In 2008 Wal-Mart launched a major remodeling project called “Project Impact.” A large part of this was in response to customer research indicating Wal-Mart’s high-end bargain shopper wanted the “Target-style” layout featuring clear aisles and a more succinct product selection. Yet, almost immediately after implementing these changes, sales began to drop.
This story illustrates a shortcoming of customer segmentation that relies on demographics, income, or profit potential alone. While customer segments can provide insight into who your customer is, they can’t tell you how a customer feels (emotional) or what they do (behavioral) in response to doing business with you.
Measuring Engagement Segments
In our line of work, we measure Customer Engagement Segments. Engagement Segments are calculated based on customer responses to a set of emotional and behavioral questions. Their responses allow us to sort them into the following four categories:
- Fully Engaged: love the experience you deliver
- Engaged: happy
- On-the-Fence: not emotionally invested
- Actively Disengaged: make an effort to detract from your brand (telling their friends, family, Twitter account how awful you are)
Why Engagement Segments Matter
These segments become meaningful when combined with ROI analysis, to determine the impact of engagement on company performance. In addition, logistic regression analysis lends even deeper meaning as it helps to identify how to migrate customers from one segment to another. Project Impact may have tripped up by attempting to further engage customers who already enjoyed the Walmart experience, when the greatest profit potential would have been to focus on the drivers that turn ambivalent customers into happy shoppers.
While a customer experience strategy similar to Wal-Mart’s may find the greatest value in moving customers from On-the-Fence to Engaged, this won’t hold true across industries. In the case of our accounting data, we found that Fully Engaged clients increased spend with a given provider by a factor of greater than two compared to On-the-Fence clients. In this scenario it made sense for partners to focus their energy on consistently delivering the elements that were moving clients from Engaged to Fully Engaged.
Creating a more engaging customer experience does not mean that your company needs to be Amazon. It doesn’t mean that you need to take a leap of faith and simply hope to see the desired results. Creating a more engaging customer experience starts with understanding how your customer experience strategy fits into your overarching business strategy and then focusing on the drivers that will move more of your customers and clients into your most profitable engagement segment.
~Janessa Lantz
Photo courtesy of Nutdanai
