prof dr Veljko Milutinovic
Mina Mićanović <minica82@EUnet.yu>
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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 <minica82@EUnet.yu>
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Managing Customer
Relationship
Don Peppers
Martha Rogers
Mina Mićanović <minica82@EUnet.yu>
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Contents
Part One
Principles of Managing Customer Relationships
Part Two
IDIC Implementation Process:
A Model for Managing Customer Relationships
Part Three
Measuring and Managing
to Build Customer Value
Mina Mićanović <minica82@EUnet.yu>
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Part One
Principles of Managing
Customer Relationships
Mina Mićanović <minica82@EUnet.yu>
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Evolution of Relationships
with Customers
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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 Electric
Bloomberg News Service, 2000
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Evolution of Relationships
with Customers
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Roots of
Customer Relationship Management
The goal of every enterprise is simply to
• Acquire profitable customers.
• 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.
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Process of Becoming an Enterprise
Focus: Building its value by building customer value
Begins with:
while
increasing
revenues and
profits
from a focus on
traditional selling
or manufacturing
A strategy or an
ongoing process
that helps
transform the
enterprise
Mina Mićanović <minica82@EUnet.yu>
to a
customer
focus
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Process of Becoming an Enterprise
Focus: Building its value by building customer value
Begins with:
and decisionmaking
capability
The leadership
and commitment
necessary to
cascade the
thinking
Mina Mićanović <minica82@EUnet.yu>
that puts
customer value
and
relationships
first
throughout
the
organization
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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
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What is CRM?
It can’t be assigned to marketing
if it is to have any hope of success
It is an enetrprisewide business strategy
for achieving customer-specific actions.
The goal is to increase
the value of each customer
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What is CRM?
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In Essence…
CRM involves treating different customers differently.
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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…
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A Good Example - PC Banking Services
… in order to be able to pay his bills electronically each month.
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A Good Example - PC Banking Services
If a competitor opens a branch in town…
… offering lower checking fees or higher saving rates…
unlikely
likely to switch banks.
… this consumer is ________
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A Good Example - PC Banking Services
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 him
in the same way.
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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
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Operational and Analytical
Process
affecting the
Operational CRM
software
installations
focuses on
the
changes
in process
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day-to-day
operations
of a firm
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Operational and Analytical
Process
Analytical CRM
needed
to build
strategic
planning
cultural
focuses on
the
changes
customer
value
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measurement
organizational
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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.
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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
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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 superior
in delivering the “four Cs”:
customer value, lower costs, better convenience,
and better communication.
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The Four Ps
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The Four Ps
Product is defined in terms of the average customer
– what most members of the aggregate market
want to need.
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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.
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The Four Ps
Place is a distribution systems or sales channel.
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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.
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Direction of Success
For a traditional aggregate-market enterprise
is to acquire more customers.
For the customer-driven enterprise
is to keep customers longer and grow them bigger.
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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,
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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.
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Example – Ford
Ford can try to sell as many Tauruses as possible,
for any price,
to anyone who will buy,
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Example – Ford
It can, by knowing Mrs. Smith better,
make sure that all cars in Mrs. Smith’s garage
are Ford 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.
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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.
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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.
Mina Mićanović <minica82@EUnet.yu>
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Overview
Mina Mićanović <minica82@EUnet.yu>
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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.
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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.
Mina Mićanović <minica82@EUnet.yu>
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Overview
The aggregate-market enterprise
competes by differentiating products,
whereas the customer driven enterprise
competes by differentiating customers.
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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.
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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.
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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.
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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
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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.
Mina Mićanović <minica82@EUnet.yu>
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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.
Mina Mićanović <minica82@EUnet.yu>
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Technology Accelerates
• 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.
Mina Mićanović <minica82@EUnet.yu>
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Technology Accelerates
• 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.
Mina Mićanović <minica82@EUnet.yu>
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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?
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What is a Relationship?
• 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.
Mina Mićanović <minica82@EUnet.yu>
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What is a Relationship?
• 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.
Mina Mićanović <minica82@EUnet.yu>
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“Connecting”
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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.
Mina Mićanović <minica82@EUnet.yu>
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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.
Mina Mićanović <minica82@EUnet.yu>
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Learning Relationships: The crux
of managing customer relationships
• The basic strategy behind Learning Relationships
is 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.
Mina Mićanović <minica82@EUnet.yu>
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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.
Mina Mićanović <minica82@EUnet.yu>
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How Does the Learning
Relationship Work?
I know something about you
that my competitors don’t know
Mina Mićanović <minica82@EUnet.yu>
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How Does the Learning
Relationship Work?
So I can do things for you my competitors can’t do,
because they don‘t know you as well as I do.
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How Does the Learning
Relationship Work?
• Before long, you can get something from me
you can get anywhere else, for any price.
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How Does the Learning
Relationship Work?
At the very least, you’d have to start all over somewhere else,
but starting over is more costly than staying with me.
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How Does the Learning
Relationship Work?
• 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.
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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.
Mina Mićanović <minica82@EUnet.yu>
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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.
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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.
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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.
Mina Mićanović <minica82@EUnet.yu>
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Enterprise Strategy Map
Ability to interact
with customers
individually
Interacting
Customers
addressed only in
mass media
III
IV
Database
Marketing
I
1 to 1 Learning
Relationship
II
Mass
Marketing
Standard
products
Mina Mićanović <minica82@EUnet.yu>
Niche
Marketing
Tailoring
Tailored
products
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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.
Mina Mićanović <minica82@EUnet.yu>
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Quadrant II: Niche Marketing
• Companies that focus on target markets, or niches,
and produce goods and services
designed for those defined customer groups.
Mina Mićanović <minica82@EUnet.yu>
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Quadrant II:
Database Marketing
Companies utilize database management to get better.
Mina Mićanović <minica82@EUnet.yu>
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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.
Mina Mićanović <minica82@EUnet.yu>
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CRM Structure
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Part Two
IDIC Implementation Process:
A Model for Managing
Customer Relationships
Mina Mićanović <minica82@EUnet.yu>
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Part Three
Measuring and Managing
to Build Customer Value
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