Developing Leader for Change & Innovation in Tourism

28th June 2010

Core Module

Customer Management

Session 1

Dr Jim Hamill

www.energise2-0.com

jim.hamill@energise2-0.com

www.twitter.com/drjimhamill

About the Module Detailed overview of the ‘key success factors’ in effective

customer management for building sustained customer and competitive advantage

Including the revolutionary impact of Web 2.0/Social Media

Key premise of the class

Power Shift.

About the Module The growing empowerment of customers, declining

customer loyalty and the social media revolution have forced many tourism and hospitality organisations to re-evaluate their approach to managing customer relationships

Defined as ‘the integration of strategy, people, processes, systems, technology, organisation and culture to identify, acquire, retain and grow quality customers‘

About the Module The ultimate objective of an effective customer

management strategy is to build a quality customer base– i.e. a strong base of high value, high growth potential customers

providing Malta tourism businesses with a solid foundation for sustained growth in visitor numbers and spend.

Synthesis of leading-edge thinking in this area, but also a very practical course using tools and techniques from our `Customer Advantage Toolkit’ (CAT) for effective CM strategy development and implementation

Learning Outcomes: Understanding/Knowledge Understand the environmental factors contributing to the

growing empowerment of customers in world tourism, including Web 2.0/Social Media

The importance of adopting innovative `customer led' strategies for building sustained competitive and customer advantage

Understand what effective Customer Management (CM) is and what it is not

The business benefits associated with effective CM

Key issues in the planning and management of effective CM strategies

The critical importance of `Knowing Your Customers' The role and importance of effective `Customer Touch

Point Strategies' Integration of people, processes, systems and

technology The CM impact of Web 2.0 and Social Media

Learning Outcomes: Subject Specific Skills Evaluate the CM practices of your own organisation

benchmarked against accepted `best practice' Develop effective `customer led' strategies for

competitive and customer advantage Develop and implement effective `customer touch point

strategies' for your own organisation Develop and implement a `Quality Customer Growth

Programme'

 

Project manage CM initiatives Monitor and evaluate CM performance within your own

organisation Propose effective Web 2.0 and Social Media responses

for building customer relationships

Learning Outcomes: Personal Abilities

Develop the personal abilities and customer empathy necessary for building strong ‘1-to-1’ customer relationships and loyalty

Module Content

This Module covers the key strategic, management, technology and organisational challenges facing Malta tourism and hospitality organisations when developing and implementing effective Customer Management strategies for building sustained customer and competitive advantage

 

Module ContentSession 1 The Customer Imperative Building Quality Customer Growth Programmes Customer Experience Management Know Your Customers: Customer Information Systems

Session 2 Customer Management and Web 2.0/Social Media

Online Support Material and Discussion

Knowledge Crowdsourcing

Readings, References, CAT

Questions and Comments

Don’t bother asking because I don’t really care if you have any questions, what your opinion is or what you think. If you ask a question I

will ignore you

If you haven’t walked out by now, think about the following:

• How many organisations adopt that attitude towards customer interaction?

• How many of you have had a poor customer experience? What impact did it have on you? What caused the poor customer experience? Bad people or bad systems?

The Video http://www.advance-tourism.eu/group/customermanagement/foru

m/topics/im-outta-here

Topic 1

Effective Customer

Management: An Overview

The Customer Imperative

‘The first challenge of the twenty-first century is to master the changes that come with customers being in control. Companies that manage this transition effectively will thrive; those that don’t will fail………Customer differentiation is the key

to success in the twenty-first century’

(Nykamp, 2001)

Customer is King• A combination of market, customer, economic and

technology barriers have shifted the balance of power from suppliers to customers

Market driversCustomer driversEconomic driversTechnology drivers

Power Shift

C u s to m e r L e dD riv e rs

S tra te g yI n n o v a tio n

C u sto m e rD iffe r e n tiatio n

'M in d s e t'C h a n g e

C us to m e rA dva nta g e -

B us ine s s B e ne fits

M ar k e tC u s tom e rEc on om ic

Te c h n olog y

C u s to m e rD o m in a n c e

The Changing Business Environment

• Global Market Turbulence and Uncertainty• Customer Discernment and Empowerment• Global Competition• Shortening Product and Technology Life Cycles• Product Convergence and Oversupply• Declining Effectiveness of Traditional Approaches to Sales

and Marketing• The 80/20 Rule• Impact of New Technology

The Life Time Value of a

‘Quality’ Customer Relationship

Customer Management Defined‘The integration of strategy, people, processes, systems, technology, organisation and culture to

identify, acquire, retain and grow quality customers‘

The success of your organisation depends on:

The quality of your customer baseThe strength of the relationship you have with themYour ability to leverage that relationship (up and cross

sell)

The Ten Key Principles of Effective CM• A New Approach

• Being Customer Led

• Know Your Customers

• Integration and Co-ordination

• New Performance Metrics and `Win-Win‘

• Organisation and Culture

• `Mission Critical'

• A Key Business Driver

• Effective Planning

• Customer Advantage

Summary

Companies are not in business to beat the competition

They exist to deliver exception levels of customer service, at a profit

The majority of customers will give you only one or two chances before bad service forces them to defect to a competitor

Business Benefits of ‘Being Customer Led’

Business Benefits• Concentration of your sales/marketing/relationship efforts on

`quality' customers – your MVCs and MGCs

• Building learning relationships with them allowing you to better service their emerging needs and wants through highly customised and personalised products and services.

• Maximising customer retention and loyalty

• Maximising customer ‘Up’ and ‘Cross’ selling opportunities

• Maximising customer profitability and lifetime value

• Acquiring new `quality' customers more easily because you have got it right for existing customers

• Improved value delivery to existing high value customers• Cost savings and improved marketing/sales efficiency through

targeting limited resources on `quality' customers (actual and potential)

• Building sustained customer and competitive advantage through customer differentiation

• Erection of loyalty barriers preventing your competitors from stealing your `best' customers

Four main areas:

• Marketing Efficiency - through concentrating on `quality' customers

• Marketing Effectiveness - through more highly targeted sales campaigns

• Higher Profits - lower costs of customer acquisition and service; lifetime value of `quality' customer relationships

• Building Long Term Customer Advantage - which can be achieved through intimate customer knowledge and the customisation/ personalisation of products, services, sales and marketing to meet the unique `needs and wants' of individual customers on a `1-to-1' basis

Topic 2

Quality Customer

Growth Programme

• The ultimate objective of CRM is to achieve sustained growth and profitability through building a loyal base of high value, high growth potential customers

• It is the quality of a company's customer base, the strength of the relationship it has with them, and it's ability to leverage `Most Valuable' and `Most Growable' customers that provides the foundation for achieving sustained profitable sales growth

It is critical, therefore, that a company's sales, marketing and relationship building efforts are targeted at `quality' customers and sales prospects

This requires a systematic, professional approach to identifying and acquiring the right type of customer, managing and growing the relationship with them

Quality Customer Growth Programme

• A sales, marketing and relationship management support programme to help companies Identify, Acquire, Retain and Grow Quality Customers

• Will ensure that ......

Growth is built on a foundation of rock (i.e. high value, high growth customers) rather than sand (low value, unprofitable customers)

The right sales prospects are being targeted and that relationships are being built with the right type of customer

Sales, marketing and relationship building efforts are customised for different customer segments based on their strategic value to the company i.e. high resource, high commitment sales and marketing strategies for high value, high growth potential customers; low resource, low commitment strategies for low value, low growth potential customers etc.

• This will improve the effectiveness (ROI) and efficiency (costs) of sales, marketing and relationship building efforts

• QCGP is a very flexible tool. It can be used to evaluate the quality of a company's existing customer base; sales prospects; target markets and sectors

Key learning/skills outcomes:

• Assess the strength of your existing customer base. Does it provide your company with a solid foundation for achieving sustained and profitable sales growth?

• Decide whether your company's sales and marketing efforts are targeted at the right prospects, markets and sectors

• Understand the importance of and the business benefits to be derived from customising your sales, marketing and relationship building efforts depending on the strategic value of different customers to your organisation

• Evaluate your existing sales, marketing and relationship strategy against `best practice' as recommended in QCGP

• Implement a Quality Customer Growth Programme for your own organisation

The Customer

Value Matrix

• A strategic framework for positioning different customers, sales prospects, markets and sectors according to their relative importance to the company.

• Two main criteria:

– `Customer Attractiveness' - the current and future value of a particular customer (sales prospect, market or sector) taking into account sales value, customer acquisition and service costs, short and long term customer profitability etc.

– `Probability of Success' - the likelihood that the company can win, retain and grow that customer's business

High

Customer Attractiveness

Medium

Low

High Value, High Growth, LowProbability of

Success

High Value, High Growth, High Probability of

Success

Low Value, Low Growth, Low Probability of

Success

Low Value, Low Growth, High Probability of

Success

Low Medium High

Probability of Success

Customer Attractiveness• Current Sales Potential

• Future Sales Potential

• Profit Potential

• Profit Timescale

• Customer Image and Reputation

• Nature of Customer's Business/Customer Base

• Business Attitudes

• Financial Strength

• Speed and Terms of Payment

• Risks

Probability of Success• Current Relationship

• Age of Relationship

• Share of Customer's Purchases

• Relative Share with Respect to the Largest Competitor

• Share Trend

• Product/Service Competitiveness (USP)

• Price Competitiveness

• Customer Service

• Customer Understanding

• Industry Experience

Strategic Implications

• The final step in building a QCGP is to develop and implement sales, marketing and relationship strategies appropriate for different customers (sales prospects, markets and sectors) depending on their respective position on the CVM

• Strategy development and implementation should take place at two main levels:

– The overall generic strategy to be followed for each customer cluster

– Specific sales, marketing and relationship actions to be implemented

Generic Strategy:• Build Strategic Relationships

• Target for Development

• Build Brand Awareness

• Defend Against the Competition

• Selectively Develop

• Defend Minimally

• Retain Minimally

• Service Minimally

• Withdraw

Quality Customer Growth Programme

High

Customer Attractiveness

Medium

Low

Build Brand Awareness

Target for Development

Build Strategic Relationship

Defend Minimally

Selectively Develop Defend Against the Competition

Withdraw? Service Minimally

Retain Minimally

Low Medium High

Probability of Success

A ‘snapshot’ for

some segments........

1. High Attractiveness/ High Probability of Success (HAHPS)

• Customers in this group represent your `Most Valuable Customers' i.e. high value, high growth potential customers with a high probability of success. Your overall strategy for this group should be `Strategic Relationship Building' or `Achieve Preferred Supplier Status'. This will require high involvement, high commitment approaches to sales, marketing and relationship management. Your overall priority should be to retain and grow this customer to become a strategic partner

2. High Attractiveness/ Medium Probability of Success (HAMPS)

• This group has the potential for becoming a `Most Valuable' customer. However, while providing very attractive sales prospects, you only have a medium likelihood of success. This may be because you do not currently have a strong relationship with the prospective customer or there is a strong incumbent competitor. Your overall strategy for this group should be to `Target for Development'. The specific goal to be achieved is to exploit the potential of this client for becoming a `Most Valuable' customer. Your priority should be to enhance the relationship you have with them thereby improving your future `Probability of Success'. Sufficient resources need to be made available to achieve this, but not at the expense of your `Most Valuable' customers. Resources should be re-allocated away from Low Attractive/Low Probability of Success Customers.

3. High Attractiveness/ Low Probability (HALPS)

• This group has the potential for becoming a `Most Valuable' customer for your company. However, your current `Probability of Success' is low so it is going to take time and good relationship building to change this. Therefore, your overall strategy for this group should be to `Build Brand Awareness' i.e. raising the profile of your company in the minds of this group. A direct selling approach is unlikely to work for this type of customer and should be avoided. You do not have sufficient brand awareness or differentiation. Your priority should be to ensure that the client becomes more aware of your company, your products and services and what you have to offer that is different and better than your competitors. Sufficient resources need to be made available to achieve this, but not at the expense of your `Most Valuable' customers.

7. Low Attractiveness/ High Probability (LAHPS)

• You have a very good relationship with this customer group, but future sales prospects are low. Your overall strategy should be to `Retain Minimally'. While it may be pleasing that you are in a strong competitive position with this type of customer (i.e. high `Probability of Success'), this may be because you are over-servicing their needs. This is a low value customer group with limited future sales prospects. You need to be careful about falling into a `comfort zone mentality'. You need to ensure that you are not over-servicing low value customers at the expense of high value ones. You may need to re-allocate resources away from this group to defend or improve your competitive position with more attractive customers.

Customer Experience

Management

CEM: What Is It?

• A new ‘buzz word’ coined by management consultants and CRM software suppliers to scare us into parting with more of our hard earned cash?

• Or the ‘holy grail’ of building strong ‘1-to-1’ relationships, especially with high value, high growth potential customers?

• The key propositions of CEM can be summarised as follows:

– The real source of customer loyalty, retention and growth is the quality of the experience that each customers has in dealing with your organisation

– Every time a customer interacts with your organisation, they experience what it is like to deal with your people, systems, organisation and culture

– Customer experiences during these interactions, especially at key ‘Moments of Truth’ (MOT), can have a major impact on future behaviour. Positive experiences will help to build customer loyalty. Negative experiences lead to customer defection

– Customer experiences occur across multiple ‘touch points’ and at different stages of the customer life cycle

– As companies cannot avoid providing experiences at each ‘touch point’, it is critical that these are proactively managed in ways that impact positively on future customer behaviour. Achieving consistency and quality across all ‘touch points’ is critical

– Based on the above, CEM can be defined as the proactive management of the critical interactions that take place between an organisation and its customers in ways that deliver exceptional value to the customer and to the business. Managing positive customer experiences will generate loyalty, retention and growth. Negative experiences will lead to customer defection

– CEM, therefore, should be an integral part of an organisation’s overall approach to customer and brand management

• In terms of bottom line business benefits, effective CEM can deliver short, medium and longer term customer advantage – immediate improvements in customer satisfaction and retention, sustained customer loyalty and competitive differentiation

‘Know Your Customers’

The Critical Importance of a Good Customer Information System

• A key pillar of CRM success

• You cannot build a relationship with someone you don't understand!!!!!

• The more that a company can learn and understand about the specific `needs and wants' of individual customers and customer groups, the more it can deliver highly personalised and customised products, services, sales and marketing messages thereby increasing customer loyalty and long-term customer advantage

• The foundation for effective customer learning and understanding is a good Customer Information System (CIS)

• `Analytical CRM‘ - The main focus is the use of information to improve customer knowledge and understanding and thereby, the quality of customer contacts

• `Analytical CRM' may be defined as the:

"collection, storage, evaluation and analysis of customer information to produce `actionable customer insights' which

improve the efficiency and effectiveness of customer contacts"

• A Customer Information System should produce `actionable customer insight'. Customer data must be turned into `Insight and Action‘

• The four main steps involved are……..

• Gather Customer Data • Derive Customer Insight from that Data • Suggest Proactive Actions e.g. develop customised marketing

collateral based on customer need • Evaluate Response

Key Questions to Address Do we need a Customer Information System? Why do we need one? What are the business benefits? What activities will be supported by the CIS/CDB? What information do we need out of the database? Who needs this information and why? What information do we need to gather and why? Where and how will we get this information? Who will be responsible for data collection, storage, analysis etc? How well are we currently doing in this area? What `gap' exists between the current and ideal scenarios? How can we best close this `gap'? What actions do we need to take? What obstacles do we need to overcome?

So how good are we at Customer Management?

‘Most managers and companies have heard the wakeup

call, and they believe that customer centricity is the keyto success in the future. The hard part now is becomingfluent in alternative thinking, strategies, and tactics –breaking away from the responses and policies that ourparents and grandparents taught us for the past 100years’

(Newell, 2000)

RUCL

‘Are You Customer Led?’

Initial benchmark evaluation of your approach to customer strategy and customer management

Resulting ‘Gap Analysis’ provides a strong foundation for future strategy development

Give yourself a score out of 10 for each area in terms of how well you are currently doing

Be honest!!!!!!!

The Ten Criteria Vision/Mission Customer Knowledge and Understanding Strategy The Customer Experience People Processes and Systems e-Business Organisation and Culture Performance Evaluation Planning

Effective customer management is critical to achieving sustained growth and profitability

But most companies do not have a clear customer management vision or strategy

Some Concluding Comments…..

Effective customer management is critical to achieving sustained growth and profitability. But most companies do not have a clear customer management vision or strategy

Evidence that Companies are destroying value with poor CRM systemsCompanies are destroying value with poor CRM systems Customer satisfaction index is at best staticCustomer satisfaction index is at best static

Rising customer expectations

A good CRM system is critical.......but wider than this

‘the integration of strategy, people, processes, systems, technology,

organisation and culture to identify, acquire, retain and grow quality

customers‘

‘The true business of every company

is to make and keep customers’

(Drucker, 1954)

‘The true business of every company

is to make and keep ‘quality’ customers’

(Hamill, 2010)

And just when we think we are ‘getting there’,

along comes the Web 2.0/Social Media revolution

Customer to Customer conversations are increasingly taking place in ‘Cloud’ –

especially in tourism

Session 2 covers the impact of Web 2.0/Social Media on World Tourism and

how you should respond