Customer centric thinking

Customer loyalty is heading towards an all time low and the only way online ventures can hope to retain customers is by adding value. Personalisation holds the key to winning and retaining customers in the virtual customer economy.

  • E-Mail
By  Matthew Southwell Published  September 26, 2001

The importance of customer loyalty|~||~||~|Customer loyalty is heading towards an all time low and the only way online ventures can hope to retain customers is by adding value. Personalisation holds the key to winning and retaining customers in the virtual customer economy.

Despite the global slump in online sales, the Middle Eastern e-commerce market remains stable and, in some cases, is growing. Last month alone, local auction site Kunoozy.com reported that its business-to-consumer (B2C) sales had cleared over $26,000 since December, while MMI's business-to-business (B2B) site has earned $1 million.

However, as the Middle Eastern market matures and more sites appear, customer loyalty will wane. Online organisations will have to interact with their source of revenue on a much more sophisticated level in order to succeed. Warnings from Gartner Group that, between 2003 and 2006, B2C customer loyalty will reach an all time low back this up.

"Until at least 2007 to 2008 … the number of unsatisfied consumers will be the highest in history [and they] will be more disloyal than ever. This will affect all B2C businesses, especially companies selling digitised products that can be distributed to mobile, nomadic clients, such as retail banking, entertainment, utilities, telecom operators or government agencies," states the report.

Although business customers and suppliers are less fickle than their consumer counterparts, similar problems will also face those operating in the B2B space. This will be particularly apparent in online marketplaces. Although Tejari.com may appear dominant now, customers will have more choice as market places, such 3Cvillage.com, go live and existing players, such as businessdubai.com and others, establish themselves. If users do not get the levels of service they require then, like the B2C user, they will shift their allegiances.

While the Internet culture that makes it possible to move on with the click of a mouse is at the heart of these fickle behaviour patterns, Dr. Peter Wilton, marketing professor of the Walter Haas School of Business, University of California, says that it is also the solution.

"Until the Internet, it simply was not economically feasible to build true customer intimacy at the individual customer level in a large customer base. Now it is," says Dr. Wilton.

"Customers are seeing for the first time that firms are able to recognise them, and respond to them, in highly focused ways, even though that customer may be just one of thousands, or tens of thousands of customers in the firms' total market," he adds.

With Harper Lee-like aplomb, Ayman Safadi, senior manger at Accenture in the Middle East, adds that the secret is to, "get into your customer's shoes, walk around in them, and see how it feels to be your own customer."
It appears as if a number of online ventures within the Middle East have already taken this advice onboard and have recognised the need for increased personalisation.

||**||Personalisation in the Middle East|~||~||~|Mona Ataya, vice president of marketing, Bayt.com, says "personalisation is absolutely fundamental as the days of keeping a surface relationship with customers have gone. You not only have to understand the needs of your customers but evolve with them."

Ramzi Zeine, CEO, Arabia.com, believes that "everyone wants to find ways to increase customer loyalty — personalisation is one of them… [It] is important because it gives the user the experience they want."

Neither Bayt nor Arabia are personalising their offerings out of the goodness of their respective hearts. Both companies realise that personalisation is the mainstay of customer loyalty, which in turn equals profit.

Zeine argues that personalisation allows Arabia.com to maximise its advertising revenue as it can accurately describe the site’s visitors. Ataya says that it is "the only way to ensure the loyalty of customers [and]… it is absolutely fundamental to win the competitive game."

Abdul Kamli, general manager, Ajeeb.com, agrees. "There are many factors that contribute to [business] success, but personalisation is one of them as it definitely increases traffic [which can then be] turned into business and increased revenue," he says.

The ethos behind this is that the loyal customer provides more revenue than a new one, and cost less to maintain. "Most organisations are aware of the high cost of acquiring new customers — typically five to ten times more than keeping current ones satisfied. Winning back a lost customer can cost up to 50-100 times as much as keeping a current one satisfied," explains Ataya.

Safadi adds that this is all related to the ‘80/20’ rule where 80% of a company’s profit is derived from 20% of its customers. As such, it is the minority that have to be kept truly satisfied as they are the most profitable.

All of these regional online players are very much aware of the role that the Internet plays in delivering high levels of personalisation. "The Internet really creates the necessary groundwork for personal interaction between the company and the person that is receiving the service. Through no other vehicle can the company and the service recipient interact face-to-face — that is unique to the two of them," says Ataya.

With this in mind, Bayt.com ensures that once a user has logged on they receive only information specific to them in future. Arabia.com builds relationships by enabling repeat visitors to personalise content.

"We currently carry out explicit personalisation where the user is in control of how they personalise their experience. For example, if they only want information on horoscopes and sport then they have the ability to turn off the other channels. Giving the user the ability to do this helps us gain customer loyalty," explains Zeine.

This will be taken one step further in the future as the portal plans to include implicit personalisation, which will allow the user to receive personalised information without them actually having to select it.

Similar work is being done at Ajeeb.com. "We monitor our entire site and have the technology to know who is using the service. We can judge how personalisation is received and know the best way to personalise it further," explains Kamli.

How the necessary data for personalisation is collected varies throughout the region's online companies. Safadi explains that "there are many ways to capture the data needed… from telephone calls to direct marketing — where they have customer profiles — to Internet surveys and customer registration."

||**||A shallow experience|~||~||~|Arabia.com uses cookies to discover which parts of its site users prefer and, according to Barig Siraj, chief technology officer, Arabia.com, they have proved very effective thus far. "[Using cookies] is not 100% reliable because some people turn the cookies off, but about 90% don't change them," he says.

Islamic finance site, iHilal.com uses log analysis software and customer relationship management (CRM) technologies to track its customers usage patterns and purchasing preferences.

"The objective of iHilal's tracking and profiling technology is to understand our customers needs and interests. This information is vital for us because it enables us to provide better service, better products, and tailor our business towards the demands of our customers," explains Jalil Sadeghi, chief technology officer, iHilal.com.

While the ‘track users/target services’ approach of Arabia and Ajeeb may be working at present, they are both only stopgaps until they, and the region as a whole, embraces customer relationship management (CRM) software on mass.

Ajeeb's Kamli recognises this but argues that, although the technology is proven worldwide, it requires better IT knowledge and Internet penetration than the Middle East currently posseses.

"Here, the Internet users have a low experience. You can offer a service, but it is not used, as they do not know what benefits it offers. According to our own research, around 90% [of our users] have a low user experience. They use the Internet just for e-mail and basic browsing. They do not have a deep experience," he says.

He does, however recognise how important it will be in the future. "More and more people are using the Internet and they are gaining more experience. In a year's time the 10% [of current deep experience users] may be 20% — so it does have to be considered," he adds.

Safadi has similar opinions as he explains that only a limited number of the region's companies have fully grasped the benefits of personalisation and CRM. Part of this problem, he explains, is to do with how the region has reacted to the "dot-com debacle in the West."

"Many organisations in the Middle East regard the failure of US and European dot-coms and e-businesses as a validation of their scepticism about e-business," he says.

"Middle East organisations are still in the transition phase to the 'e' business. It is premature to judge an ‘e-fatigue’ happening in the West, and applying it to our environment. But because many organisations did not get moving to 'e' right does not mean that the whole philosophy is wrong," adds Safadi.

While undoubtedly premature to write off technologies such as CRM, there is a certain backlash against it. Gartner Group reports that the technology is both immature in its design and implementation. "A portion of the immaturity of CRM transformation can be blamed on the immaturity of CRM technology itself, particularly the lack of integration between niche applications, as well as between those and back-office applications," it states.

||**||What the experts say|~||~||~|A recent report by the Butler Group paints a similar picture as it claims that while CRM can offer a significant competitive advantage to companies that are prepared to invest in the technology, it has a long way to go before it even begins to live up to the industry hype.

"CRM should provide quantifiable benefits to organisations and their customers. It should help to improve the quality and relevance of customer relationships, but so far it has failed to achieve its key objectives," says Andrew Kellett, senior research analyst, Butler Group.

The report goes on to says that "CRM deployments are known to have a high casualty rate." However, failure is, in part, due to the fact that businesses that have tried to implement CRM have often done so for the wrong reasons.

Safadi adds that "part of the problem is that vendors have promised an entire electronic customer relationship management solution, where in reality they only have a few of the components, which when implemented do not necessarily create the whole that improves the customer's experience."

He goes onto explain that it is not, in fact, the actual personalisation and CRM technology that is important. But rather how the end user interacts with a business.
"Companies spend a fortune on technology systems, gather vast amounts of information for customer profiling, set up e-business and relationship management systems, prepare marketing campaigns to sell online — but at the end of the day the customer can only see the front layer of the business: the customer service they receive," says Safadi.

"If they [the users] don't have a good experience as a customer, no amount of money spent on e-business technology will convince them that they should remain that company's customer," he adds.

The right approach for Middle Eastern companies, in Safadi's opinion, is "to learn from the West's mistakes, and 'e-enable' their businesses in a sensible and structured manner."

Accenture emphasises that CRM implementations have a clear vision and proper structure, where the sales, marketing and services channels are integrated in order to "create harmony between all the business units and allow the customer information to flow much more easily."

Once this has occurred, Safadi explains, all three channels are "aligned to serve the customer's demand."

Abdul Kader Kamli, general manager, Ajeeb.com believes that, until CRM technologies really take off in the online environment, the focus should be on the interface.

"We should focus on the interface, because most web sites do not spend enough time studying the interface and online navigation. The problem in this region is that to cut costs and time, they do not develop these things as well and end up copying the design from global companies. Companies in this region should take into account the regions culture and local habits," he says.

In addition to ensuring that the site is attractive and easy to use, Kamli adds that the levels of personalisation should be based on the knowledge of the users. "It is not necessary for them to be able to personalise every component and each channel on the web site. [Businesses] can just concentrate on the main ones," he says.

||**||The way forward|~||~||~|The modified approach that local companies are taking to personalisation appears to dovetail with current analyst opinion.

A recent Gartner Group report states that the heavily touted personalisation technologies and techniques — which the Middle East has thus far ignored — have not automatically translated in to either relevance or value to the customer. This, the analyst house reports, has in turn led to disappointing results in many personalisation projects with companies achieving success on only trivial levels. For example, with web pages that welcome customers by name.

"True one-to-one personalisation is, in essence, segmentation to a segment of one. However, in application, this level of segmentation is not necessarily practical or desirable. The number of variables that might be relevant to a customer is finite, even though the total number of possible variables is not. The key to a successful personalisation effort is learning to identify and use the variables that are truly relevant," the Gartner report states.

In the same vein as Safadi's 80/20, Gartner suggests that "by limiting the number of variables by which it segments, an enterprise can achieve a balance between maintaining a manageable number of segments (as they help define strategic value for the enterprise) and retaining a level targeting (as it enhances relevance to the customer)."

Such segments may include customer value, the stage of the customer's relationship with the business, ways in which the customer interact, and variables such as context and timing.

The bottom line according to Gartner is that "smart enterprises will not chase the elusive dream of one-to-one. In reality, most customers' needs can be categorised into a finite set of segments and targeting. Enterprises must learn to match customer preferences to the appropriate segment and deliver relevant interactions that communicate a personalised level of intimacy. The true value of one-to-one to the customer is in his or her perception of that intimacy."

As Safadi says, the Middle East has the opportunity to learn from the West and take recommendations from the likes of Gartner on board. If it does, then the region's businesses may well be able to, as Dr. Wilton prescribes, "create the best imaginable experience possible for the customer" and "design unique experiences for them as the individual that goes beyond what they have done before."||**||

Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code