Who are your priority customers and how do you serve them? Classic brand and customer experience theory says to focus on the “best fit customer” to drive relevance, yet it is rare to find a case where pleasing only one customer type can help achieve your goals. Case in point: when I took this position at Forrester, I started flying… a lot. Yet my 25,000 miles in 3 months on a certain airline didn’t align with their pre-set qualification period, so I didn’t receive status nor am I recognized in any way when I fly with them. That lack of recognition undermines loyalty, yet I’m precisely the type of customer whose loyalty they should be eager to gain.
This airline puts emphasis and resources into maintaining an improved experience for their defined priority customer – existing loyalty program members – and doesn’t consider the experience for attracting new customers like me into the fold. While they have a terrific app, the rest of their relatively generic flying experience (including wi-fi on only 1 of 10 flights I’ve taken) does little to motivate me, or any business traveler, to choose this airline over another brand.
When portfolio thinking comes into play
It’s true that by trying to be all things to all people, you become nothing to anyone. Imagine Apple trying to appeal to both innovators and technology laggards, or Southwest Airlines trying to cater to both bargain and luxury fliers. It doesn’t work. Good brands have the courage to stand for something.
This is typically where brand portfolios come into play. Companies in highly experiential categories like hospitality and retail create dedicated brands for specific customer types, ensuring the entire experience is highly relevant for each audience. Think Gap Inc. with Banana Republic at the higher-priced end and Old Navy at the low, or Starwood’s diverse brand portfolio for psychographic segments like the sustainably minded (Element) or the trendy (W Hotels). High relevance creates an emotional connection with a brand, and our research shows that emotional connection is the top driver of loyalty-based revenue.
However, creating new brands is a very expensive proposition and often hard to sell. An airline could create a sub-brand or entirely reposition itself for business travelers, creating exponentially higher relevance and connection, yet these approaches are often challenging to sell to stakeholders and shareholders of large public companies. Sub-brands also don’t make sense for many companies that, by their nature, attract a wide range of customers, those in which the purchase decision is not under customer control like: utilities; health insurance; 401k programs; office technology; location-dependent categories like convenience stores, grocery stores, banks, etc; or B2B companies selling to multiple decision makers and influencers across small and large customers. Even experiential brands with a clear psychographic audience, like Apple or luxury hotels, sell to both businesses and consumers with different experiences for each.
Let’s face it: priority targets are a terrific idea in theory, but in practice, you have a lot of different types of customers that likely require different experiences to create loyalty. Or, as in the case of my not-so-favorite airline, there’s no mechanism to identify potential priority customers.
Defining the experience portfolio
There’s a middle ground between laser focus and being all things to all people: the experience portfolio. An experience portfolio can help you define and prioritize experiences for categories of customers. It’s a way to think through the different possibilities and create an optimal approach to experience design.
Let’s take an example of a B2B company with multiple business units selling to the same large and small customers. The typical “inside-out” perspective designs experiences by product or business unit, yet that’s an artificial and inefficient distinction for customers that buy across business units. The “outside-in” perspective starts with the customer experience and then determines the right internal structure to support it. We could consider the following experience portfolio framework to work through this challenge:
The vertical axis is customer lifetime value (CLV); the company can justify a higher cost-to-serve for an enhanced experience to keep high-value customers happy. To properly calculate CLV, our hypothetical client must share data across business-unit silos to create a shared CLV score, and then ensure that score is communicated to anyone who might touch that account.
The horizontal axis in this example measures complexity. The company must create a different experience for high-complexity customers (i.e. those working with multiple business units or across company regions) that necessitates breaking down silos across organizations and systems, data, etc., versus a small account working with one business unit. We used the Nordstrom analogy to make it easy for internal stakeholders to quickly understand the difference in experience that should be delivered to each group, and then worked with them to determine the internal requirements of delivering these experiences.
Now for priorities: if we improve the experience for Tier 1 customers (high complexity, high value) all other types of customers will benefit from the efficiencies gained. Even complex small customers (currently deprioritized due to low ROI) will likely see significant experience improvements in ease of doing business after the company architects a solution for their larger counterparts. Likewise, if they create a low-cost way to serve Tier 3 customers via digital/self-serve technologies, these investments will benefit all customers. The same app or online experience can be re-skinned and modified for Tiers 1 and 2. Read More