Chapter Six
Building Customer Relationships
Building Customer Relationships
Building Customer Relationships
Variety of techniques used:
– Customer Relationship Management (CRM)
– Customer Performance Management (CPM)
– Customer Experience Management (CEM)
– Customer Win-Back
A Customer-Centric company means that
Customers must be the center of its business
Focus on Customer Equity
• Value Equity– Perceptions of organization’s quality price and
convenience• Brand Equity
– Perceptions not explained by product’s objective attributes
• Retention Equity– Customers who have chosen the firm in their
most recent purchase for any reason
Profitability, Retention Measures Building Customer Relationships
• Firms must balance need for growth with profitability
– Most valuable customers
– Most growable customers
– Most costly customers
The Nature of Loyalty and Satisfaction
• Satisfaction is how well an organization fulfills the expectations of customers on quality, service elements of a brand’s value proposition.
• There are Objective and Emotional elements in that evaluation.
• Possible to achieve high levels of customer satisfaction, but not loyalty
Segmenting for Loyalty• Segmenting customers is vital to building a loyal
customer base.
• Need to identify those most likely to stay from this total customer base
Managing Customer Lifestyles
• Customer lifestyle changes over time
• Try to find offers that appeal to segments as they move from one stage to another.
• Original GM versus Ford lifestyle – product strategy
Product offerings matched to financial market customers by stage of lifestyle
The Role of Customer Relationship Management
• The People Factor
• The Process Factor
• The Technology Factor
The Role of Customer Relationship Management - People
• The People Factor
– Most important part, cuts across interdepartmental lines
– Failure of marketing, sales, customer serv. to cooperate most common cause of failure
– Get everyone involved from the beginning
• The Process Factor
• The Technology Factor
The Role of Customer Relationship Management - Process
• The Process Factor
– Systems are usually generic, hard to adapt to way specific organizations work
– Review internal and external customer-facing buying processes
– Bad processes do not magically work better once they are automated
The Role of Customer Relationship Management - Technology
• The Technology Factor
– Lots of CRM alternatives
– Don’t necessarily believe everything vendor says
– Test real time applications of software, don’t just rely on presentations
Loyalty and Frequency Programs
• Frequency and loyalty programs are not CRM
• CRM uses information effectively and efficiently to segment customers based on profit, value, events, etc.
• Loyalty program can be part of CRM, but need to customize support, communications, . . .
Example of personalized loyalty program communication
Customer Experience Management
• Customer experience is that set of connections between customer and brand that delivers benefits through touchpoints
• Must be more than personalized/customized connections – customer must feel is a collaborative process where fair exchange of value for customer and brand
• Organization must manage customer experience across all touchpoints [see p. 127]
Customer Performance Management
• Customer Performance Management, p. 128
– Beyond CRM and CEM to allow financial and business performance monitoring
– Data collected needs to be linked to profitability metrics (measures)
– See possible metrics p. 128
CRM, CEM, and Customer Performance Management (CPM)
p. 128
Marketing Dashboard
• Marketing Dashboard is a graphical representation of the most important performance indicators of an enterprise.
– Can be real time or periodic
– Charts and graphs help managers interpret and spot trends
p. 130
Marketing Dashboard from Principles
Customer Scorecards
• Customer scorecard groups information from two or more data elements.
• Allows performance in different segments on different performance measures to measured
• To create a scorecard first have to decide what to measure (metric), see p. 131 for a list
Example of customer scorecard resultsp. 131
Each gray line represents a different time period for this chart
The Net Promoter Score• Net Promoter score is a measure of how likely is a
customer to recommend/discuss your product with other.– Promoters – loyal brand enthusiasts who
encourage others to do so too– Passives – satisfied but not enthusiastic, easily
drawn away by the competition– Detractors – unhappy customers trapped in a
bad relationship who are likely to share their unhappy experience
• Net Promoter Score (NPS) = Promoters - Detractors
Win-Back: Too Little, Too Late• Do organizations have an active program to entice
former customers back?• On average firms lose 20% of customers annually,
p. 135• Finding out why customers left is starting point
– Analyze customer account histories, customer service records
– important to get info directly from customer in addition to company information so have whole story
• Lost Customer Report – sales results, fluctuations, top reasons for customers defecting
p. 135
p. 136
Why Customers Leave
• Intentionally pushed away
• Unintentionally pushed away
• Pulled away by competitors
• Bought away
• Moved away – geographic relocation, lifestyle changes
Win-Back Plan
• Once identify select segments to target
• Calculate second lifetime value for segments which is different that for new customers, already have experience and data as former buyers
• Win-Back Segment is important enough that should be an on-going process
• Win-Back decision map plan
p. 137
Building Customer Relationships Summary
• Success comes from finding the right mix of customer equity drivers and by focusing efforts on them
• Ask the “Ultimate Question:” Would you recommend us to a friend?
• Be ready to act upon its results • Organizations need to find a more balanced
approach to Customer Marketing, unlocking data
• The alignment of people, processes and technology make an organization customer-centric
• As few as 20% defections can reduce a customer base by half in just 4 years
• Win-back processes can be as complex or simple as needed, but an organization must learn the real reasons that customers defect
• Segment, segment, segment.
Building Customer Relationships Summary
Guinness Case StudyGuinness Relationship Marketing
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