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Companies
have managed relationships with customers – and vice versa - long before
customer relationship management (CRM) became a popular term. Customers are managed
in many ways – from explicit management of named customers (as in direct
marketing) or implicit management of customers (as in FMCG brand management, in
which customers are managed by a combination of product, packaging, advertising,
sales promotion, merchandise display and so on). In the latter case, although
customers might be managed directly (e.g. if they respond to a sales promotion),
normally they are managed in groups, or market segments. Nor is the idea of customers
managing relationships with suppliers new. Customers have done this for years
– whether in deciding which stores to visit, which advertisements to watch,
listen to or read, which products to buy, or which direct marketing contacts to
respond to.
Generally,
in each market, a “model of customer management” emerges, in which
suppliers and customers manage each other in a particular way. Each competitive
player makes similar assumptions about the relative effectiveness of different
elements of the marketing mix for this model. A market is described as one in
which, for example, “brand management”, mail order”, “key
account management”, “territory selling”, “mass market
retailing” is the normal method by which suppliers and customers interact.
Note that models of customer management often vary by industry or sector. Particular
tools and techniques are used by suppliers, while customers respond or take the
initiative in particular ways. Of course, at any one time, some suppliers and
customers might be more proactive in how they manage each other, others much less
so. It is one of the marketer’s main functions to appraise the situation
and decide which marketing mix elements will work best and most cost-effectively,
given the norms of customer management for the product and market.
There
is, of course, no single model of customer management that works well in every
market, or even a single model that is best in a particular market. Which model
works best in a particular market at a particular time depends on many factors
e.g. customers’ propensities to manage or be managed in different ways (and
whether there are groups of customers with strong preferences for particular models),
suppliers’ strengths and weaknesses, the state of customer management technology.
However, there may be one or two models that work best for most
or most of the valuable customers in a particular market
at a particular time. Spotting which models these are, and making sure that the
company can work them well, is a marketing director’s responsibility. Now
comes the crux. Where the optimum model does not change much, this part of the
marketing director’s job is relatively easy. It’s when it changes
that there’s a problem that demands the tools of scenario planning to solve
it.
To
understand this, let us examine the rise of the idea of the CRM model. For years,
marketers were brought up (even educated) to believe that models such as consumer
goods branding, retail marketing and sales force management were timeless models,
that would work for ever. Along came the idea of CRM with the claim to replace
or substantially supplement these tried and tested ways of doing business. On
what did CRM base its challenge? There were three main factors.
The
first was the change in companies’ capability to manage customers, occasioned
by rapid advances in information and communications technology. This made a whole
range of tasks much easier – typically transforming them from what had been
manual or one-off operations into ones that could be carried out easily, sometimes
automatically. Examples included:
- Advances
in database and data access technology, allowing data about large numbers of customers
to be held more cheaply, accessed more quickly and updated more accurately and
securely
- Advances
in customer interface technology (e.g. in contact centres, on the web, using mobile
technologies, rise of interactivity), enabling interactions with customers to
be managed more easily, cheaply and in a more friendly manner, and allowing data
arising from the interactions to be transferred to the relevant database more
securely
- Advances
in analysis software, allowing the patterns of customers’ enquiries, responses
and purchases to be understood more easily
- The
web, which allowed customers to access companies much more easily, give data about
themselves and select products
The
second factor was the rapid change in customer behaviour prompted by new customer-interface
technologies – again in contact centres and on the web. Customers became
much readier to give data, even update it themselves, but also more concerned
about the accuracy of the data and the uses to which it was put. Other developments
reinforced these trends. They included:
- Media
developments, particular the arrival of new media and fragmentation of existing
media (press, TV), giving customers far more choice of media (which they exercised),
requiring companies to know their customers better and understand their behaviour
in order to be able to spend advertising money wisely
- Social
trends - more confident consumers who demanded to be treated better, and who were
less loyal because exit was easier
The
third factor was learning by both sides of the market – customers and suppliers
- about what was possible, how to make it happen, and also how to avoid dealing
with companies or customers that one did not want to do business with.
The
problem that all this poses for marketing directors is the certainty that CRM
is not the last evolution of the sales and marketing wheel. CRM is simply another
model of customer management, used in many different ways by different types of
company in different sectors. Therefore, as part of marketing scenario planning,
a company should keep under review the different models of customer management
that may not but could exist in their market, or that are currently minority models,
and work out.
- Why
technological, sociological or market conditions might lead to one or other model
(or combination of models) of customer management being more or less favoured
- Where
their own company stands in relation to this model or these models model –
how its current model(s) compare with it, the company’s ability to change
to other models
- How
it might change to use one or more new models – including using the resources
of business partners, including outsourcing.
There
are many implications of all this for senior marketing managers. They include:
- Understand
your customers and their propensities to use interactive marketing technologies
and channels to change what, when, how and from whom they buy
- Understand
that you get the customers you deserve. If you have been slow to adopt interactive
marketing approaches relative to your competitors, then your particular customer
base is likely to be skewed towards customers with low propensities to adopt them
too. Leaders attract leaders, laggards attract laggards. Being at one end or other
of the spectrum is not necessarily good or bad – it depends where the type
of customers YOU want lie, and whether your marketing proposition is attuned to
them
- Keep
a close watch on changing propensities and competitive actions. Don’t copy
them slavishly, but do understand their implications for you
- Build
scenarios of model evolution, and consider how your company can achieve competitive
domination by being either the faster and/or the best to exploit evolving models.
If you are a market leader, consider how you can influence model evolution, and
if you are a challenger, consider how you can use different models to attack incumbents
- Integrate
this analysis and planning with your business strategy and marketing planning.
It’s this that separates the winners from the losers
Health
warning
Remember
- the biggest barrier to successful change is failure to deploy change management
techniques. When companies do deploy them, the change is much more likely to be
successful and profitable. But such success is rare in marketing. Marketers are
not very good at managing change, but when they do it well, it works. One reason
for this is that marketing training never focuses on change management, but more
importantly marketers are rarely exposed to good change management practice, and
even more rarely rewarded for achieving high quality change. Their rewards are
much more related to the success with which they deploy their existing marketing
mix. This is all very well in companies where the way marketing is done does not
change much. But in companies where changing regulation, technology, and markets
force constant changes to how marketers need to work, it’s very dangerous.
Final conclusions: marketing directors, be honest about your own change management
record, consider whether you’re going to need more change management expertise,
and if so, make sure you’ve got the right skills in your team – whether
by hiring or training.
About
the author
Merlin
Stone recently parted company with IBM and is Director of WCL, specialists in
change management in the public and private services. Merlin is also Director
of The Database Group Ltd and NowellStone Ltd.
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