The
conventional approach of a Brand manager is to segment the market, target
specific segments & position his or her product portfolio with a
differentiation strategy. The brand’s performance will be measured by aggregate
sales & profitability, while the incentives will be dependent solely on
numbers. Companies which have been following the same notion are falling behind
today.
In today’s world, almost all companies have the
capability & infrastructure to interact with the customers directly,
collecting & mining information about them & tailoring offerings
according to their needs. With the advent of Data Sciences & SMAC
technology along with concepts like Big Data, companies have the option of
tracking down each customer & retain them for future. The 80:20 rule
applies here as well; 80% of your revenue comes from 20% customers and those
20% customers are your repeat customers. To be sure, most companies use
customer relationship management and other technologies to get a handle on
customers, but no amount of technology can really improve the situation as long
as companies are set up to market products rather than cultivate customers.
There is a need for paradigm shift from mere transactions to maximization of
Customer Lifetime Value (CLV); which implies bringing in the flexibility within
the marketing department to create brands & products subservient for
long-term relationships. The key distinction between a traditional and a
customer-cultivating company is that one is organized to push products and
brands whereas the other is designed to serve customers and customer segments.
In the latter, communication is two-way and individualized, or at least tightly
targeted at thinly sliced segments.
Nowadays, Mass
marketing is effective only till a point. B2C marketing should take a leaf out
of B2B marketing. The KRAs of Key Account Managers should be emulated in B2C as
well. One of the best examples is IBM’s Insurance Process Acceleration
Framework. Customer and industry specialists in IBM’s insurance practice work
with lead customers to build fast and flexible processes in areas like claims,
new business processing, and underwriting. Instead of focusing on short-term product
sales, IBM measures the practice’s performance according to long-term customer metrics.
In B2C front, Tesco has been an example of leveraging Data Analytics; from
stocking items in their stores according to local tastes/preferences to
Market-Basket analysis through complementary beer coupons for new fathers with
every purchase of baby diapers. Data analytics with features like Customer
profiling, Churn modelling, Customer segmentation analysis through Engagement
scoring, Campaign response modelling, Customer Lifetime Value analysis &
Perceptual mapping are paving the way for the companies to know their customers
better & serve them accordingly.
There has to be a
shift in strategy for companies today. The increasing opinions by consumers
& customers flooding social media sites along with increasing call volume in
customer care stations, points at a future where customer-cultivation will be
the key to success. The involvement of customers into product creation is the
future. In a customer-cultivating organization, Segment managers are encouraged
to guide consumers for moving into a more-profitable brand from a
less-profitable brand. The switching cost in this case might be high, but the
emphasis is on Customer Lifetime Value than Sales. For example, P&G employs
customer segment managers instead of product managers in major retail outlets
like Walmart to guide customers in better buying.
In Pharmaceuticals, a
lot of emphasis was laid on Customer Relationship Management in Sales front.
Sales Representatives had their products & territories designated; so they
liaised with Doctors on promoting a product. Traditional CRM tools have ruled
the roost in the last decade. Hanks survey of 300 companies in North America:
42% of companies report that CRM is managed by the IT group, 31% by sales, and only
9% by marketing. Yet CRM is ultimately a tool for gauging customer needs and
behaviors — the new customer department’s central role. It makes little sense
for the very data required to execute a customer-cultivation strategy to be
collected and analyzed outside the customer department. Bringing in CRM to the
customer department means bringing in IT and analytic skills as well. But
today, CRM has opened another front in the value chain. The concept of CRM
being used for sales only has changed; now it caters to Patients as well. In “Patient
Centricity”, Patients are the customers while Doctors & Hospitals are
accounts through which patients can be routed indirectly. Patients are the
end-users of medicine, yet their preferences & opinion never came into the
limelight. “Patient Centricity”, the latest buzzword would establish a partnership among
practitioners, patients, and their families (when appropriate) to ensure that
decisions respect patients’ wants, needs and preferences and solicit patients’
input on the education and support they need to make decisions and participate
in their own care. Patient involvement was never so high before, and neither
the industry was so eager to interact with patients individually. As the
business landscape of Life Sciences companies turn into digitization of their
existing assets, “Patient Centricity” poses a new opportunity in customer
involvement space. Patient centricity
solutions need to interact with all key stakeholders i.e. Hospitals, Doctors,
Patients, Third Party Risk Assessors, Healthcare Portals, Patient Community
websites; which in turn
presents great opportunities for Business Intelligence & cloud-based CRM
systems. Here too, the need for Social Media analytics (through text mining
& sentiment analysis), Knowledge portals, Customer Data Management and
Segmentation rules are essential.
There is a new focus on Customer metrics
nowadays. It’s a shift from product profitability to customer profitability;
some products may be unprofitable to the company but strengthen customer
relationships. Companies also need to concentrate on CLV rather than current
sales. The
customer lifetime value metric evaluates the future profits generated from a
customer, properly discounted to reflect the time value of money. Lifetime value
focuses the company on long-term health which in turn proves that customers
retained incurring cost to the company in the initial stages, turn out to be
profitable in the long run. Shifting their focus from brand equity (the value
of a brand) to customer equity (the sum of the lifetime values of their
customers) is essential in long-term. Companies need to pay less attention to
current market share and more attention to customer equity share (the value of
a company’s customer base divided by the total value of the customers in the market).
Conclusion:
Due to all of this & to enable companies function at their best today, there needs to be a change in the internal structures as well. A Chief Marketing Officer (CMO) usually holds the highest position in the Marketing arm & reports to the CEO. A position of Chief Customer Officer (CCO) needs to be created in parallel to CMO, who will work with the CMO in harmonizing strategies on customer segments & products. Customer managers will be most effective when they’re T-shaped, combining deep knowledge of particular customers or segments with broad knowledge of the firm and its products. These managers must also be sophisticated data interpreters, able to extract insights from the increasing amount of information about customers’ attitudes and activities.
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