Chapter Six Building Customer Relationships

BuildingNurturingLoyaltyRetentionReactivation

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 results p. 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 Study Guinness Relationship Marketing