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CUSTOMER RELATIONSHIP MANAGEMENT FOR HIGH TECHNOLOGY COMPANIES Trainer: Jesus Belle M.Sc. MBA PhD Candidate Supporting condtions Primary stages THE CUSTOMER RELATIONSHIP MGMT VALUE CHAIN Customer analysis Customer information Network Development Value Proposition development Leadership and culture Data and information technology People Processes Manager the customer lifecycle THE CUSTOMER RELATIONSHIP MGMT VALUE CHAIN Customer analysis Customer information • Market • Customer segmentation database development • Customer Costs • Lifetime value • Customer analysis toolkit • Internal data • Data enhancement Network Value Proposition Development development (SCOPE) • Network management • Internal networks •External network –suppliers/investors/ • Sources of customer value • Customer experience • Process reengineering • Data warehousing partners • People issues - SWOT/ PESTE/5 • Data mining • Network position • Technology forces/ BCG martix enablement • Benchmarking • E-Commence • Privacy • Database technology and software - EDI / Extranets/ portals Manage The customer lifecycle • Customer acquisition – who/how/what? • Customer retention – who/ how? – exceed experiences/add value/social and structural bonds/commitment • Customer development - who/what/how? Organisation design - physical/ virtual? - cross-Functional teams Metrics Adapted from Buttle (2004) 1. CUSTOMER ANALYSIS • Which activities are being carried out at your company in order to gather critical customer information? Level of Implementation Segmentation Sales forecasting Customer Costing Customer Metrics Other ?? Other ?? Intuitive Medium Professional 1. CUSTOMER ANALYSIS Customer types: Loyalty through the consumer relationship life 1. 2. 3. 4. 5. 6. 7. Suspect: Prospect: First-time customer: Repeat customer: Majority customer: Loyal customer: Advocate: Could the customer fit our desired profile? Consumer fits profile and is being approached First purchase is made Customer makes additional purchases We are the customer’s company of choice Customer is resistant to switching suppliers Customer generates additional referrals and orders 1. CUSTOMER ANALYSIS • What is your overall consumer portfolio loyalty (in customer amount percentage)? Current % Ideal % SUSPECT PROSPECT FIRST-TIME REPEAT MAJORITY LOYAL ADVOCATE Total: 100% Total: 100% 1. CUSTOMER ANALYSIS • What is your overall consumer portfolio loyalty (in sales percentage)? Current % Ideal % SUSPECT PROSPECT FIRST-TIME REPEAT MAJORITY LOYAL ADVOCATE Total: 100% Total: 100% Customer Loyalty Matrix REPEAT PURCHASE Strong Weak RELATIVE ATTITUDE High Low Loyals Latent loyalty Occasional loyalty No loyalty 2. CUSTOMER PROFITABILITY • Customer Profitability = Revenues per Customer (or customer group) per year minus Cost of Customer Related Activities Cost of Activity E Revenues per Customer XX Cost of Activity F minus In year 200X Cost of Activity G = Profit per Customer XX In year 200X 2. CUSTOMER PROFITABILITY Required Customer Intimacy • CUSTOMER INTIMACY CLUSTERS ELIMINATE OR PROVIDE MINIMUM SERVICE KEEP! OPTIMIZE INTIMACY PROCESSES IDEAL: NURTURE AND GROW Customer Profitability 2. CUSTOMER PROFITABILITY TRANSACTION-ORIENTED CUSTOMER FULL-INTIMACY CUSTOMER Key Actions “Transaction cost” Market mechanism Serving through the whole customer process Objective Serve and satisfy through minimum service Maximum long-term profits through a long-term relationship Competitive Advantage Price General Product Attributes High Customer Value Price and Process Intimacy Organization Product Managers Purchasing Customer Teams Effectiveness Economy of Scale Process Differentiation for Segmented Customer Groups Strategic Metrics Sales Volume Market Share Customer Profitability % of Customer Expense Customer Orientation Satisfy through basic needs Relationship Strength New cooperation opportunities 2. CUSTOMER PROFITABILITY • Most of the customers are somewhere between transaction-based and fullintimacy • Early customers have great potential (long-time to reap benefits) • Mature markets are less loyal and more price-based 2. CUSTOMER PROFITABILITY • Customer Lifetime Value Gross Margin from Customer A during the lifetime - Year 2005 + 2006 + 2007 + 2008 + 2009 (discounted to a certain rate, beyond the scope of this training) Minus: - Customer acquisition cost - Customer maintenance activities cost 3. SAMPLES OF CUSTOMER DATABASE STRUCTURES B2C B2B Households Organizations Organization structure individuals Contacts Roles Profiles relationship addresses History Partners Customer products Opportunities Contact plans Promotions Claims Sales orders Service request 3. SAMPLES OF CUSTOMER DATABASE STRUCTURES Customers Special pricing/ Promotion Pricing Competing Products Catalogues Components Structures and configuration rules Products Known issues Quotes and orders Inventory 3. SAMPLES OF MARKETING DATABASE STRUCTURES History plans Customers Attributes personalistion Segments Lists Campaigns Leads/ opportunities Budgets Marketing funds Responses Activites Partners 3. SAMPLES OF SALES AUTOMATION DATABASES Customers Buying process Competitors Leads Opportunities Quotes, proposals, presentation Activities Sales team Sales methodology Incentives Partners Oblectives and tactics Products Configuration Sales orders Customers products Territory Forecast 3. SAMPLES OF SERVICE AND SUPPORT DATABASE STRUCTURES Agreements and warranties Customer products Maintenance parts customers Activities Service team Inventory Dialogue scripts Service requests Service orders and return material automation Rosolutions Products Known issues Manuals Defects Solutions 4. CUSTOMER VALUE Negative Differentiation Value Positive Differentiation Value Total Economic Value Reference Value 4. CUSTOMER VALUE • The Customer Experience: Value = Benefits minus Sacrifices – Benefits: Which are the key benefits that the customer is getting from your product or service experience? • Some commonly identified ones (SERVQUAL model): – Reliability: the product performs dependably and accurately – Assurance: Ability of suppliers personnel to convey trust and confidence – Tangibles: equipment and materials – Empathy: Individualized attention to customers – Responsiveness: willingness to provide prompt service when needed – Others??? 4. CUSTOMER VALUE • The Customer Experience: Value = Benefits minus Sacrifices – Sacrifices: What is the customer pain in acquiring your product or service? • Some commonly identified ones: – – – – – – Money Searching costs (looking for different alternatives) Physical purchase experience: traveling abroad, negotiating… Installation costs Learning and adaptation costs Psychic costs: » Performance risk: when the user is not fully sure that the product will do as required » Financial risk: customer doubts the financial gain from the purchase » Social risk: company reputation is at risk when purchasing the product 4. CUSTOMER VALUE • How do consumers typically reduce the risk and sacrifice? – – – – – – – – – Purchase delay Seek word-of-mouth references Negotiate service contracts Seek additional information Buy known brands Deal with reputable suppliers Seek performance guarantees Negotiate discounts Demand pre-purchase trial • How ready is your company to minimize the customer sacrifice? 5. RELATIONSHIP PROCESS • Components of the Customer Relation: a) The Whole Product/Service Offering Consulting Hardware Complementary Services Post-sales service & support Pre-sales services Software Complementary Products The Product Peripherals interfaces Connectivity 5. RELATIONSHIP PROCESS • Components of the Customer Relation: b) The Firm and Customer Relationship Customer’s Value Process (generic example) Strategy Planning Strategy Planning Product Design/ Develop Comp/service Design/Devel. Supplier Search Marketing Purchasing Sales Integration Productio n Delivery Production Delivery Suppliers Value Process (generic example) Service & Support After sales Service 5. RELATIONSHIP PROCESS CUSTOMER PROCESS Strategy Planning Strategy Planning Product Design/ Develop Comp/service Design/Devel. Supplier Search Marketing Purchasing Sales Integration Productio n Delivery Production Delivery Service & Support After sales Service SUPPLIER (OUR COMPANY) PROCESS Concentration of traditional marketing Is this enough for creating the customer loyalty and profitability in our business? 5. RELATIONSHIP PROCESS CUSTOMER PROCESS Strategy Planning Product Design/ Develop Supplier Search Purchasing Integration Productio n Delivery Service & Support EMPTY SPACE!!!!!! -Could our company design activities for each of these stages in order to: - Develop the products and services together - Maximize accuracy in delivering what the customer wants - Accelerate product development - Adapt quicker to technological changes - Ensure lifetime loyalty Strategy Planning Comp/service Design/Devel. Marketing Sales Production Delivery SUPPLIER (OUR COMPANY) PROCESS After sales Service IDENTIFY YOUR COMPANY PROCESS AND YOUR CUSTOMER PROCESS CUSTOMER PROCESS SUPPLIER (YOUR COMPANY) PROCESS FROM THE PREVIOUS CUSTOMER PROCESSES, RANK THEM IN STRATEGIC IMPORTANCE, INDICATING THE REASONS CUSTOMER PROCESS Rank Rank Rank Rank Rank Rank Reasons Reasons Reasons Reasons Reasons Reasons FOR EACH STAGE OF THE CUSTOMER AND OUR PROCESS, WHICH ACTIVITIES COULD WE IMPLEMENT IN ORDER TO BEST SERVE OUR CUSTOMERS AND CREATE A LONGLASTING RELATIONSHIP? RELATIONSHIP ACTIVITIES FOR EACH STAGE CREATING AN ACTIVITY SCORECARD: FOR EACH ACTIVITY CHOSEN, SELECT A METRIC, TARGET, OWNER, BUDGET AND TIMETABLE CUSTOMER STAGE Expected Result: Budget: ACTIVITY METRIC TARGET OWNER TIMETABLE EXPECTED RESULT: EXPECTED RESULT • • • • • • • Supplier and consumer learn to develop processes together Product development is accelerated Customer uncertainty reduced sharply The costs of relationships are internalized in the organization The cost of relationships diminished greatly over time Loyalty is boosted Huge switching cost: would customers be willing to start the whole process from zero again? • Forgiveness: Customer is more willing to forgive minor performance flaws • Customers will become active advocates, providing valuable referrals • Premium prices can be charged as a result of the huge customer benefit UNPROFITABLE CUSTOMERS WITH NO POTENTIAL PROFIT OR RELATIONSHIP BENEFIT • Solutions: – A) Keep the product to the minimum standard (minimum effort to create satisfaction without damaging brand equity or reputation) – B) Elegant “goodbye” • Raise price • Unbundle previous packages, sold as non-discounted separate products • Redesign the product, so it only appeals to profitable customers • Reorganize sales and marketing, so the effort is placed on the profitable customers • Invite low-profit customers to migrate to other lower valueadded channels