Back to the Future

Back to the Future
by Andrew Szabo

Often I find myself counseling our clients to market with a customer-centric approach versus a product-centric approach. This thinking is supported by the results of a survey of global companies that I recently came across. The Economist Intelligence Unit and Andersen Consulting contend that “Customer Relationship Management” (CRM) is becoming central to corporate strategy. While only 18 percent of businesses surveyed are currently organized around customer type, the figure is expected to rise to 50 percent by 2002.

Since the Internet allows the (already unpredictable) customers to exercise even greater freedom of choice, major corporations must therefore craft a clear customer relationship strategy. Businesses are shifting their attention from attracting new customers to retaining profitable ones and fully realizing their profit potential. And, in some cases, they will “choose-to-loose” unprofitable customers.

“Focusing on customer needs seems the most basic, fundamental tenet of business. Yet, major corporations are just now beginning to blend strategic thinking, management resources, front-line support and technology to better understand and serve more sophisticated buyers,” said Dale Renner, global managing partner of Andersen Consulting’s Customer Relationship Management practice. “In the wake of relentless cost-cutting, organizations are developing long-term customer relationships as a path to enhancing profitability … this shift is nothing short of revolutionary.”

Other major findings of the survey include:

  • Companies are becoming more sophisticated at tracking customer profitability. Nearly 50% said that customer profitability would be a critical measure by 2002, up from 26% today.
  • By 2002, 83 percent of companies expect to have customer data warehouses, up from about 40 percent today.
  • More than 60% of businesses believe that “changing customer demographics and needs” and the “pressure to customize” their offerings in light of these changes, now have the most profound influences on their business
    strategies.
  • This new sophisticated approach will be aided by the evolution in interactive technology, specifically the soaring popularity of the Internet. Companies predict their use of the Internet to collect customer data will surge 430% by 2002.

Since not all customers are created equal companies need to build viable relationships to intelligently gather more data and discern the differences among customers. This “customer knowledge” can shape their offerings and marketing propositions based on the relative value these customers bring to the enterprise.

At The Marketing Chef we are particularly excited by the Internet’s capability to build customer knowledge. In my previous life in direct marketing we were able to build databases over a few months using mail, within weeks by telephone, but now with the Internet we can literally help our clients build at the speed of light! In addition, not only is it faster but also it is qualitatively far richer. New levels of customer learning lead to an increased ability to communicate with relevance to a targeted audience that is interested.

So the future lies in developing intelligent relevant relationships …  a premise that dates back to the prehistoric dawn of communication.  Back to the future.

Building Relationships with Customers

Building Relationships with Customers
by Andrew Szabo

The nineties heralded the shift from product-centricity (selling what a company has) to customer-centricity (fulfilling customer wants and needs). This has allowed firms to not only serve large market segments but also small niches and thus increase their target market universe.

What does this take? A new value-exchange proposition, the development and management of customer relationships and loyalty, and marketing to the individual  potentially on a mass scale. To succeed in this new environment of constant change and instability requires new information, a new level of customer knowledge. Knowledge that is generated expressly for the decision at hand, not information created for another purpose entirely and then massaged on a “best can do” basis.

At The Marketing Chef we are strong proponents of relationship management and the role of strategic marketing communications to effectively support our clients’ marketing goals. In the last six years much has been written on the subject. From Peppers & Rodgers seminal work: “The One to One Future”, first published in 1993 to Bain & Co’s Frederick Reichheld business classic: “The Loyalty Effect”, and from the relationship marketing guru of Silicon Valley, Regis McKenna’s “Relationship Marketing” to great HBR articles by Professor Len Schlesinger: “Realize your customers’ full profit potential”, and W. Earl Sasser’s “Why satisfied customers defect”.

I know it’s hard to keep up in this day and age, so here is a good primer that I came across that summarizes several of the aforementioned authors’ work. It is located on a German Website at the University of Mannheim:

http://webrum.uni-mannheim.de/bwl/grether/Alba.html#_Toc362507130

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