1. Principles of Managing Customer Relationships

2. The Learning Relationship works like this
If you are my customer and I get you to talk to me, and I remember what you tell me.
Then I get smarter and smarter about you.
I know something about you competitors do not know.
So I can do things for you my competitors cannot do.
Because they do not know you as well as I do.
Before long you can get something from me you cannot get anywhere else, for any price- a product or service.
At the very least, you would have to start all over somewhere else, but starting over is more costly than staying with me.

3. According to Jack Welch, Former CEO,
General Electric
We have only two sources of competitive advantage:
The ability to learn more about our customers faster than the competition.
The ability to turn that learning into action faster than the competition

4. Customer Strategy
Understand the essence of customer strategy as a necessary and important element of managing every successful enterprise in the 21st century Customer strategy is not a fleeting assignment for the marketing department, rather it is an ongoing business imperative that requires the involvement of the entire enterprise.

5. Acquire profitable customers
Increasing the Value of the Customer Base????
Acquire profitable customers
Retain profitable customer longer
Win back profitable customers
Eliminate unprofitable customers
Upsell additional products in a solution
Cross-sell other products to customers
Referral and word-of-mouth benefits
Reduce service and operational costs
GET
KEEP
GROW

6. The Traditional Four Ps
Product
Place
Price
Promotion

7. Customer Value Lower Costs Better Convenience Better Communication
The new Four Cs
Customer Value
Lower Costs
Better Convenience
Better Communication

8. Dr. Philip Kotler shares his views
Modern technology makes it possible for enterprises to learn more about individual customers, remember those needs, and shape the company’s offerings, services, messages and interactions to each valued customer. The new technologies make mass- customization (otherwise an oxymoron) possible.
At the same time technology is only a partial factor in helping companies do genuine one-to-one marketing. The following quotes about customer relationship management(CRM) make this point vividly”
“CRM is not a software package. It’s not a database. It’s not a call center or a web site. It’s not a loyalty program, a customer service program, a customer acquisition program or a win back program. CRM is an entire philosophy.” ( Steve Silver)
“ A CRM program is typically 45 percent dependent on the right executive leadership, 40 percent on project management implementation and 15 percent on technology.” (Edmund Thompson, Gartner Group)

9. Traditional Marketing
Market Share versus Share of Customer
Increasing Returns
1 to 1® Strategies
Customer
Needs
Satisfied
Traditional Marketing
Diminishing Returns
Customers
Reached

10. Market-Share Strategy Share-of-Customer Strategy
Comparison of Market-Share and Share-of-Customer Strategies
Market-Share Strategy
Share-of-Customer Strategy
Product (or brand) managers sell one product at a time to as many customers as possible.
Customer manager sells as many products as possible to one customer at a time.
Differentiate products from competitors.
Differentiate customer from each other.
Sell to customers.
Collaborate with customers.
Find a constant stream of new customers.
Find a constant stream of new business from established customers.
Use mass media to build brand and announce products.
Use interactive communication to determine individual needs and communicate with each individual.

11. Customer Value and Relationships
The foundation for an enterprise focused on building its value by building the value of the customer base is unique:
Establish relationships with customers on an individual basis, then use the information gathered to treat different customers differently, and increase the value of each one to the firm.

12. Get, Keep, and Grow Customers in 21st Century
Getting customers is all about making the sales and marketing process not only more efficient, but also more effective.
Keeping Customer addresses the biggest challenge in business today: managing customer attrition.
Growing Customers is about increasing every customer’s lifetime value to a company.

13. Learning Relationships
Enterprises that build Learning Relationships clear a wider path to customer profitability than companies that focus on price-driven transactions. Learning Relationships have less to do with creating a fondness on the part of a customer for a particular product or brand, and more to do with a company’s capability to remember and deliver based on prior interactions with a customer.

14. Interacting Tailoring
Enterprise Strategy Map
Marketing
Database
III
1 to 1 Learning Relationships IV
Mass I
Niche II
Ability to interact with customers individually
Interacting
Customers addressed only in mass media
Tailored
Products
Standard
Products
Tailoring

15. Enterprise Strategy Map
Quadrant I:Traditional Mass Marketing. Companies that compete on cost efficiencies based on economies of scale and low price. Quadrant II : Niche Marketing. Companies that focus on target markets, or niches, and produce goods and services designed for those defined customer groups.

16. Enterprise Strategy Map
Quadrant III: Database Marketing. Companies utilize database management to get better, more efficient use of their mailing lists and other customer information. Quadrant IV: One-to-one Learning Relationship Companies use data about customers to predict what each one needs next, and then is able to treat different customer differently, and increase mutual value with customer.

17. Quadrant I through Quadrant IV
To realize the highest return on customer base enterprise should
Move up on the Enterprise Strategy Map
Recognize individual customers, names and addresses.
Send different messages to different customers and to remember responses of each.
Move to right on the Enterprise strategy Map
Increase its production and logistics flexibility.
Entail customizing and delivering individual products for individual customers.

18. Customer Retention and Enterprise Profitability Four Factors- Profit
Profit derived from increased purchases. Customers grow larger over time and need to purchase in greater quantities.
Profit from reduced operating costs. Customers become more experienced ,fewer demands on the supplier and fewer mistakes.
Profit from referrals to other customers. Less spent on advertising and promotions due to word-of-mouth.
Profit from price premium. New customers can be benefited from discounts but long term customers re likely to pay regular prices.

19. Industry Year 1 Year 2 Year 3 Year 4 Year 5
Profit One Customer Generates over Time
Industry
Year 1
Year 2
Year 3
Year 4
Year 5
Credit Card
$30
$42
$44
$49
$55
Industrial Laundry
$144
$166
$192
$222
$256
Industrial Distribution
$45
$99
$123
$168
Auto Servicing
$25
$35
$70
$88

20. Benefits of Increasing Customer Value
By increasing the value that the customer perceives in each interaction with the company, enterprises are more likely to increase customer satisfaction levels, leading to higher customer retention rates. When customers are retained because they enjoyed the service they are receiving , they are more likely to become loyal customers. This Loyalty leads to repeat buying and increased share of customers.

21. 5 Principal Business Functions
Financial custodianship of the customer base.
Production, logistics, and service delivery.
Marketing Communications.
Sales distribution and channel management.
Organizational management strategies.

22. Customer Strategy Enterprise
A customer strategy enterprise seeks to create one centralized view of each customer across all business units.
Every employee who interacts with a customer has to have real-time access to current information about that individual customer so that it is possible to pick up each conversation from where the last one left off.
The goal is instant interactivity with the customer.

23. Characteristics of Relationships
Mutuality: In order for any “state of affairs” to be considered a relationship, both parties have to participate and be aware of the existence of the relationship. Interaction: When two parties interact, they exchange information, and this information exchange is a central engine for building on the relationship. Iterative: Both parties interact mutually to build up a history over the time.

24. Characteristics of Relationships Cont..
Ongoing Benefits to both parties. Change in behaviour on part of both parties. Uniqueness Trust as the product & requirement of a successful, continuing relationship.

25. 4 Phases of B2B relationship
Awareness about each other as viable relationship partners. Exploration: Potential relationship members engage in search-and-trial activities in order to determine goal compatibility, integrity, and performance capabilities of each other. Communication takes place and is used to convey wants, issues and priorities. Expansion: Positive outcomes of exploratory phase provide evidence of the other relationship member’s worthiness, thus the impetus to advance to the expansion phase. Commitment: Members achieve a level of value and satisfaction that enables them to comfortably make a commitment to relationship, which lower their focus on alternative relationships.

26. 3 Criteria to measure Commitment
Inputs: Both parties provide high level of inputs to the relationship. Consistency: Inputs quality is reliable and allows accurate prediction of future relationship outcomes. Durability: Exchange benefits are identifiable and can be expected to continue in future exchanges.

27. Development Enhancers: Learning Relationship Process
Communication, Cooperation, Conflict Resolution
Awareness
Exploration
Expansion
Commitment
Development Detractors:
Dissolution

28. Attitudinal = Emotional
The Nature of Loyalty
Attitudinal = Emotional
Attitudinal = Loyalty is a state of mind. Such customers have a positive preferential attitude towards a brand or a company. The emphasis is on willingness.
Behavioral = Functional
Behaviour = Willing to pay a premium for brand A over brand B. Such customers buy from this company and continue to buy from it. The emphasis is on Repurchase activity.