Replacing Customer Hierarchies With Customer Choices

by D. Daniel Ziv, Nov 16, 2010, 11:52 AM

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Today's "social customer" may drive organizations to rethink their customer segmentation strategies, taking into account the power and impact of social media.

In recent Marketing Tools:CRM articles, we've explored such topics as the synergies between marketing and customer service operations, best practices for helping ensure customer feedback survey success, and the power and vulnerability of the modern brand. Today, we'll look at another interrelated topic: social media's impact on traditional customer segmentation strategies.

Like many of you, I travel frequently for business. The story that follows details a recent "on the road" encounter. The airline industry is about to enter its busiest season. With the holidays come an influx of travelers making their way to see friends and family. Some will have a pleasant travel experience; others may not. Something to consider: is that by design?

I fly more than 100,000 miles a year and tend to be loyal to a couple airlines. Recently, however, I flew with an airline that I don't normally use -- and felt the impact. This particular company didn't care much about my well-earned frequent flyer status and "randomly" put me in the worst seat on the plane -- the very last row.

During my journey, I started wondering why the last row on most planes do not have reclining seats. Maybe the aviation engineers who made that decision were working off the assumption that last-row passengers are so uncomfortable with the loud engine noise, fuel and lavatory fumes, and long lines throughout the flight that reclining seats really wouldn't make much of a difference.

The airline industry is a common example of how many organizations use customer segmentation and price differentiation strategies. Airlines want to treat their best and most loyal customers better than casual consumers. It's part of the strategy. The methodology is based on the assumption that more loyal customers offer an airline a higher lifetime value, which is probably true in most cases.

The flaw in this thinking is that, by design, on every full flight someone is likely to have a bad experience. It may be because the respective passenger had the last-row seat or their luggage or carry-on did not make the cut. In the past, this may have been acceptable and even logical. However, in the age of the "social customer," this tried-and-true approach to managing passengers can be extremely costly.

The value of a customer should no longer be measured only by the number of miles s/he flies a year with one airline. Instead, treating a casual customer as if s/he is valued creates a great opportunity to make a positive first impression and potentially get them to switch.

Additional factors should also be considered. For example, how likely is the customer to share his experience with others? Someone who rarely flies and has a bad experience may very well share his/her perspective with millions of others via Facebook, Twitter, blogs, YouTube and more. Such negative social commentary is easy to post and can be exponentially damaging to the organization.

Some companies have started to track active participants in the social sphere, taking the information and applying it to their customer segmentation strategies. Where some run and hide at the thought of monitoring yet another channel, others use this approach to their advantage. For example, in one of its television commercials, Hotels.com claims that travelers who use its services are more apt to be treated well, lest they post complaints about their bad experiences on the site for millions of other travelers to view.

Another more straightforward strategy can be one that states "every customer counts," replacing customer hierarchies with customer choices. Some travelers prefer aisle seats, while others prefer window seats. Most airlines allow customers to choose their own seat, which is an effective way to maximize the customer experience for passengers. The middle seat is typically dreaded -- it poses no special benefit. Yet, I flew once on an airplane where the middle seat was actually a little bit wider than the window and the aisle seats, creating a third viable choice for people wanting a little extra "waist" room. Interesting concept, right?

Since it's unlikely airlines will be replacing or reconfiguring passenger seats in the near future, maybe offering "free drinks" or some extra bonus miles for those in the last row would serve as a nice gesture. Your trip would be a little less painful, and the airline would hopefully receive "kind words" or at least avoid negative social commentary. Sounds like a much better way to go, if you ask me.

Safe travels.

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