9.8 KiB
| title | author | output |
|---|---|---|
| Introduction to marketing: Part 2 | François Pelletier | pdf_document |
Week 4: Customer centricity
4.1 From product-centric to customer-centric management
Three axis of marketing
- Performance superiority: Having the best products
- Operational excellence: Low cost and efficiency
- Customer intimacy: Who is the customer. How intimate we want to get to add value.
What stores are customer inmtimate ?
Product-centric approach
All about making money by maximising the value of the company Total value of the company = time value of money -> Maximising shareholders value Volume and cost reduction:
- Will it scale : Can we deliver our products and services at scale ?
- Different metrics:
- Volume
- Costs
- Market share (how well you will do right in the future)
- Fine tuning the metrics
- Growth
- PS and OE are now standard
- Search new sources of growth:
- New customer segments and geographies
- Innovation (extending products)
- Companies work in product/service expertise (silos).
- Competitive advantage
- Mental process: Divergent thinking, different uses for the same product
4.2 Cracks in the product centric approach
Changes in the last 15-20 years:
- Emerging trends are here to stay
Leading factors:
- Commoditization (technology enables product development)
- Lifecycle is shorter
- Always must have a new product coming
- No more natural monopoly power
- Smart customers
- Technology enabled informatino flow
- Aware of options availabl for them
- Put mode demand of companies
- Have to extract value from product
- Retail saturation
- Tech enabled delivery
- Instant availability
- Globalisation
- Deregularization : Must be more competitive
More demanding customers:
- How will the product solve my problem
- end-to-end solutions with products form multiple vendors
- Example: IBM
- Customer centric solutions provider
- Harder to commoditize
- Left building and slling products
Information systems allow customer tracking
- Before:
Know the sales
Don't know who buys and how many they buy
- Now: Know who buys what and when
4.3 Data driven business models
Harrahs:
- Casino chain in the US
- Loyalty programs
- Games / meals / rooms at a really granular data
- Detect thresholds (when to offer a meal, ...)
Tesco:
- Grocery chain in UK
- Loyalty program
- What products are boucht in Tesco vs. products bought elsewhere.
- Know which customer can switch to competition easilyDefending against Wal-Mart
4.4 Three cheers from direct marketing
Individual customers = unit of analysis:
- Who they are, what they buy
- Determine marketing communication
- Segmentation / Customer lifetime value comes from direct marketing
What kind of product for the most valuable customers and how to attract them. Capacity to learn and leverage customer information: Should inspire from direct marketing books
Being Direct Making Advertising Pay
4.5 Which firms are customer centric ?
None of the big firms are really customer centric:
- Walmart: Best at product-centric
- Apple: Best at product superiority, begins to collect data abour customers with iStore
- Starbucks: Customer-centric only at local level.
- Nordstorm: Great personalized service, but not based on CLV, so does not target the best customers but all of them.
Week 5: The Opportunities and Challenges of Customer Centricity
5.1 What is customer centricity
How do you define customer centricity ?
- Development and delivery of product and services
- Fulfill the current and future needs of a select set of customers
- Maximise their long-term value to the firm
You have to be willing to change:
- Risky
- Require data and models
Do something even if someone is not an actual customer because he/she will be one later
5.2 Living in a customer-centric world
-
The main goal is still maximising the shareholder's value
-
Distinguish the profitable customers from the less profitables ones
-
Past is of some guidance for the future
-
Focus of future profitability instead of short-term profitability
-
Three tactics:
- Acquisition
- Retention
- Development
-
Customer-centric organisational structure
-
Customer data can't be commoditized easily
-
Divergent (different uses for the same product) to convergent thinking (different products for the same customer)
5.3 More reflections on customer-centricity
There is a balance between really valuable customers and not so valuable ones. The latter ones add stability to the business like cash or bonds in an investment portfolio.
Paradox of customer-centricity The more you focus on the most valuable customers, the most you need the other customers too.
5.4 Questions on customer-centricity
Who is your customer ?
Example: Healthcare:
- Patient
- Doctor
- Hospital
- Insurance company
Procter & Gamble: Customer = Retailers
- It could be the customers in a few years: get ready for a direct marketing approach
Barriers to customer-centricity:
- Data
- Regulatory issues
- Control: Impossible to move
- Specific challenges for each company
- Resources available
- Build IT, hire employees
What competitors are doing in this area:
- Financial services
- Hotels and hospitality
- Be the first ones !
Does it make sense to be customer-centric ?
- Technology initiatives
- Experiments
You have to prepare before taking the big step.
Week 6: How Can Customer Centricity Be Profitable?
6.1 How Can Customer Centricity Be Profitable?
Focus on the right customers for strategic advantage
Product-centric approach have some cracks:
- Commoditization
- Well-informed customers
- Globalization
Customer-centric:
- Promising alternative
- Not clearly understood
- Many firms are tauted to be customer-centric but are not really
Clear definition:
- Celebration of customer heterogeneity
- Customer lifetime value
How to manage tactics:
- "Show me the money"
- Can't be world-calss on 3 tactics
- Doing one well can be really lucrative
- A lot trickier than we think of
Where tu put the extra dollar ?
- Most managers would put it either in retention or development
Acquisition
Metric: Cost per acquisition (CPA): Big mistake to guide customer acquisition performance
For employees, lawyers, technology: we focus on the best, not the cheapest Why for customers we would like the cheapest to acquire ?
VPA: Value per acquisition = Customer lifetime value
- Upper bound for spending to acquire a new customer
- A lot of value in customers that we don't appreciate
- Match info with what customer prove to be over time
Customer acquisition summary
- Avoid CPA mentality
- Ceiling instead of floors
- Heterogeneity with CLV (search words, geographical, social)
- Be more patient and forward-looking when judging acquisition efforts
- Firms tends to underspend on acquisition
6.2 Customer retention
Metric: Churn / Attrition / Retention rate
- Good measure, but need to examine it at the right levevl
- How the retentino rate variaes across customers
Average retention rate = bad calculation
The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value
Right calculation: Average expected lifetime: Accounts for customer heterogeneity.
Customer retention summary
- There is no average customer
- Difference can be huge between average measures and accounting for heterogeneity
- Attrition elasticity is much lower than in the homogeneous case
- Investment in reducing attrition give more modest returns than expected
6.3 Customer development I
Make existing customers as valuable as possible Loyalty programs themselves are not a tool for customer development
- Cross selling
- Up-selling
- Increase frequency and volume
- Premium pricing
6.4 Customer development II
Metric:
- Share of wallet: How many needs are met by this firm
- Amount of product and services
Share of wallet is not correlated with size of wallet
Good and bad news about cross-selling
Good: Customer's share are correlated Bad: Some customer will not become better customers
- Upside of developmenet opportunities is more limited than managers think
- Icing on the cake: Not to change the customer but unlock value that is already there
But: Acquisition is not valuable in saturated markets
Overall summary
- Celebrating heterogeneity
- Smart acquisition
- Don't overspend retention:
flighty customers will fly away no matter what you do or will become unprofitable
6.5 Wrap-up
Making customer centricity profitable:
- Need to have the technology to track data and do projections
- Update regularly the CLV
- Break customers into segments that we cam measure:
- When they reach us
- What products they buy first
- What campaign bring them to us
- Allocate retention and development ressources appropriately:
target marketing communications based on a segment characteristics
- Constantly experiment with these tactics
- Send different messages to different people
- Bottom up perspectives to drive product line decisions
- Think about competition identifying the same high-value customers too