Managing Customer Interface

Managing Customer Relationships: A Strategic Framework

Chapter 1
Evolution of Relationships with Customers

Managing Customer Relationships: A Strategic Framework, Second Edition

Don Peppers and Martha Rogers

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

Introduction
Information (Interactive) Age businesses

structured around:
Customer information as competitive

advantage
Interactive technologies
Two-way brands or branded relationship

Roots of Customer Relationship

Management
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.

Roots of Customer Relationship

Management
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.

Roots of Customer Relationship

Management
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.

Traditional Marketing Redux

The Four Ps of traditional marketing focus

on the get portion of get, keep, and

grow customers.
Product
Place
Price
Promotion

Market Share vs. Share-of-Customer

Strategies
Products and brands as

Market
Share
source
of company value
Sells one product 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
Uses mass media to build

brand and announce

products

Share of Customer
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

Learning Relationship:
Definition
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.

Benefits of Learning Relationship

Customer loyalty
The customer learns more about his or her

preferences
The enterprise learns more about its own
strengths and weaknesses

The Technology Revolution and the

Customer Revolution
Increased enterprises ability to connect

with customers one-to-one

Increased customers expectations to be
treated as an individual

Where Is a Firm on the Customer

Strategy Map?

Interacting

Quadrant
III
Database
Marketing

Quadrant
IV
1to1Lear
ning
Relations
hips

Quadrant
I
Mass
Marketing

Quadrant
II
Niche
Marketing

Tailoring

Customer Retention and Enterprise

Profitability
Reichheld and Sasser (1990) found that a

customers 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

Becoming a Customer-Strategy
Enterprise
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

Extra

Extra

Extra