derive a customer relationship strategy for a marketer supplying a marketing service for a business...

8/2/2019 Derive a customer relationship strategy for a marketer supplying a marketing service for a business of your choice

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Tinotenda R Chabvonga

Student Number 210546075

4/20/2012

Marketing 301 assignmentDerive a customer relationship strategy for a marketer supplying a

marketing service for a business of your choice .

tinotenda reginald chabvonga


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Introduction

In the wake of increased competition between companies offering often very similar products

that are vying for patronage of a limited pool of customers, organisations have become alert

to the reality that customers are the cornerstone and basis for their successful existence(Zamil, 2011). This increased competition is largely a result of globalization, economic and

cultural integration and the proliferation of multinational and global organisations which has

seen consumers range of options widen in terms of product and service substitutes and

product and service choice. Zamil (2011) further states that for companies to cement their

future existence they have to develop a keen and genuine desire to form mutually beneficial

relationships with their customers in order to fulfil their long term objectives, this view is also

shared by Jenkinson and Jacobswho state that success lies in identifying and attracting

customers who will value your service and then retaining them as customers and win the

largest possible share of their lifetime business. (Jenkinson and Jacobs, 2006)

This increased focus on the customer and customer satisfaction can be credited with the birth

and growing focus on Customer Relationship Management (CRM). Satoshi succinctly

defines CRM as a management strategy that combines the efficiency of information

technology with marketing and other functional programs in the firm so as to better relate

with its customers (Satoshi ,2006).Alternatively CRM is defined as a business philosophy

which provides a strategy and vision that dictates the manner in which a company seeks to

relate and interact with its customers present and potential (www.atosorigin.com). Anton and

Hoek add that these integrated technologies, processes and businessactivities must revolve

around the customer for the CRM strategy to be effective. (Anton and Hoek, 2002)

As shown above CRM has a variety of meanings to different people but the underlying

concept is to establish, nurture, and sustain long-term relationships with customers at every

level of the customer lifecycle (diagram below) in order to delight current customers and to

acquire new ones via referrals and word of mouth communication. The ultimate objective is

the conversion of these relationships into increased profit margins by increasing repeat

purchase ratesand reducing customer acquisition and retention costs by focusing resources

on our most profitable customers.
http://www.atosorigin.com/http://www.atosorigin.com/http://www.atosorigin.com/


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Source www.gartner.com (Kirkby.J, 2002)

This essay seeks to derive and outline an effective Consumer relationship strategy for Nexus

bank ltd a financial services provider that focuses on retail banking and providing finance

for Small to medium enterprises in southern Africa. For the purpose of this essay we assume

that ;

a) Nexus ltd has legacy software and databases that contain information on their customersbased on their current accounts and information gathered from loan applications and

account opening transactions.

b) There is high mobile phone and internet penetration in Africa and the majority of theclients have access to internet services . (Winer,R.S ,2001)

c) Nexus has strong relations with Macro Ltd (a chain of retail outlets ) that allows holdersof the Nexus Connect credit and debit cardholders discounts and loyalty benefits .

d) Rival banks have strong relationships with other retailers and this poses a threat to NexusBank

customer

life cycle

target

acquire

build

relations

retain


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The derivation of the strategy will be done by following these steps ;

i. Creating a databaseii. Analysing the Database

iii. Defining Customer Segments for targetingiv. Crafting the strategy by ;

Carrying out an internal SWOT analysis Examining the SWOT components Using the five forces model by Porter Using the relevant factors of ten steps framework by Jenkinson and Jacobs

(2006) to tailor the strategy to Nexus bank

v. Making recommendations

1) Creating a Customer DatabaseThe foundation of the customer relationship strategy is constructing a customer database.

Since Nexus Bank is a state of the art Web-based bank with online banking site and cell

phone, automated teller machine facilities, gathering and accessing customer data will be a

simple process. Customer data are recorded simultaneously with account opening, deposit or

withdrawal transactions, contact information is collected at the onset of the relationship with

the consumer (Yao,H and Khong ,K.W 2011 ) . Nexus bank is in the service business and

so has high level of customer interaction as shown in the figure below.


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Customer interaction matrix

Customer interaction

Direct indirect

high

Banks (Nexus Bank)

Telecom companies

Retailers

Airlines

Packaged goods

Drugs and

pharmaceuticals

Interaction

frequency

lowPersonal Computers

Internet Infrastructure

Furniture dealers

Car dealers

Figure 1. Customer matrix (Winer, 2001)

To enhance The quality of information collected and customer contact and feedback internet

and cell phone banking and ATMs can be used as contact points these touch points especially

the internet reduce the cost of Bank to customer communication (Yao and Khong,2011) . To

get customers to use these contact points the Bank can offer free use of ATM and internet

services to groups like students and pensioners, increased frequency of use ensures that more

updated and accurate data is readily available to internal departments like marketing,

accounting and customer service via the intranet and shared records (Winer, 2001).

According to Winer (2001) a model database should contain the following aspects

Transaction History. In the case of Nexus Bank transaction history should include average

deposit and withdrawal amounts , punctuality of loan repayments or payment defaults


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(credit records ) , frequency of internet , cellphone and ATM transactions and average

account balance .

Customer contacts.

Contact details like postal and email addresses, telephone numbers can be used to initiate

customer contact for communicating new Bank offerings and service notifications . Social

networks like Facebook allow the company more informal interaction with clients.

Descriptive information.

This is for segmentation and other data analysis for example gross monthly income, race, age

employment status and special needs groups like students and revenue and cash flow status

for businesses. This information is important for segmentation and provision of personalized

or customized services. The ability to obtain descriptive customer information creates a

competitive advantage (Yao and Khong, 2011).

Response to marketing stimuli.

This part of the information file should contain

Whether or not the customer responded to a direct marketing initiatives.

2) Analysing the collected DataAnalysis of the database helps to create predictive models for customer interaction and

purchasing behaviour insight ; on the basis of these models the bank can define customer

segments. Customer segments can be refined based on customer profitability, and growth potential to best

allocate scarce marketing resources. The goal of the analysis is to aid the targeting of the most

profitable customers and tailoring customised and personalised service for them. the

information created is an asset for the all the consequent steps of the strategy which are

efficiently targeting, acquiring, developing and retaining high life time value customers .

(www.gartner.com). data analysis in addition to helping Nexus bank understand customer needs

helps forecast the rate of customer churn , customer loyalty levels , effectiveness of contact

points and and sales campaign performance.

The data analyses allows the bank to pay more attention to consumers as individuals on a

One-to-one level to cater to their idiosyncratic needs.it indicates each customers profit

potential or their Lifetime Customer Value (LCV). The idea is that each customer should be

analysed in terms of current and future profitability to Nexus Bank .When a profit figure can


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be assigned to each customer, the marketing managers can then decide which customers to

target objectively.

3)

Defining Customer Segments for targetingA study conducted in Australia for St George Bank showed that conversion rate i.e. the

proportion of initial loan and account inquiries resulting in actual transactions could be raised

by tailoring service packages to each customers level of Banking needs. on the basis of its

databases , it classifies prospective clients as

Nuggets - A small number of high account balance users with high brand emotionalloyalty who use their accounts frequently and contribute for as much as half of

transaction volume. They consist about 20% of all clients and generate 80% of profits

Backbone these are more numerous and are a relatively loyal to the bank It is the sizeof this group and, rather than the high account balances of individuals that makes them

the backbone of the bank.

The apatheticthese customers have accounts which they use only monthly orquarterly they are generally disinterested in additional services other than savings

accounts . ( www.gartner.com)

The staff of Nexus bank can adopt this model and use it to create offerings most suitable for

the clients level of usage respond to customer needs in a customer centric manner on a one-

to-one basis. In the case of St George Bank the inquiry to transaction the conversion rate

Increased from 33% to 51%, improving both profit levels and customer service

simultaneously. (www.gartner.com)

Effective targeting of clients becomes possible when the segmentation is complete targeting

is discussed in detail later in the ten steps framework.

4) Crafting the strategyVision

To become the Bank of first preference to customers in corporate and retail banking in

Africa.

Objectives
http://www.gartner.com/http://www.gartner.com/


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To understand and segment our current customer base of 600 000. To develop the loyalty of current customer segments and to use differentiated service

based on customer needs to increase customer satisfaction.

To differentiate our banking service from that of other banks by the end of 2012

To identify 20% population of our customers who are our most most-valuable customerin terms of profitability

To increase retention of the most-valuable customers by 75%. To win new customers and to win back valuable ex-customers. To handle customer inquiries in real time. To increase customer contact points by 15 % in 2012 by allowing customers can to access

their accounts via Wi-Fi tablets and smartphones. To reduce the costs of customer acquisition and communications by 50%

Critical success factors

For this strategy to be successful the following factors need to strengthened

a) The senior management must be committed to the CRS and its programs and theymust take the lead in directing and advocating the need for the strategy and its

benefits to all the banks employees

b) The strategy and its goals must be communicated effectively and management mustensure that they are understood by everyone in the organisation.

c) The program will have to funded generously overtime before actual tangible resultsbecome apparent

d) The rules of business must be changed for the strategy to work effectively andmanagers will have to engage in change leadership to ensure the strategy and its

programs are accepted.

e) For the program to be successful customer data will have to be gathered accuratelyand on time from Nexusbanks databases and legacy enterprise software.( Jenkinson

and Jacobs 2006)

SWOT analysis

The next step in the strategy is to carry out a SWOT analysis to understand the banks

Strengths, Weaknesses, Opportunities and Threats) in customer acquisition and retention.


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Figure 1: SWOT Analysis of CRM (Haran,2005)

The SWOT involves weighing our strengths and weaknesses in order to take advantage of

market opportunities and to avert or mitigate threats exist in the market.

Strengths

Strong ties with retail shops

Nexus bank has strong ties with retail shops such as Macro allowing customers to get

discounts on purchases made with the Nexus connect card customers can also make

purchases at the selected stores on low interest credit. These benefits are the foundation of

the next strength which is loyal customers who have a low propensity to leave the bank

resulting in low customer churn.

Strengths

we have ample customerinformation

we have loyal customers high customer response and

communication efficiency

a strong culture of customer servicewhich ensures customer satisfaction

Strong relations with retail shops forpoint of sale purchases

Weaknesses

Duplicated records of some customers Staff may lack skills required for new

system

Current organisational culture is notvery keen on complete customer service

there will be a time lag in switching tothe new CRM technology

Some retail shops are uncooperativeand have ties with rivals

Opportunities

improved Ability to please customersand retain them

Increased client base due to referrals Improved relationship with customer

resulting in brand loyalty

A chance to increase switching costs

Threats

Loss of personal interaction withcustomers

Poor integration with back officesystems

Over reliance on computer automatedprocesses

Downtime due to malfunctions willinconvenience customers


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Rapid response to customer demands because of wide contact point network

The bank has numerous contact points making communication consumers with and response

to consumer queries rapid Nexus customers can access their accounts via ATMs, mobile

phones, and the Internet making its access mix one of the richest in the world.

(Galbraith,2002)

Ample database information on customers which simplifies targeting and segmenting

consumers

A good CRM strategy is anchored in its ability to identify the best and most profitable

customers (Conlon, 1999) the identification process is facilitated by transactional history

which Nexus has in its database. Good customers conduct at least a single transaction daily

and the best customers transact regularly generating 10 times as much revenue as the good

customer best customers must be identified and rewarded (Kale, 2004).Kale argues

passionately that the major strength of CRM is that it stores valuable customer information

customer permitting Nexus personal level familiarity with the customer. (Kale, 2004).

Strong customer service culture

The bank staff are willing to bend over backwards to meet customer needs and interact with

them in a cordial and professional manner and they know most big customers by name this is

the jewel in the crown which creates emotional brand loyalty .this sales staff efficiency

allows customers to be more reliant on the organization and discourages customers to leave

the organisation (Xu et al., 2002) .

Weaknesses

Some retail shops are affiliated with other banks

This represent a weakness in the strategy this inconveniences customers who patronise these

shops regularly and they might be lured away by rivals who offer in store discounts by using

their credit or debit cards.

Duplicated customer information may cause information overload

Due to improper data capturing the relevant information maybe there, but if not managed

Properly it could lead to failure of the CRM strategy. This creates an overload of customer

data (Kale, 2004).


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There will be a Time lag for loading data in new systems

No CRM system comes preloaded with customer information. The bank will have to

transfer data from legacy systems into the new system this could cause the project to fail and

the organization losing valuable time and money. (Bultema, 2000).

Organisational culture

CRM strategy implementation will lead to cultural change within the organization, especially

among frontline staff (Fickel, 1999) i.e. staff in a retail banking firm may be focused on

managing accounts but not customer relationships. Through the implementation of a CRM

technology, staff will be forced to change their approach to their work and they may resist

this change.

Opportunities

Better relationships with customers

CRM allows the bank to know who its customers are and what solutions and service s they

expect from the bank and this helps improve relationship with customer. The secret of better

customer relations is making customers feel appreciated and important as pointed out by

Todman, (2001). To achieve this requires good control of CRM technology, ensuring

customer data clarity and accuracy and ensuring that staff is good with the customers.

Increased customer satisfaction

CRM strategy enhances customer satisfaction using technology and so the bank has an

opportunity to increase profitability (Galbraith, 2002). This can be achievedby knowing

what the customer wants. For example, a good CRM system willkeep track of a particular

brand ofproduct a customer may use and anticipates new customer needs and it also provides

the bank with an opportunity to widen its offerings and revenues. According to Galbraith,

sources of future profits lie with existing customers. Organizations are able to increase their

revenue by selling more to their existing customers. To adopt a statement by Peppers &

Rodgers (1993) rather than trying to get as many clients as we can to save with us we can

increase the transactions per existing customer by including services such as stock exchange

brokerage and consulting as well as providing financial planning advice as part of our

service. The revenue base can be increased by including extra services or incentives.

Threats

Loss of personal interaction

A real threat of CRM is loss of personal interaction and human warmth. Through extended

use of technology the customer becomes an identification number rather than a person and


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this induces feelings of insignificance in customers. The bank must ensure that staff is

meeting customers face-to-face to combat this threat (Haran 2005).

Over reliance on computer automated processes

Its possible that CRM can become too computerized and impersonal again resulting in the

loss of personal interaction. Haran (2005) suggests this could lead to the customer feeling

unappreciated because customers place import on their relationships with their Bank and

resent being just another client on a database.

Poor integration with back office systems

Another threat lies in the probable inability to integrate CRM technology with existing

(legacy) BackOffice systems this is a critical success factor for CRM implementation and

success (Haran, 2005). According to Haran, implementing a new CRM module requires

guidance to ensure everything fits together in function and form.

The five forces that shape strategy

Porters five forces

The most important of these factors in CRM are the buyer associated pressures. Jenkinson

and Jacobs (2006) suggest considering the marketplace from the viewpoint of the customer.Current levels of customer loyalty must be taken into account. In the banking services

Nexus

Bank&

its CRS

Substitute

services to

savings e.g share

investments

Potential

entrants

Rival banks

Suppliers and

their bargaining

power

Buyers(clientsand their

bargaing power)


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marketplace the customer loyalty factor power is as significant as buyer bargaining power in

the commodity marketplace ultimately for Nexus Bank customer loyalty is what produces a

competitive advantage.( Jenkinson and Jacobs , 2006)Brand loyal Customers tend to

patronise the bank regularly, resist competitive offers and be less sensitive to price changes.

This produces customer inertia which translates into brand equity which represents the

strength and competitive advantage that the Nexus brand commands. Clients that have a

strong attachment to our services have less bargaining power.Emotional customer brand

loyalty will serve as an entry barrier to potential new entrant the CRs should aim to increase

positive emotions the customers have for the banks services.

To increase the chances of success of the strategy the strategy will draw from the ten steps

framework to successfully target acquire and retain customers .these ten steps will serve as adrivers of the strategy however only those relevant to Nexus Bank will be discussed

(Jenkinson and Jacobs,2006)

Source Jenkinson and Jacobs (2006)

Investment: Invest according to customer value

Relationship: Optimise the whole customer relationship

Touchpoints: Manage the relationship at all appropriate touchpoints


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Investment

From the segmentation process the most valuable customers will have been identified, Nexus

Bank must then proceed to invest its resources in the most profitable customers . According to

Pareto we should invest in the 20% of our customers who generate 80% of our revenue. This

implies that the marketer bank investing resources equally on all clients is wasteful. Thewiser approach is to tailor the investment by prioritising customers with the highest

account, contact point usage and marketing media response rates, brand loyalty, the

biggest account and loan balances and the customers who repay loans promptly.

(Winer,R.S 2001)

This is the most desirable segment to Nexus Bank and it must become the primary focus in

terms of marketing resource allocation. The proportion in which of marketing tools will be

deployed between Client segments will be based on individual customer-based profitability

and Lifetime Customer Value to maximise returns . This strategy worked for PageNet a

wireless provider reportedly increased usage rates for unprofitable subscribers to drive them

out or increase their transactional value and profits. The risk of excluding potentially valuable

customers is significantly reduced by LCV analysis because it accounts for potential growth

in client purchasing. (Winer,R.S 2001).

Conversely many unprofitable customers can be placed in the Nuggets segment because of

imperfections in prediction techniques group .No matter what criterion is employed, de-

selected customers need to be chosen with care. Once driven away or ignored, unhappy

customers can spread negative word-of-mouth quickly over the web. (Winer,R.S 2001).

Relationship ProgramsRelationships are built and sustained with personalised customer centric banking solutions

rather than technology. Direct e-mails and other communications are only a delivery system

of the banks financial services. Delivering higher levels of customer satisfaction than

competing banks should be the ultimate goal of the CR strategy. To meet customer

expectations of service performance delivering higher levels of satisfaction is critical.

Research has shown that there is a strong, positive relationship between customer satisfaction

and profits. The bank must constantly develop programs which deliver performance in excess

of targeted customer expectations. The bank must make efforts to understand why customersdefect how to stop them or win them back if they defect. Customer Loyalty is created by

having the right processes and capabilities these are described below

Touch points and Customer Service

Touch points are any media that allow customer interaction with the organisation. Any

contact with the customer is an opportunity to gain repeat business and in any of these

encounters the bank must maximise positive customer experience by using customer service

to build or improve a relationship with the client. The firm must react positively in solving

enquiries and answering questions concerning customer accounts or service.


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(Jenkinson and Jacobs,2006) . Infrastructure to deal with reactive service situations such toll

free 0800 must always be available and well maintained. Managers can also pre-empt

dialogue before they complain to explain why a particular account error occurred and how it

will be solved, employees must also be trained to initiate contact and anticipate client needs.

Recommendations

1) Improving the human element of ATM and online bankingThe intensive use of online banking services reduces the human element which this may

impact customer satisfaction and inhibit the development of long lasting relationships with

customers (Cox and Dale, 2001; Herington,C. and Weaven,S 2007) . To remedy this the

bank to design online services must be designed with delighting the customers above their

expectations ensuring both customer retention and loyalty . To achieve this all customer

related processes must be Designed from the customer perspective : emphasis must be

placed on a handful of processes that customers care most about and then redesigning them

from the point of view of the clients.( Herington,C. and Weaven,S 2007)

2) Acting on customer feedback

Customer feedback on procceses must form a basis for process modification . Forward-thinking organizations make sure they act on the feedback. (www.gartner.com)

3) Alter employee attitudes towards customer serviceEmployees must be trained to see their jobs not only as managing figures in accounts but they

must see themselves as providers of financial solutions and service to individuals and

companies via their managers. service excellence enhances customers repeat purchases of

current an additional t services, reduces price sensitivity.hence the cost of training is

insignificant in comparison to the benefits that will accrue to the organisation training staffproperly (Cronin & Taylor, 1999;Haran,2005)

Conclusion

In conclusion it must be noted that the CRM strategy is not a strategy for technology and

management but it is a strategy to satisfy customers and create and sustain long lasting

relationships with them throughout the consumer life cycle from targeting , acquisition and

retention . (Winer,R.S 2001). The strategy must evolve from creating a database , analysing

the database ,creating customer segments and internal analysis of the organisation using

SWOT analysis .Improvements must be made on the banks current service delivery system

based on the Swot analysis and feedback from customers to increase customer loyalty .


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BibliographyConlon, G., (1999) Growing sales from existing customers Sales and Marketing

Management, Vol.15, Issue 11

Dickie , J. (1999) Why CRM projects fail CRM Journal, online article,

www.crmcommunity.com accessed on 19 April , 2012

Fickel, L. (1999) Know your customer, CIO Magazine, Vol.12 Issue 21

Galbraith , J. R., (2002) Designing organizationsan executive guide to strategy, structure

and process Second Edition - Jossey-Bass, SanFrancisco, CA

Haran ,A (2005) Development of a framework to retain customers through customer

relationship management Dublin

Herington,C. and Weaven,S (2007),Can banks improve customer relationships with high

quality online services? , Managing Service Quality, Vol. 17 Iss: 4 pp. 404427

Jenkinson,A and Jacobs,M (2006) The IDM Guide to CRM Mastery (www.gartner.com)

Accessed 14 April 2012

Kale, S. H., (2004) CRM Failure and the seven deadly sins Marketing Management, 13 .5

Peppers, D., Rogers, M. (1999) The One to One Manager: Real-World Lessons in Customer

Relationship Management, Doubleday, New York

Porter, M., (1995) Competitive Advantage :Creating and Sustaining Superior Performance,

Simon & Schuster, USA

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Winer,R.S (2001) Customer Relationship Management: A Framework, Research Directions,

and the Future 1. 4-35

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