andrás bauermarketing management1 customer relationship management basic assumptions for this...
TRANSCRIPT
![Page 1: András BauerMarketing Management1 Customer Relationship Management Basic Assumptions for this paradigm: 1. There is a lifetime-profitability correlation](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d845503460f94a6b0f9/html5/thumbnails/1.jpg)
András Bauer Marketing Management 1
Customer Relationship Management
Basic Assumptions for this paradigm:
1. There is a lifetime-profitability correlation
2. Profits increase over time
3. Serving long-term customers is less costly
4. Long-life customers pay higher prices
![Page 2: András BauerMarketing Management1 Customer Relationship Management Basic Assumptions for this paradigm: 1. There is a lifetime-profitability correlation](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d845503460f94a6b0f9/html5/thumbnails/2.jpg)
András Bauer Marketing Management 2
Price Premium
Referrals
Cost Savings
Revenue Growth
Base Profit
Acquisition CostYears
1 2 3 4 5 6 7
Graphical representation of consumer/profit development
PROFIT
![Page 3: András BauerMarketing Management1 Customer Relationship Management Basic Assumptions for this paradigm: 1. There is a lifetime-profitability correlation](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d845503460f94a6b0f9/html5/thumbnails/3.jpg)
András Bauer Marketing Management 3
Some explanations
• Acquisition costs: depending on the category, it could be quite substantial. In fast growing businesses, firms are willing to spend upfront in hope of future recovery. Cellphones are prime examples. Average acquisition cost in the US: $ 300. However high churn rates may not justify this. (There is a market segmentation reason)
![Page 4: András BauerMarketing Management1 Customer Relationship Management Basic Assumptions for this paradigm: 1. There is a lifetime-profitability correlation](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d845503460f94a6b0f9/html5/thumbnails/4.jpg)
András Bauer Marketing Management 4
Further explanations
• Base profit: the average margin
• Revenue growth: retained customers might buy more from the company (partly because of cross-selling partly, because of they are happy)
• Operating costs: it is less costly to serve loyal customers
![Page 5: András BauerMarketing Management1 Customer Relationship Management Basic Assumptions for this paradigm: 1. There is a lifetime-profitability correlation](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d845503460f94a6b0f9/html5/thumbnails/5.jpg)
András Bauer Marketing Management 5
More explanations
• Referrals: satisfied customers make recommendations (however if you force them they become suspicious)
• Price premium: loyalty makes blind and customers are willing to pay higher prices (though it could just be inertia)
![Page 6: András BauerMarketing Management1 Customer Relationship Management Basic Assumptions for this paradigm: 1. There is a lifetime-profitability correlation](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d845503460f94a6b0f9/html5/thumbnails/6.jpg)
András Bauer Marketing Management 6
Discussion
• If the basic assumptions hold, firms should pursue loyalty building strategies
• Loyalty strongly depends on customer satisfaction
• However, if the basic assumptions do not hold, caution is advised
![Page 7: András BauerMarketing Management1 Customer Relationship Management Basic Assumptions for this paradigm: 1. There is a lifetime-profitability correlation](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d845503460f94a6b0f9/html5/thumbnails/7.jpg)
András Bauer Marketing Management 7
The Customer Satisfaction Branch
• Customer Satisfaction is usually approached based on the expectancy-disconfirmation theory:
Looking at the match of expectations and experience
![Page 8: András BauerMarketing Management1 Customer Relationship Management Basic Assumptions for this paradigm: 1. There is a lifetime-profitability correlation](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d845503460f94a6b0f9/html5/thumbnails/8.jpg)
András Bauer Marketing Management 8
Customer satisfaction
• Is a multidimensional construct based and measured on many dimensions.
• Usual dimensions:
response, info exchange personal service,price, availability, attributes
• Need for own measures: customersat.com
![Page 9: András BauerMarketing Management1 Customer Relationship Management Basic Assumptions for this paradigm: 1. There is a lifetime-profitability correlation](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d845503460f94a6b0f9/html5/thumbnails/9.jpg)
András Bauer Marketing Management 9
Customer satisfaction measures
• Behaviour (based on data)
• Surveys
• Lost customer analysis
• Mystery shopping
• Benchmarking for competitors
![Page 10: András BauerMarketing Management1 Customer Relationship Management Basic Assumptions for this paradigm: 1. There is a lifetime-profitability correlation](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d845503460f94a6b0f9/html5/thumbnails/10.jpg)
András Bauer Marketing Management 10
The impact of market segmentation
• Not all customers are equal, therefore pursuing loyalty in general, is not a good strategy
• Even highly satisfied customers switch
• There could be some free-riding
• Membership (contract) and non-membership business can be different
![Page 11: András BauerMarketing Management1 Customer Relationship Management Basic Assumptions for this paradigm: 1. There is a lifetime-profitability correlation](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d845503460f94a6b0f9/html5/thumbnails/11.jpg)
András Bauer Marketing Management 11
Low Lifetime Revenue High
Long
Lifetime Length
Short
Lifetime Profit: 51 Mailing cost: .128 Ave.Price: 47.7
Lifetime Profit 289 Mailing Cost: .063 Ave.Price: $ 58.4
Lifetime Profit: 51 Mailing Cost: .142 Ave Price: 47.8
Lifetime Profit 258 Mailing Cost .065 Ave. Price: $ 63.5
Source:Reinartz & Kumar
![Page 12: András BauerMarketing Management1 Customer Relationship Management Basic Assumptions for this paradigm: 1. There is a lifetime-profitability correlation](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d845503460f94a6b0f9/html5/thumbnails/12.jpg)
András Bauer Marketing Management 12
Interpretation
• This is a non-contractual business
• In this business (direct marketing) rewarding long lifetime with the company is counterproductive
• It might be different in contractual relations
![Page 13: András BauerMarketing Management1 Customer Relationship Management Basic Assumptions for this paradigm: 1. There is a lifetime-profitability correlation](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d845503460f94a6b0f9/html5/thumbnails/13.jpg)
András Bauer Marketing Management 13
Industry approaches
• Industries might follow different approaches to customization such as one-to-one, mass customization etc.
• Measurement is more and more possible, though industry specific
• Could be very important in B2B
![Page 14: András BauerMarketing Management1 Customer Relationship Management Basic Assumptions for this paradigm: 1. There is a lifetime-profitability correlation](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d845503460f94a6b0f9/html5/thumbnails/14.jpg)
András Bauer Marketing Management 14
Some examples
• High-value customers receive better treatment
• Can use more services
• Receive more rewards
• Low value customers are treated badly
• « Customer apartheid ? »
![Page 15: András BauerMarketing Management1 Customer Relationship Management Basic Assumptions for this paradigm: 1. There is a lifetime-profitability correlation](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d845503460f94a6b0f9/html5/thumbnails/15.jpg)
András Bauer Marketing Management 15
Customer relationship management as an application
• CRM is about identifying, winning, retaining and expanding customer relationships; in the most profitable way, across the complete spectrum of point to contact with the customer. It includes, sales force, call-center, the Internet
• A technology enabled dialogue
![Page 16: András BauerMarketing Management1 Customer Relationship Management Basic Assumptions for this paradigm: 1. There is a lifetime-profitability correlation](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d845503460f94a6b0f9/html5/thumbnails/16.jpg)
András Bauer Marketing Management 16
The Dell model
• Dell captures more customer value in its model than its competitors through differentiation in customer knowledge and therefore better problem solving
• This leads to higher selling prices
![Page 17: András BauerMarketing Management1 Customer Relationship Management Basic Assumptions for this paradigm: 1. There is a lifetime-profitability correlation](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d845503460f94a6b0f9/html5/thumbnails/17.jpg)
András Bauer Marketing Management 17
When is CRM a good tool ?
• In businesses with complexity and high value. This is where the customer value can be driven by differentiation and tailorability to the customer
![Page 18: András BauerMarketing Management1 Customer Relationship Management Basic Assumptions for this paradigm: 1. There is a lifetime-profitability correlation](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d845503460f94a6b0f9/html5/thumbnails/18.jpg)
András Bauer Marketing Management 18
Beyond CRM...
Consumers are co-producers, not just users We can manage consumer by marketing
and HR tools Customer Efficiency
Management
![Page 19: András BauerMarketing Management1 Customer Relationship Management Basic Assumptions for this paradigm: 1. There is a lifetime-profitability correlation](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d845503460f94a6b0f9/html5/thumbnails/19.jpg)
András Bauer Marketing Management 19
Simple profit model: satisfied employees
Firm Employees Customer
Satisfied employees Satisfied employees make customers happy
Satisfied customers increase company profit
![Page 20: András BauerMarketing Management1 Customer Relationship Management Basic Assumptions for this paradigm: 1. There is a lifetime-profitability correlation](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d845503460f94a6b0f9/html5/thumbnails/20.jpg)
András Bauer Marketing Management 20
A more rational profit model: based on a process view
Firm Employees Customers
Company systems allow employees to provide consistently better services
Well supported employees provide consistently better services
Satisfied customers improve their relationship with the firm
![Page 21: András BauerMarketing Management1 Customer Relationship Management Basic Assumptions for this paradigm: 1. There is a lifetime-profitability correlation](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d845503460f94a6b0f9/html5/thumbnails/21.jpg)
András Bauer Marketing Management 21
The efficient customer profit model
Firm
Employees
Customer
Company systems support employees and customers to become
more efficient
Well supported employees provide better services
Satisfied customers have better relationship with the company and with other customers, as well.
Efficient customers use company systems better and create better serv ices