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