Chat with us, powered by LiveChat Refer to Chapter 5( File Given Below ): Under what conditions should a customer-strategy enterprise consider firing an unprofitable customer??? Think of the different types of conditions tha | EssayAbode

Refer to Chapter 5( File Given Below ): Under what conditions should a customer-strategy enterprise consider firing an unprofitable customer??? Think of the different types of conditions tha

 Refer to Chapter 5( File Given Below ): Under what conditions should a customer-strategy enterprise consider firing an unprofitable customer?  

Think of the different types of conditions that a company should fire customers, identify those conditions and share your thoughts.

Do online research and find examples of cases where companies have “fired customers” – which had successful outcomes; which were unsuccessful, and why? 

Managing Customer Relationships: A Strategic Framework, Third Edition, Don Peppers and Martha Rogers

MKT 456-CRM Instructor: Cynthia Bellian, MBA E-mail: [email protected]

1

Managing Customer Experience and Relationships: A Strategic Framework

Chapter 5

Differentiating Customers

Some Customers are Worth More Than Others

1

Chapter 5 Preview

IDIC Review

The Two Fundamental Differences between Customers

Why Differentiate?

Customer Lifetime Value

Growing Share of Customer

Most Valuable Customers

Customer Value Categories

Dealing with Tough Customers

Managing the Mix of Customers

Managing Customer Relationships: A Strategic Framework, Third Edition, Don Peppers and Martha Rogers

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2

Action

Analysis

…customers as unique addressable individuals

…by value, behavior and needs

…more cost -efficiently and effectively

…some aspect of the company’s behavior, offerings, or communications

Identify

Differentiate

Interact

Customize

Review: IDIC Framework

COPYRIGHT © 2009. ALL RIGHTS PROTECTED AND RESERVED.

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The Two Fundamental Differences between Customers

1. Different value to the enterprise (Chapter 5)

2. Different needs from the enterprise (Chapter 6)

All other ways of differentiating customers – demographics, behaviors, transactional histories, and attitudes – are all tools and concepts used to get at these two fundamental differences

Managing Customer Relationships: A Strategic Framework, Third Edition, Don Peppers and Martha Rogers

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4

Why Differentiate?

To treat each customer differently is the essence of managing customer relationships

Different customers have different needs

Different customers represent different values to the enterprise

Customer value is future oriented

Actual value

Potential value

Customer differentiation helps an enterprise increase customers’ actual value and realize customers’ potential value

Managing Customer Relationships: A Strategic Framework, Third Edition, Don Peppers and Martha Rogers

5

5

Customer Lifetime Value

LTV: The net present value of the expected future stream of financial contributions from the customer

LTV is calculated according to the customer’s trajectory: positive contributions (product and service purchases, as well as non-monetary referrals) minus expenses (cost of maintaining a relationship)

In practice, no company can calculate LTV precisely

Managing Customer Relationships: A Strategic Framework, Third Edition, Don Peppers and Martha Rogers

6

6

Growing Share of Customer

Unrealized potential value:

The amount by which the enterprise could increase the value of a particular customer if it applied a strategy for doing so

Aspects of a customer’s unrealized potential value:

Business with competitor

Additional relevant product lines

Cost to serve

Undefined needs

Referrals and non-monetary contributions

Customer growth over time

Managing Customer Relationships: A Strategic Framework, Third Edition, Don Peppers and Martha Rogers

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7

Most Valuable Customers

Pareto principle: the top 20% usually accounts for 80% of company’s business

LTV is difficult to calculate, so some companies use a proxy variable to rank customers in rough order of LTV

RFM: most common proxy variable

R: Recency

F: Frequency

M: Monetary value

The goal of value differentiation is not a historical understanding, but a predictive plan of action

Managing Customer Relationships: A Strategic Framework, Third Edition, Don Peppers and Martha Rogers

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8

Customer Value Categories

Most Valuable Customers

Retain

Most Growable Customer

Grow

Low-Maintenance Customers

Streamline/automate services

Super-Growth Customers

Retain and mine for more

Below-zero customer

Make them profitable

Churn them out

Ethical concern: Should we “fire” unprofitable customers?

Managing Customer Relationships: A Strategic Framework, Third Edition, Don Peppers and Martha Rogers

9

9

Dealing with Tough Customers

Four primary strategies:

1. Customize services and products

2. Innovate perpetually and cost-efficiently

3. Develop personal relationships within the customer organization

4. Appeal directly to end users

Managing Customer Relationships: A Strategic Framework, Third Edition, Don Peppers and Martha Rogers

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10

Managing the Mix of Customers

What kind of new customers should be acquired?

Mass-market method: All customers

Customer-strategy enterprise: More high-value and high-growth customers, less low-value customers

Creating a valuable customer base

Rank customer by value

Invest consistently in acquisition, development, and retention (get, keep, grow)

Use different strategy for differently valued customers

Managing Customer Relationships: A Strategic Framework, Third Edition, Don Peppers and Martha Rogers

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