MANAGING THE CUSTOMER

There is no ideal way of managing customers. Marketers have been brought on customer-goods branding, retail marketing, and sales-force management. Along comes customer- relationship management with the claim to replace or substantially supplement these tried-and–true ways of doing business.  However, there are many ways of managing customers. The main ways are listed below. In practice, many companies combine several.

Models For Managing The Customer

One-On-One

Here most aspects of the marketing mix are actively attuned to the individual, based on information given by the individual before or during contacts, perhaps supplemented by other data (for example, inferred data). Some– but-not all customers are considered receptive to this, that is, customers have different propensities to respond in terms of returning more value. The principles work when applied to large customers whose values justifies the degree of customization implied by this approach.

Transparent Marketing

Many customers would like to manage their relationship with companies rather than the other way around. They try to do this by soliciting information from them and customizing the other offer made to them (content, timing, etc.), but they are not usually allowed to do so. When it is possible (for example, via advance call centers or the Web) some customers are very responsive. However, most companies do not offer this to their customers, and even waste large amounts of money trying to guess what customers want based on inadequate information. 

Customer Relationship Marketing (CRM) Through A Few Segmented Offers

This is still the aspiration of most companies. Although most companies make slower progress than they would like, many get solid gains by prioritizing those areas of the relationship in which the offer for target customers (for example, positive-and/or high-value) is most at variance with the need. This model recognizes that the relationship is only one part of the marketing mix, and there are often situations in which classic elements of the marketing mix are more critical for marketing success.

Personalized Communication and Targeting

Campaign selection and tailored packaging of standard offers are examples of personalized communication and marketing. The practice grew from good practice in direct mail and telemarketing. It involves good use and management of customer data.  It can raise response and conversion rates and save communication costs. In its most advanced form, data given by the customer at the point of contact is used to create or modify the profile and hence the offer made.

Top Vanilla

In this method, leadership is gained by offering excellent customer management (before, during, and after the sale), but to a standard available to everyone in the target market rather than just a few selected customers. In some cases this is combined with one of the other approaches for one or more small segments of highly valuable customers. The approach is characteristic of companies that manage their customers entirely by direct-marketing technique such as telemarketing, direct mail, and the Internet.

Spot-sell within Managed Roster

For some, or all of the products they buy, some customers prefer to get the best deal (value for money, not necessarily lowest price) at the time of purchase, but only from a selected roster suppliers. This is characteristic of heavy users of fast-moving consumer goods or shopping goods, but also of many industrial purchases in which a roster of suppliers is used to guarantee optimal variety, product quality, and service.  In such situations attempts to develop behavioral loyalty (so that a customer buys more than the usual proportion from one supplier) usually require some promotional incentive.

Branding is usually a critical determinant of inclusion in the roster. For products bought through intermediaries, the supplier’s goal is to guarantee availability through intermediaries in the customer’s roster. Note that the final customer may have a roster of products/brands and a roster of intermediaries. In this model, marketing focuses on getting on the customer’s roster and providing best value compared with other companies on the roster.  

Top vanilla service can add competitive edge. CRM can be used to reinforce the supplier’s or intermediary’s position in the roster, though it may not help in gaining profit. However, if the supplier’s product or the intermediary’s offer is good value for the money, a fair share of the business can be obtained, so the returns to CRM can be good

Spot-sell Managed by Agent

In some cases drawing up the roster can be a complete task, with which customers feel they need the help of an agent, whether for expert advice, bargaining expertise, or just to delegate some of the transaction management. Some modes of purchase may require the customer to sign on as a registered customer (for example, buying over the telephone or on the Web), but the customer prefers to register with an independent agent rather than original product or service supplier. So the customer appoints one intermediary to act as an agent, and the agent then draws up the roster. However, CRM techniques can be used very successfully with the intermediaries. This approach can often be combined with top vanilla service for final customers and agents.  In an increasing number of cases, the agent may be web-based.

Pure Spot-sell

Here the customer rejects all relationships and buys (whether from original supplier or intermediary) purely on the basis of current perceived value.  This in turn is strongly influenced by classic market-mix variables – brand, perceived product quality, price (including promotional discounts), availability, etc.

To avoid being drawn to this situation, suppliers must seek to differentiate their offer such that the customer sees pure spot-buying as being risky,

The Partnership Model

This is a model that seems to have a very good pedigree, but it is quite difficult to implement. It is suggested as a model where both supplier and intermediary have strong visibility of and to the final customer, as in the automotive industry or in financial services.

CLASSIC MARKETING MODELS

There are several marketing models in which the nature of customer management is not specified explicitly but there is a very strong implicit model of customer management. These include:

  • Retailing;
  • Salesforce management;
  • Mail order;
  • Consumer-product and company-brand management
  • Business-product management (closely related  to technical innovation models)

Adopting the Right Approach

Obviously, these approaches to managing customers overlap, and suppliers may find they need to combine them in different ways for managing different customers and for different products. However, each has characteristics and very different patterns of marketing investment and return. The choice is affected by factors such as:

  • State and rate of change of product technology, which can lead customers to require uncertainty reduction – available through relationship  or agents – but it can also create big differences in spot value;
  • Underlying production and distribution techniques and costs, for example, costs of varieties of economies of scale;
  • Rate of entry of new-to-category  customers, which affects the role of experience;
  • Market structure fundamentals, for example, patterns of competition or regulation;
  • Transfer of learning and expectation of customers between different paradigms of management that customers know;
  • Customer behavior and psychographics or, more simply, what they think and feel  how they buy, their need to give or take control , and associated way of life  and life cycle issues;
  • Timing Issues – how quickly customers’ needs can be identified, and how quickly they can be attended to;
  • Customer expertise –  whether customers are good at identifying  their own needs (and if so,  how long it takes) and associated learning issues;
  • Sector – the strong tendency in some complex business-to-business relationships for customers to prefer a CRM management repertoire with spot-buying;
  • State of intermediation – type of intermediation (for example, by agents, web-based) and amount and type of value added by intermediaries;
  • Relationship between risk and value, for example, whether  customers have high risks (credit, insurance, etc.) attached to them as individuals; what the balance is between good  and bad customers and between good and bad customer characteristics;
  • Data issues –quality, legal issues;
  • Staffing – current skill levels, possibilities of recruiting new skill sets, training options, etc.;
  • Systems culture of the supplier, for example, whether managers are able to cope with the latest call-center and web-based technology.

No one paradigm dominates another. Our research indicates that companies should consider the variety of models of customer management that might work on their market, identifying which might be best for their market as a whole and for particular segments.  They should review the extent to which these approaches have really been successful in their own and parallel markets.

This review should take place as part of a general corporate strategy review, for each paradigm requires its own operational structure, processes, systems, and policies.

There is no point choosing a marketing model that sits badly with other functional strategies. Perhaps most important of all, companies should keep a close watch on the preferred paradigms of their most-valued customers – `but with a skeptical eye. Often a paradigm only works because customers have been offered nothing better.

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