CRM366
AK47
mcr2e_chapter_1_slides-2.pptxManaging Customer Relationships: A Strategic Framework
Chapter 1
Evolution of Relationships with Customers
Course Title Instructor
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
1
Introduction
From the Industrial Age to the Information Age, the customer-enterprise relationship has changed
Industrial Age businesses structured around:
Competitive advantage from product innovation
Assembly-line technology: mass production and mass distribution
Mass media and branding
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
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Introduction
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
Information (Interactive) Age businesses structured around:
Customer information as competitive advantage
Interactive technologies
Two-way brands or branded relationship
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Roots of Customer Relationship Management
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
If customers are key to competitive advantage, the main task of the enterprise becomes growing the value of the customer base.
To grow the value of the customer base, the enterprise must get, keep, and grow customers.
This kind of customer relationship management is an enterprise-wide strategy, not merely the implementation of the right technology or a quick add-on to one department.
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Roots of Customer Relationship Management
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
Definition of customer relationship management:
Customer relationship management is an enterprise-wide approach to understanding and influencing customer behavior through meaningful analysis and communications to improve customer acquisition, customer retention, and customer profitability.
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Roots of Customer Relationship Management
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
The role of technology:
Although many believe CRM is a synonym for software, customer strategy involves analytical as well as operational processes.
Technological advancements in interactivity, such as the Internet, mobile technologies, and social media, have driven the growth capacity of CRM, but such technology is a means of managing customer relationships, not the end in itself.
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Traditional Marketing Redux
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
The Four Ps of traditional marketing focus on the “get” portion of “get, keep, and grow” customers.
Product
Place
Price
Promotion
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Market Share vs. Share-of-Customer Strategies
Market Share
Share of Customer
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
Products and brands as source of company value
Sells one product at a time at a time to as many customers as possible
Differentiates products from competitors
Sells to customers
Finds a constant stream of new customers
Makes sure each product is profitable, even at expense of customer confidence
Uses mass media to build brand and announce products
Customers by definition only source of revenue
Sells as many products as possible to one customer at a time
Differentiates customers from each other
Collaborates with customers
Finds a constant stream of new business from established customers
Makes sure each customer is profitable, even if loses money on occasional product or transaction
Uses interactive communication to determine needs and communicate individually
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Learning Relationship: Definition
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
A Learning Relationship is one where the customer teaches an enterprise about his or her preferences and the enterprise tailors its response to those preferences, such that it becomes more worthwhile for the customer to remain loyal than to switch to a competitor for any price.
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Benefits of Learning Relationship
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
Customer loyalty
The customer learns more about his or her preferences
The enterprise learns more about its own strengths and weaknesses
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The Technology Revolution and the Customer Revolution
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
Increased enterprises’ ability to connect with customers one-to-one
Increased customers’ expectations to be treated as an individual
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Where Is a Firm on the Customer Strategy Map?
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
Interacting
Tailoring
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Quadrant III
Database Marketing
Quadrant IV
1to1Learning Relationships
Quadrant I
Mass Marketing
Quadrant II
Niche Marketing
Customer Retention and Enterprise Profitability
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
Reichheld and Sasser (1990) found that a customer’s profitability increased with length of retention, based on four factors:
1. Increased purchases
2. Reduced operating costs
3. Referrals to other customers
4. Price premium (conversely, new customers usually pay lower introductory prices)
Additional benefit of retention: acquiring new customers is costly
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Becoming a Customer-Strategy Enterprise
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
Becoming a customer-strategy enterprise requires a unified view of the customer across the five principal business functions:
1. Financial
2. Production, logistics, and service delivery
3. Marketing communications, customer service, and interaction
4. Sales distribution and channel management
5. Organizational management strategy
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