mina mićanović 1/nn prof dr veljko milutinovic. mina mićanović 2/nn remember this!!! ceo –...

Mina Mićanović <[email protected]>1/NN

prof dr Veljko Milutinovic


Remember This!!!

CEO – Chief Executive Officer

CFO – Chief Financial Officer

CIO – Chief Information Officer

CMO – Chief Marketing Officer

CPO – Chief Privacy Officer

CRO – Chief Relationship Officer

Mina Mićanović <[email protected]> 3

Managing Managing Customer Customer

RelationshipRelationship

Don PeppersMartha Rogers


Contents

Part OnePrinciples of Managing Customer

Relationships

Part TwoIDIC Implementation Process:

A Model for Managing Customer Relationships

Part ThreeMeasuring and Managing to Build Customer Value


Part One

Principles of Managing Customer

Relationships


Evolution of Relationships with Customers



We have only two sources of competitive advantage:

1. The ability to learn more about our customers faster than the competition.

2. The ability to turn that learning into action faster than the competition

- Jack Welch, former CEO, General ElectricBloomberg News Service, 2000


Roots of Customer Relationship

Management

The goal of every enterprise is simply to

• Retain profitable customers 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.

• Acquire profitable customers.


Process of Becoming an Enterprise

Focus: Building its value by building customer value

Begins with:

A strategy or an ongoing process

that helps transform the

enterprise

from a focus on traditional selling or manufacturing

to a customer

focus

while increasing

revenues and profits


Process of Becoming an Enterprise

Focus: Building its value by building customer value

Begins with:

The leadership and commitment

necessary to cascade the

thinking

and decision-making

capability

throughout the

organization

that puts customer value

and relationships

first


What is CRM?

CRM is not a software package.

It is not a database.

It is not a call center or a Web site.

It is not a loyalty program or a win-back program.

CRM is entire philosophy.

Steve Silver


What is CRM?

It is an enetrprisewide business strategy for achieving customer-specific actions.

It can’t be assigned to marketing if it is to have any hope of success

The goal is to increase the value of each customer


What is CRM?


In Essence…

CRM involves treating different customers differently.


A Good Example - PC Banking Services

Consumer spends several hours, usually spread over several session…

… setting up an online account and inputting payee addresses and account

numbers…



… in order to be able to pay his bills electronically each month.


If a competitor opens a branch in town…

… offering lower checking fees or higher saving rates…

… this consumer is ________ to switch banks.likelyunlikely



He has invested time and energy in a relationship with the first bank, and it is simply more convenient to remain loyal to the first bank than to teach the second bank how to serve himin the same way.



CRM Synonyms

Integrated marketing communications (Don Schultz)

One-to-one relationship management (Don Peppers and Martha Rogers)

Real-time marketing(Regis McKenna)

Customer intimacy(Michael Treacy and Fred Wiersema)

… and a variety of other terms


Operational and Analytical Process

Operational CRM

software installations

changes in process

day-to-day operations of a firm

focuses on the

affecting the


Operational and Analytical Process

Analytical CRMstrategic planning

focuses on the

needed

to build

customer value

changes

cultural

measurement

organizational


Computer Technologies

New computer technologies and applications have spawned enterprisewide information systems that help to harness information about customers, analyze the information, and use the data to serve customers better.


Computer Technologies

Enterprise resource planning (ERP) systems

Supply chain management software (SCM)

Enterprise application integration software (EAI)

Data warehousing

Sales force automation (SFA)

and other enterprise software


The Four Ps

• Traditional marketing efforts have centered on the “four Ps”.

• In essence, the four Ps are all about the “get” part of “get, keep and grow customers”.

• The customers needed to believe that the enterprise’s offerings would be superiorin delivering the “four Cs”: customer value, lower costs, better convenience, and better communication.


The Four Ps


The Four Ps

Product is defined in terms of the average customer – what most members of the aggregate market want to need.


The Four Ps

Promotion has also worked in a fundamentally nonaddressable, noninteractive way. The various customers in a market are all passive recipients of the promotional message, whether it is delivered through mass media or interpersonally, through salespeople.


The Four Ps

Place is a distribution systems or sales channel.


The Four Ps

Price refers not only to the ultimate retail price a product brings, but also to intermediate prices, beginning with wholesale; and it takes account of the availability of credit to a customer and the prevailing interest rate.


Direction of Success

For a traditional aggregate-market enterpriseis to acquire more customers.

For the customer-driven enterprise is to keep customers longer and grow them bigger.


Example – Kellogg’s

Kellogg’s can either sell as many boxes of cornflakes as possible to whomever will buy them, even though sometimes cornflakes will cannibalize raisin brain sales,


Example – Kellogg’s

Kellogg’s can concentrate on making sure its product are on Mrs. Smith’s breakfast table every day for the rest of her life, and thus represent a steady or growing percentage of that breakfast table’s offerings.


Example – Ford

Ford can try to sell as many Tauruses as possible, for any price, to anyone who will buy,


Example – Ford

It can, by knowing Mrs. Smith better, make sure that all cars in Mrs. Smith’s garage are FordFord brands, including the used car she buys for her teenaged son, and that Mrs. Smith uses Ford financing and credit cards, and gets her service, maintenance and repairs at Ford dealerships – throughout her driving lifetime.


Tasks…

• … for growing market share

are different from

• … for building share of customer

but the two strategies are not antithetical

• A company can simultaneously focus on getting new customers as well as growing the value of and keeping the customers it already has.


Overview

Customer-strategy enterprises are required to interact with a customer and use that customer’s feedback from this interaction to deliver a customized product or service.


Overview


Overview

Market-driven efforts can be strategically effective and even more efficient at meeting individual customer needs when a customer-specific philosophy is conducted on top of it.


Overview

The customer-driven process is time-dependant and evolutionary, as the product or service is continuously fine-tuned and the customer is increasingly differentiated from other customers.


Overview

The aggregate-market enterprise competes by differentiating products, whereas the customer driven enterprise competes by differentiating customers.


The Traditional Marketing

• The traditional marketing company, no matter how friendly, ultimately sees customers as adversaries, and vice versa.

• The company and the customer play a zero-sum game:

If the customer gets a discount, the company loses profit margin.


The Traditional Marketing - Interests…

• The customer wants to buy as much product as possible for the lowest price.

• The company wants to sell the least product possible for the highest price.


The Customer-based Enterprise

• Aligns customer collaboration with profitability.

• For starters, a one-to-one enterprise would likely be willing to fix a problem raised by a single transaction at a loss if the relationship with the customer was profitable long term.


The Central Purpose…

• … of managing customer relationships is for the enterprise to focus on increasing the overall value of its customer base - and customer retention is critical to its success.

• Increasing the value of the customer base through:– Cross-selling– Upselling– Customer refferals


Market Share versus Share of Customer

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 customers from each other.

Sell to customers. Collaborative 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.


Technology Accelerates

• To effectuate customer-focused business relationships, an enterprise must integrate:

– The disparate information systems– Databases– Business units– Customer touch points– And many other facets

to ensure that all employees who interact with customers have real-time access to current customer information.



• The objective is to optimize each customer interaction and ensure that the dialogue is seamless – that each conversation picks up

from where the last one ended.



• Technology has made possible the mass customization of products and services, enabling business to treat different customers differently, in a cost-efficient way.

• Implementing an effective customer strategy can be challenging and costly because of the sophisticated technology and skill set needed by relationship managers to execute the customer-driven business model.


What is a Relationship?

• What does it mean for an enterprise and a customer to have a relationship with each other?

• Do customers have relationships with enterprises that do not know them?

• Can the enterprise be said to have a relationship with a customer it does not know?

• Is it possible for a customer to have a relationship with a brand?



• The critical business objective can no longer be limited to acquiring the most customers and gaining the greatest market share for a product or service.



• Instead, to be successful in the era of interactivity, when it is possible to deal individually with separate customers, the business objective must include establishing meaningful and profitable relationships at least with the most valuable customers, and making the overall customer base more valuable.


“Connecting”


In Short…

• The enterprise strives to get a customer, keep that customer for a lifetime, and grow the value of the customer to the enterprise.

• Relationships are the crux of the customer-strategy enterprise.

• Relationships between customers and enterprises provide the framework for everything else connected to the customer-value business model.


Learning Relationship

• The exchange between a customer and the enterprise becomes mutually beneficial, as customers give information in return for personalized service that meets their individual needs.

• This interaction forms the basis of the Learning Relationship, an intimate, collaborative dialogue between the enterprise and the customer that grows smarter and smarter with each successive interaction.


Learning Relationships: The crux

of managing customer relationships

• The basic strategy behind Learning Relationshipsis that the enterprise give a customer the opportunity to teach the company what he wants, remember it, give it back to him, and keep his business.

• The more the customer teaches the company, the better the company can provide exactly what the customer wants and the more the customer has invested in the relationship.


How Does the Learning Relationship Work?

If you are my customer,

and I get you to talk to me,

I remember what you tell me,

and I get smarter and smarter about you.



I know something about you that my competitors don’t know



So I can do things for you my competitors can’t do, because they don‘t know you as well as I do.



• Before long, you can get something from me you can get anywhere else, for any price.



At the very least, you’d have to start all over somewhere else, but starting over is more costly than staying with me.



• This creates a significant switching cost for the customer, as the value of what the enterprise is providing continues to increase, partly as the result of the customer’s own time and effort.

• The result is that the customer becomes more loyal to the enterprise, because it is simply in the customer’s own interest to do so.


Benefits

• The customer learns more about his own preferences from each experience and from the firm’s feedback.

• The enterprise learns more about its own strengths and weaknesses from each interaction and from the customer’s feedback.


Not all customers are equal

Some are not worth the time or financial investment of establishing Learning Relationship

Nor are all customers willing to devote the effort required to sustain such a relationship.


Not all customers are equal

• Enterprises need to decide early

– on which customers they want to have relationship with,

– which they do not, – and what type of relationship to nurture.


Teaching

• When a customer teaches an enterprise what he wants or how he wants it, the customer and the enterprise are collaborating on the scale of the product.

The more the customer teaches the enterprise, the less likely the customer will want to leave.


Enterprise Strategy Map

Database Marketing

1 to 1 LearningRelationship

MassMarketing

NicheMarketing

Interacting

Tailoring

Ability to interactwith customers

individually

Customersaddressed only in

mass media

Standardproducts

Tailoredproducts

I II

III IV


Quadrant I: Traditional Mass Marketing

Companies that compete primarily on cost efficiencies based on economies of scale and low price.

Companies in this quadrant are doomed to commoditization and price competition.


Quadrant II: Niche Marketing

• Companies that focus on target markets, or niches, and produce goods and services designed for those defined customer groups.


Quadrant II: Database Marketing

Companies utilize database management to get better.


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 customers differently and increase mutual value with the customer.


CRM Structure


Part Two

IDIC Implementation Process:

A Model for Managing Customer Relationships


Part Three

Measuring and Managing

to Build Customer Value

mina mićanović 1/nn prof dr veljko milutinovic. mina mićanović 2/nn remember this!!! ceo –...

Documents

customer valuebegins

customer focuswhile

customerspecific actions

relationships firstwhat

ongoing process

customers faster

analytical processfocuses

process daytoday operations