customer behavior & branding · customer behavior & branding course 21 b pgppro 2018-19 v....
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www.drvkumar.com© Dr. V Kumar
Customer Behavior & Branding Course 21 B
PGPpro 2018-19
V. Kumar, PhDRegents’ Professor,
Richard and Susan Lenny Distinguished Chair & Professor of Marketing, Executive Director, Center for Excellence in Brand & Customer Management,
and Director of the Ph.D. Program in MarketingJ. Mack Robinson College of Business, Georgia State University, Atlanta GA
andChang Jiang Scholar, HUST, Wuhan China.
Fellow, Hagler Institute for Advanced Study, TAMU, College Station, TX Senior Fellow, Indian School of Business, India
Putting it all togetherDay 2 – Session 9
April 14, 2019 HyderabadApril 21, 2019 Delhi
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POPULAR PRESS PERSPECTIVE ON ENGAGEMENT
Engagement is the continuous development of an emotional relationshiphttp://www.staffsquared.com/blog/2012/06/15/effective‐engagement‐lead‐great‐business‐success‐performance‐2/
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Engagement was the 8th top buzz word in 2014 in businesshttp://mashable.com/2014/07/22/stop‐using‐jargon/#BmoqGIiai8qP
Engagement is both a strategy and an investment in employeeshttp://dalecarnegiewayohio.com/2013/10/18/is‐the‐business‐buzzword‐engagement/
Engagement is a function of listening to the customer’s voice‐ http://mashable.com/2013/05/01/engagement‐buzzword/#VvubX.tCoOq6
“Engagement is the desire to think about and interact with an organization beyond what is necessary ‐ purchasing multiple products, sharing feedback on social media sites, and acting as a reference” – Bruce Temkin, CEO Temkin Group
Engagement Concept Customer Engagement Employee Engagement Measuring CE & EE Implementation Actions
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Based on various perspectives of Engagement, the main components seem to
focus on…Customers and Employees
Engagement Concept Customer Engagement Employee Engagement Measuring CE & EE Implementation Actions
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WHAT IS CUSTOMER ENGAGEMENT?
Engagement Concept Customer Engagement Employee Engagement Measuring CE & EE Implementation Actions
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Total value provided by customers to the firm through their behavior and interactions
Source: Kumar, V. (2013), “Profitable Customer Engagement,” Sage Publications.
CUSTOMERENGAGEMENT
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FORCES BEHIND EVOLUTION OF CUSTOMER
MANAGEMENT
TransactionRecency, Frequency, Monetary Value
Relationship
EngagementSatisfaction & Emotion
Trust & Commitment
5Engagement Concept Customer Engagement Employee Engagement Measuring CE & EE Implementation Actions
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MARKET PLACE EVIDENCE FOR
ENGAGING CUSTOMERS
Consumer Electronics
Fully‐engaged shoppers make 44% more visitsper year and spend $84 more than actively
disengaged shoppers
Fully engaged customers make 56% more visits per month
than actively disengaged Casual
Restaurants
Fast Food
Fully engaged customers make 28% more visits per month
than actively disengaged customers
Fully engaged hotel guests spend 46% more per year than actively disengaged guests
Hospitality Sector
Insurance Sector
Fully engaged policy owners purchase 22%
more types of insurance products
than actively disengaged
Fully engaged customers bring 37% more annual revenue to their primary bank
than actively disengaged Retail Banking
Industry
6Engagement Concept Customer Engagement Employee Engagement Measuring CE & EE Implementation Actions
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FIRMS WANT MORE… ENGAGING CUSTOMERS IS NOT ENOUGH, SO WHO
ELSE SHOULD THEY ENGAGE?
Engagement Concept Customer Engagement Employee Engagement Measuring CE & EE Implementation Actions
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OF COURSE, EMPLOYEES!
8Engagement Concept Customer Engagement Employee Engagement Measuring CE & EE Implementation Actions
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EMPLOYEE ENGAGEMENT
“A multidimensional construct which comprises of all the different facets of employees attitudes and behaviors towards the organization”
Source: Kumar, V., and Anita Pansari (2015), “Measuring the Benefits of Employee Engagement,”MIT Sloan Management Review, 56(4), 67‐72.
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WHAT IS EMPLOYEE ENGAGEMENT?
Engagement Concept Customer Engagement Employee Engagement Measuring CE & EE Implementation Actions
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MARKET PLACE EVIDENCE FOR ENGAGING EMPLOYEES
10Engagement Concept Customer Engagement Employee Engagement Measuring CE & EE Implementation Actions
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COMPONENTS OF EMPLOYEE
ENGAGEMENT (EE)
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Employee Satisfaction
Employee Identification
Employee Commitment
Employee Loyalty
Employee Performance
Engagement Concept Customer Engagement Employee Engagement Measuring CE & EE Implementation Actions
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ONCE CUSTOMER AND EMPLOYEE ENGAGEMENT HAVE BEEN MEASURED,
HOW DO THEY WORK TOGETHER?
Engagement Concept Customer Engagement Employee Engagement Measuring CE & EE Implementation Actions
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LINKING ENGAGEMENT TO FIRM PERFORMANCE
Source: Kumar, V., and Anita Pansari (2016), “Competitive Advantage through Engagement,” Journal of Marketing Research, 53(4), 497‐514.
FIRMPERFORMANCE
EMPLOYEE ENGAGEMENT
CUSTOMER ENGAGEMENT
EMPLOYEE EMPOWERMENT
Service vs. Manufacturing
Control Variables
Engagement Concept Customer Engagement Employee Engagement Measuring CE & EE Implementation Actions
B2B vs. B2C
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ENGAGEMENT AND FIRM PROFITABILITY
MODERATELY ENGAGED (60-79)
SOMEWHAT ENGAGED (40-59)
DISENGAGED (20-39)
EMPLOYEE ENGAGEMENT
CUSTOMER ENGAGEMENT
DISENGAGED (16-31)
SOMEWHAT ENGAGED (32-47)
MODERATELY ENGAGED (48-63)
SUPER ENGAGED (80-100) SUPER ENGAGED (64-80)
Engagement Concept Customer Engagement Employee Engagement Measuring CE & EE Implementation Actions
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IMPLEMENTING ENGAGEMENT STRATEGY
Obtained contact information for 2,000 randomly selected large public firms listed in the U.S. stock exchange from a trading firm
Measured the level of Engagement with 120 companies at two time periods over a 2‐year period (August 2013 and August 2014)
The 120 firms were grouped as:• 62 B2B firms and 58 B2C firms • 52 manufacturing firms and 68 service firms
Large companies with 5,000+ employees and operations in
the U.S.
Employee Survey: Contacted the HR mangers within the firms (Average Response Rate of 67%)
Customer Survey: Link to survey was sent by firm to its customers (Average Response Rate of 32%)
15Engagement Concept Customer Engagement Employee Engagement Measuring CE & EE Implementation Actions
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MANAGING ENGAGEMENT
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HIGH
LOW
HIGHLOW FIRM’S IDEAL FIRM’S IDEAL POSITION
CUSTOMER ENGAGEMENT
CUSTOMER ENGAGEMENT
EMPLOYEEENGAGEMENT
EMPLOYEEENGAGEMENT
Engagement Concept Customer Engagement Employee Engagement Measuring CE & EE Implementation Actions
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IMPLEMENTING ENGAGEMENT
What the Data Shows
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Average Number of Employees
Average Years of
Work Experience
Average Number of Customers
Average Number of
Years Transacting
with the Company
Type of Firm
Time Period
Average CE
Average EE
Average Employee Empower
ment
Average Revenues
Average Profit
1,122 8.1 596 6.1 B2B Product
T1 36 32 6.4+8.2% +23.8%
T2 48 44 9.1
1,304 7.7 722 7.2 B2B Service
T1 50 60 7.2‐5.2% ‐8.1%
T2 43 52 7.1
1,286 4.9 1,816 5.4 B2C Product
T1 55 60 6.6+3.4% +9.2%
T2 62 67 6.9
1,461 5.6 1,604 3.2 B2C Service
T1 35 36 5.5+5.6% +5.4%
T2 41 40 5.7
Engagement Concept Customer Engagement Employee Engagement Measuring CE & EE Implementation Actions
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Linking CLV to Firm Level Metrics (Share Holder Value)
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In the current marketplace:• The CEOs of many firms have put customers at the top of the list to
focus for growth (NYSE CEO Report, Opinion Research Corporation, 2007)• The drive for customer‐centricity is stronger than ever before• The CMO should be the most sought‐after executive in the
boardroom
In reality:• The CMO is the most frequently fired C‐level executive, with an
average tenure under 24 months (Spencer Stuart Report, 2006)• “There is a perceived lack of marketing accountability, threatening
marketing’s existence…” (Rust et al. 2004)• The CMO presence in top management teams has practically no
impact on firm performance (Nath & Mahajan 2008)
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Marketing Strategy Implementation
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The marketing initiatives were differentiated on the basis of the lifetime value of each customer/customer segment.
B2B Firm B2C Firm
Resource Reallocation Customer Selection
Selective Customer Acquisition Cross‐Selling
Multi‐Channel Behavior Multi‐Channel Behavior
CLV Based Marketing Strategies (Implemented in July 2006):
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Stock price movement of the B2B Firm
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48
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Oct‐05
Nov‐05
Dec‐05
Jan‐06
Feb‐06
Mar‐06
Apr‐06
May‐06
Jun‐06
Jul‐0
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Aug‐06
Sep‐06
Oct‐06
Nov‐06
Dec‐06
Jan‐07
Feb‐07
Mar‐07
Apr‐07
Time(months)
Time after CLV Based
Time Before CLV Based Strategy Implementation
Avg Monthly Stock Price($)
Strategy Implementation
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Stock price movement of the B2C Firm
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Oct‐05
Nov‐05
Dec‐05
Jan‐06
Feb‐06
Mar‐06
Apr‐06
May‐06
Jun‐06
Jul‐0
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Aug‐06
Sep‐06
Oct‐06
Nov‐06
Dec‐06
Jan‐07
Feb‐07
Mar‐07
Apr‐07
Time(months)
Avg Monthly Stock Price($)
Time Before CLV Based Strategy Implementation
Time After CLV Based Strategy Implementation
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Can such a lift outperform market expectations?
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Comparison of B2B firm’s Stock Price movement with the S&P 500 Index
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0%
5%
10%
15%
20%
25%
30%
35%
Jul‐06 Aug‐06 Sep‐06 Oct‐06 Nov‐06 Dec‐06 Jan‐07 Feb‐07 Mar‐07 Apr‐07
Time (months)
% Change in B2B Firm Stock Price
% Change in S&P500
Creation of Shareholder Value
% Change from July06 Level
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Comparison of B2C firm’s Stock Price movement with the S&P 500 Index
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0%
10%
20%
30%
40%
50%
60%
70%
Jul‐06 Aug‐06 Sep‐06 Oct‐06 Nov‐06 Dec‐06 Jan‐07 Feb‐07 Mar‐07 Apr‐07
Time (months)
% Change in B2C Firm Stock Price
% Change in S&P500
Creation of Shareholder Value
% Change from July06 Level
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Stock Price Increase After Wheel of Fortune Strategy Implementation
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58%
17% 15%
Percentage increase over nine months
B2C firm Stock Price
S&P 500Index
Average Stock Price of Top Three Competitors
33%
17%12%
B2B firm Stock Price
S&P 500Index
Average Stock Price of Top Three Competitors
Percentage increase over nine months
B2C FirmB2C Firm B2B FirmB2B Firm
The increases in Market Capitalization for the B2C firm and the B2B firm during the test period (July 2006 – April 2007) were approximately 57.6% and 32.8%, respectively
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What did we learn during this class?
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Conceptual Approach to Measure CEV
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• Totalvalueprovidedbycustomerstothefirmsthroughtheir(a)purchasetransactionswiththefirm,(b)abilitytoreferothercustomerstothefirm,(c)powertopositivelyinfluenceothercustomersaboutthefirm’sofferings,and(d)knowledgeaboutthefirm’sproduct/serviceofferingsinprovidingafeedbacktothefirm.
• Totalvalueprovidedbycustomerstothefirmsthroughtheir(a)purchasetransactionswiththefirm,(b)abilitytoreferothercustomerstothefirm,(c)powertopositivelyinfluenceothercustomersaboutthefirm’sofferings,and(d)knowledgeaboutthefirm’sproduct/serviceofferingsinprovidingafeedbacktothefirm.
CustomerEngagementValue(CEV)
CustomerLifetimeValue(CLV)
CustomerLifetimeValue(CLV)
Netpresentvalueoffuturecashflows
fromacustomeroverhis/herlifetimewith
thecompany
Netpresentvalueoffuturecashflows
fromacustomeroverhis/herlifetimewith
thecompany
CustomerReferralValue(CRV)
CustomerReferralValue(CRV)
Quantifiablemeasureofthetype,quantity,&effectivenessof
paidreferralsthatanindividualcustomerprovidestoothers
Quantifiablemeasureofthetype,quantity,&effectivenessof
paidreferralsthatanindividualcustomerprovidestoothers
CustomerInfluenceValue(CIV)
CustomerInfluenceValue(CIV)
Monetaryvalueofcustomers’socialmediainfluenceonotheracquiredcustomersandprospects
Monetaryvalueofcustomers’socialmediainfluenceonotheracquiredcustomersandprospects
CustomerKnowledgeValue(CKV)
CustomerKnowledgeValue(CKV)
Valueacustomeraddstothefirmthroughhis/her
feedback
Valueacustomeraddstothefirmthroughhis/her
feedback
FirmandCompetitiveActions
CustomerBehavior/Attitudes/NetworkMetrics
Source: Kumar, V. (2013), “Profitable Customer Engagement: Concepts, Metrics & Strategies”, Sage Publications.
CustomerBrandValue(CBV)
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Key Takeaways• Efficient Customer Management is about knowing your customers well to
deliver superior value while maximizing profitability for the firm
• Get a deeper understanding of your customers’ loyalty – Understand the drivers of customer/distributor loyalty– Manage ‘loyalty’ and ‘profitability’ simultaneously
• Adopt a forward looking metric such as the customer lifetime value for superior decision making and customer management strategies:– Selling the right product to the right customer at the right time– Allocating the optimal marketing budget across different customers/distributors based
on their ‘future’ revenue potential– Linking acquisition & retention to profitability– Predicting churn of your customers/distributors– Channel migration analysis– Linking Brand Value to Customer Lifetime Value
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The Wheel of Fortune Strategies Used for Maximizing CLV
Acquiring Profitable Customers
Customer Selection
Preventing Attrition of Customers
Referral Marketing Strategy
Linking Investments in
Branding to Customer Profitability
Pitching the Right Product,to the Right Customer, at the Right Time
Managing Loyalty and Profitability
SimultaneouslyMEASURING& MAXIMIZING CUSTOMER
LIFETIME VALUE
Linking CLV to Shareholder Value
Product Returns
Future of Customer
Management
Cross ‐ Buy
Source: Kumar, V., “Managing Customers for Profits”, Reprinted 2009, The Wharton School Publishing
Optimal Allocation of Resources
Managing Multi‐channel Shoppers
Interaction Orientation
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The Big Picture
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Initial Purchase
CustomerCharacteristics
Reinforcement
Behavior
Customer Engagement Value (CEV)
• CLV, CIV, BRV, CRV, CKV & CBV Consequences
Higher Customer ProfitabilityStronger Social Networks
Prospects
Profiling
Strategy (CLV)1.Choose the Right Customers2.Optimal Contact with the Customer3.Send the Right Message at the Right Time4.Manage Multichannel Shopping5.Manage High‐cost Customers6.Find and Keep the Right Customers7.Manage Loyalty and Profitability Simultaneously
Strategy (CRV)8.Managing Brand Value to Maximize Customer Value9.Increase Product Knowledge10.Increase Customer Satisfaction of Potentially High Value Customer
CLVExchange CharacteristicsObserved Customer HeterogeneityFirm Initiated ContactCustomer Initiated Contact
BRV, CRV & CIVCustomer AdvocacyReferrals(Word‐of‐Mouth and Observational Learning)
CKV
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Path to Increased Profitability‐ A Differentiated & Sustainable Strategy
CREATE RADICALLY INNOVATIVE PRODUCTS
SELL TO MORE
CUSTOMERS ‐Customer Acquisition
VALUE TO THE CUSTOMER ‐Create Rich Experience
HIGHER SATISFACTION
STRONGER LOYALTY
RETAIN YOUR CUSTOMERS
SELL MORE TO EXISTING CUSTOMERS‐Cross‐Sell, Up‐
Sell
ENHANCED REVENUES
VALUE FROM THE
CUSTOMER ‐Higher Profits
Reinvested profits
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Path to ProfitabilityReversing the Conventional Wisdom
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CLV
Cross‐Sell
Up‐Sell
Enhanced Revenues
LoyaltyManagement
Differential Experience & Satisfaction
Retention of Profitable Customers
Seek Inputs for Product Innovation
Acquisition of Profitable Customers
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.....need to end up together in an eternal blissful marriage so that the managers can live happily ever after
CEV
Loyalty & Profitability
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THANK YOU!
Customer marketing strategy without using a forward looking metric like CLV is like driving a car by looking in the rear view mirror.
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