Download The R in CRM Stands for Risk and Respect from Customers, not Relationships

The R in CRM Stands for Risk &
Respect from Customers,
not Relationships
Huw Davis
European Managing Director
of Brann Discovery
Brann Worldwide
©
Huw Davis, 2001
A statement on CRM
©
Huw Davis, 2001
The Boundaries of CRM
• It is not about just calling your marketing
database - “a customer relationship database”
• It is not about just re-badging your Direct
Marketing Department - Customer
Relationship Department
• It is not about customer rather than product
profitability
• It is not about loyalty schemes, cards and
magazines
©
Huw Davis, 2001
The Boundaries of CRM
• Its about
– you understanding the type of relationships
your customers want with you
– knowing when to invest in the relationship
– knowing when to reap the benefits of the
relationship
It’s about customer Risk and Respect
©
Huw Davis, 2001
Customer Risk Management
• Risk with respect to;
–
–
–
–
–
–
–
financial loss
consumer perception
brand image
competitors
missed opportunities to invest in the customer
missed opportunities to offer more product
knowing how the customer will react to the
signals your company sends out
©
Huw Davis, 2001
1
Net Worth
2
+
Marketing
Effort
3
Time
4
-
©
Huw Davis, 2001
?
How to Manage this Risk and
Respect Through Information
©
Huw Davis, 2001
Two Prerequisite for a
Marketing Data Strategy
Quality
Data
Rational
Information
Delivery
Statistical
Techniques
©
Huw Davis, 2001
Two Views of the World
Yours and Your Customer’s
©
Huw Davis, 2001
The Customer’s Viewpoint
©
Huw Davis, 2001
This Room is on Fire and There
100 People in the Room!
• Option A has 50% chance of saving 95
people and a 50% chance of saving 5 people
• Option B has 50% chance of saving 60
people and a 50% chance of saving 40
people
Which do you Choose?
©
Huw Davis, 2001
Customer Decision Making
Social
Cost
Social
Cost
Social
Cost
0 1 2 . . . . . . . . . . 100
0 1 2 . . . . . . . . . . 100
0 1 2 . . . . . . . . . . 100
No. of Lives Lost
at One Time
No. of Lives Lost
at One Time
No. of Lives Lost
at One Time
Curve 1
Curve 2
Curve 3
©
Huw Davis, 2001
Customer Decision Making
Choice 1
Cash
Coupons Book
Worth
Gift Package A
£20
-
Gift Package B
£10
£18
Cash
Coupons Book
Worth
Gift Package A
£14
-
Gift Package B
£10
£18
Choice 2
76%
52%
©
Huw Davis, 2001
Customer Decision Making
•
•
•
•
•
Justification and Choice
Framing
Information Processing
Anchoring and Adjustment
Value-focused Thinking
©
Huw Davis, 2001
Value-focused Thinking
DECISION
PROBLEMS
- evaluation of
alternatives
DECISION
OPPORTUNITIES
- Creation of
Alternatives
Objectives
MultiAttributes
Utility
Function
Objectives
Hierarchies
SingleAttributes
Utility
Function
Attributes
COMMUNICATION
- language
- education
PERSONAL
INTERACTION
- bargaining
-one-side bargaining
-negotiation
-Basis for consensus
USEFUL
INFORMATION
- data collection
-value of information
©
Huw Davis, 2001
Incorporating these Factors
into a Data Strategy
• What factors of value-focused thinking can
be encapsulated - hard vs. soft data
• Identifying the moments of truth that allow
you to influence the utility functions of
decision
• What points in the customer contact cycle
can these attributes and factors by collected
and monitored
©
Huw Davis, 2001
Your Viewpoint
©
Huw Davis, 2001
The Internal Data Model
Customer
Identity
Product
Transactions
Marketing
History
©
Huw Davis, 2001
The Total Data Model
Household
Information
Customer
Identity
Individual’s
Lifestyle
Product
Transactions
Intentions /
Plans
Marketing
History
Competitor
Information
©
Huw Davis, 2001
The Total Data Model
Household
Information
Customer
Identity
Individual’s
Lifestyle
Product
70%
to 80%
Transactions
predictability
Intentions /
Plans
Marketing
History
Competitor
Information
©
Huw Davis, 2001
Looking for Signals
©
Huw Davis, 2001
Creating Customer Relationships
Prospect
Purchase
Complaint
“The Signal Machine”
“Moments of Truth”
Signals
Derived Signals
©
Huw Davis, 2001
Creating Customer Relationships
Prospect
Purchase
Complaint
“The Signal Machine”
Information
Thank You
Lesson
to Learn
©
Huw Davis, 2001
Financial Evaluation of the
Segmentation
Initial ROI and LTV Modelling
Concept
©
Huw Davis, 2001
Acquisition, Trialist and
Retention
©
Huw Davis, 2001
Calculating Value of
Customer Segments
Time
A
GV1
B
Effort needed
to
Move segment
GV2
©
Huw Davis, 2001
Developing the Value Model
n
n
t =1
t =1
GV = N ∑ (Qtπ t ) − N ∑ ( At + Tt + Rt )
GV = a given segments Group Value for a given time period
Q= Average volume of purchases per period
A,T,R= Average cost of acquisition, trialist and retention
π =
Margin per average purchase
N = Number of consumers in group / segment
Adapted from original source - Customer Connections - Robert Wayland
& Paul Cole - HBS Press
© Huw Davis, 2001
Developing the Value Model
G = [aCn Ν − A(Cn )] + [drCeE − T (Ce )] − [(1 − r )CeE + R (Ce )]
G= total growth in segment portfolio value
a= attraction rate of new customers, expressed as new divided by potential customers
Cn= number of potential new customers to the company
A(Cn)= acquisition cost function
N= value of each new customer
d= development rate(increase of value) of remaining customers
E= value of an existing customer
Ce= number of existing customer at beginning of the period
T(Ce)= trialist cost function
r= retention rate of existing customers
(1-r)= switching rate
R(Ce) =retention cost function
Adapted from original source - Customer Connections - Robert Wayland
& Paul Cole - HBS Press
© Huw Davis, 2001
Modelling Factors
•
•
•
•
•
•
•
Demographics
Regionality
Activity Types
Budget allocation
Proximity of competitor brands / pricing
Existing market share
Continuous evaluation and adaptation due
to success levels of campaigns
©
Huw Davis, 2001
Summary
• The need to identify where best to spend
your marketing effort
• Understand the relationship the customer
wants with you
• Appreciate the effect your marketing effort
has on the customer
• No when to stop
©
Huw Davis, 2001
Huw Davis
European Managing Director
of Brann Discovery
Brann Worldwide
[email protected]
©
Huw Davis, 2001