disaffected customers: Let them know what you've done.
  • Dormant customers: Re-engage them – get in touch.
  • Draining customers: Make them worthwhile or dump them.
  • Dumped customers: Good, keep them dumped.
  • iDeal customers: Get focused to get more.

Obviously you can choose to deal with your customers in any way that suits you, and you can obviously decide to ignore what i have to say. However, I hope you'll dwell on this and do something [that enough of the 'D's! – ED].

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About The Author

Andy Hanselman
Andy Hanselman

Andy Hanselman helps businesses and their people think in 3D. That means being Dramatically and Demonstrably Different. An expert on business competitiveness, he has spent well over 20 years researching, working with, and learning from, successful fast growth businesses. His latest book, The 7 Characteristics of 3D Businesses, reveals how businesses can get ahead, and stay ahead of their competitors.