Michael Lowenstein, PhD CMCSenior Vice President, U.S. Operations

Customer Management Center of Excellence

Customer Targeting and Acquisition: Essential Foundations of Loyalty and Profitability

What is CRM?What is CRM?

• CRM is exactly what it says it is: A single, integrated approach to customers and business strategy Customers - Potential, Present, Past,

Internal/External Relationship - All customers; mutually beneficial

value Management - Time, Money, Facilities, People,

Technology, Strategy, Culture, Systems (Data Flow); and Sales, Marketing, and Customer Service Processes

Do Companies Have A Single, Enterprise-Wide View of Customers Today?

Do Companies Have A Single, Enterprise-Wide View of Customers Today?

• 92% of companies say it is Critical (44%) or Very Important (48%)

• 12% of companies say they have it Fully (2%) or Somewhat (10%)

Source: Forrester Research, Inc.

Managing The Big Three: Acquisition, Loyalty and WinBackManaging The Big Three: Acquisition, Loyalty and WinBack

• Acquisition Management – Targeting and attracting high-value prospects and turning them into first-time buyers

• Retention Management - Strengthening relationship with current customers by increasing value; identifying/stabilizing at-risk customers

• WinBack Management - Recovering lost customers and rebuilding relationships

Customer Targeting, Segmentation, and CommunicationCustomer Targeting, Segmentation, and Communication

• Targeting - Those potential customers who lack experience with your product or service

• Segmentation - Based on externally acquired data

• Communication - Directed one way, toward the prospect

Interdependence of The Big ThreeInterdependence of The Big Three

• Retention and Acquisition - Knowing which customers become loyal can help target better quality prospects

• Acquisition and Retention - Knowing new customer needs helps customize products and services for higher value

• Acquisition and WinBack - Comparing profiles of high value prospects against lost customers can help identify best potential former customers to recover

• Beginning with Acquisition (New Customer) Analysis, look at - How they were acquired How they are being serviced What product/service needs are driving large/frequent

purchases

The Importance of Customer Lifetime ValueThe Importance of Customer Lifetime Value

• Beginning with Acquisition (New Customer) Analysis, look at - How they were acquired How they are being serviced What product/service needs are driving

large/frequent purchases

• Continue for Retention and WinBack Analysis

Moving Beyond Past Purchase Data to Customer Lifetime ValueMoving Beyond Past Purchase Data to Customer Lifetime Value

• The best decisions for maximizing return on customer relationships will come from evaluating interaction of Acquisition, Retention, and WinBack

• In addition to purchase history, look at - Emerging customer potential Demographic/lifestyle factors Overall relationship + key elements of relationship

with supplier

Targeting Prospects With Strong Loyalty PotentialTargeting Prospects With Strong Loyalty Potential

Attract the Best ProspectsAttract the Best Prospects

• The right customers are: Within a defined niche, around which the business model

is built Within clients and industries that match your firm’s vision

and expertise The most profitable Prospects for repeat/cross-sold business Those that need your capabilities and will let you do your

job

Also……………..Also……………..

• They need less direct incentive to purchase

• They are more resistant than others to competitive claims and attempts to lure them away

• They are less price sensitive

• They are more accepting of occasional value delivery lapses

• They are more positive about ‘their’ brand

Identify Customers You Don’t WantIdentify Customers You Don’t Want

• Price Grinders - Customers who apply pressure for initial-sale low prices

• Chronic Defectors - Customers who often pull their business without reason

• Discourteous Jerks - Chronically rude and verbally abusive customers

• Pushers - Switch suppliers with haste

• Misfits - Customers who don’t align with capabilities

Most Companies Overemphasize AcquisitionMost Companies Overemphasize Acquisition

- Studies show that 80% of companies spend too much of marketing budget on customer acquisition (Acquirers)

- About 10% spend too much on retention (Retainers)

- About 10% are Profit Maximizers, balance

between acquisition and retention

Source: Prof. Adrian Payne, Cranfield University, U.K.

Why Does This Happen?Why Does This Happen?

- Belief that existing customers will be retained; company needs to focus on acquisition

- High churn rate/”leaky bucket”

- Customer acquisition reported regularly to analysts/share holders/senior management; churn may/may not be reported

- Lifetime value profit impact of lost customers not reviewed

- Sales force/senior management compensation based on acquisition, not retention

So, What is The Most Appropriate Way to Approach Customer Targeting and Acquisition?

So, What is The Most Appropriate Way to Approach Customer Targeting and Acquisition?

Conduct Original Prospect ResearchConduct Original Prospect Research

- What care/value do targeted prospects want?

- What relationship channels do they want? - Telephone Call Center(s)

- eMail/Mobile Devices

- On-Premise Customer Service Representative

- Field Service Representative/Sales Representative

- Customer Self-Service on Web Site/Knowledge Base

- On-line Chat

- Message Boards/Instant Messaging

- FAX

- How well does company match relationship and value offerings with prospect needs?

Develop and Build Products/Services With The Right Customers In MindDevelop and Build Products/Services With The Right Customers In Mind

• Geographic differences

• Demographic/lifestyle differences

• Branding decisions

• Customer on-line/off-line experiences

• Bottom Line: Positioning/Value Proposition

Staffing Considerations: Matching Employee Skills With Customer NeedsStaffing Considerations: Matching Employee Skills With Customer Needs

• Getting close to the customer for personal components of CRM

• Alignment of attitudes, proactive and anticipatory capabilities

• Targeted education, training, teamwork, reward and recognition

• Though painful, may require some culling of staff for better matching

Avoiding the ‘Casanova Complex’Avoiding the ‘Casanova Complex’

• Causes Compensating salespeople, and other staff,

based on new customers brought into the company

Promotional programs for attracting new product/service triers

• Avoidance Carefully audit sales and promotional programs Track loyalty of customers recruited through

sales and promotional offers

Work for Referrals, the Best Source of New CustomersWork for Referrals, the Best Source of New Customers

• Nurturing and leveraging word-of-mouth

• Listening to your customers

• ‘Viral Marketing’ techniques Community - Chat rooms, message boards,

newsletters, e-mails, etc. Friend-Get-A-Friend, and other referral

incentive programs

Turning Targeted Prospects Into TriersTurning Targeted Prospects Into Triers

• Requires patience and diligence

• Requires higher level value perception

• Customers more wary and selective Information availability and access - Multiple

sources (Internet, cable television, standard print and electronic media) invites more comparison shopping

Time pressure and the need for speed - The ‘hurry-up’ society

Overpromise and underdelivery intolerance - Higher customer expectations

Next Stage: Triers Become Repeat Customers.......Or Defect (And Have To Be Won Back, If Desired)

Next Stage: Triers Become Repeat Customers.......Or Defect (And Have To Be Won Back, If Desired)