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Course Title

Instructor
Managing Customer Relationships: A Strategic Framework
Chapter 1
Evolution of Relationships with Customers

Managing Customer Relationships: A Strategic Framework, Second Edition


Don Peppers and Martha Rogers

Introduction
From the Industrial Age to the Information

Age, the customer-enterprise relationship


has changed
Industrial Age businesses structured
around:
Competitive advantage from product

innovation
Assembly-line technology: mass production
and mass distribution
Mass media and branding
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers

Introduction
Information (Interactive) Age businesses

structured around:
Customer information as competitive

advantage
Interactive technologies
Two-way brands or branded relationship

Managing Customer Relationships: A Strategic Framework, Second Edition


Don Peppers and Martha Rogers

Roots of Customer Relationship


Management
If customers are key to competitive

advantage, the main task of the enterprise


becomes growing the value of the
customer base.
To grow the value of the customer base, the
enterprise must get, keep, and grow
customers.
This kind of customer relationship
management is an enterprise-wide
strategy, not merely the implementation of
the right technology or a quick add-on to
oneManaging
department.
Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers

Roots of Customer Relationship


Management
Definition of customer relationship

management:
Customer relationship management is an

enterprise-wide approach to understanding


and influencing customer behavior through
meaningful analysis and communications to
improve customer acquisition, customer
retention, and customer profitability.

Managing Customer Relationships: A Strategic Framework, Second Edition


Don Peppers and Martha Rogers

Roots of Customer Relationship


Management
The role of technology:
Although many believe CRM is a synonym for
software, customer strategy involves
analytical as well as operational processes.
Technological advancements in interactivity,
such as the Internet, mobile technologies,
and social media, have driven the growth
capacity of CRM, but such technology is a
means of managing customer relationships,
not the end in itself.
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers

Traditional Marketing Redux


The Four Ps of traditional marketing focus

on the get portion of get, keep, and


grow customers.
Product
Place
Price
Promotion

Managing Customer Relationships: A Strategic Framework, Second Edition


Don Peppers and Martha Rogers

Market Share vs. Share-of-Customer


Strategies
Market Share

Share of Customer

Products and brands as source of

company value
Sells one product at a time at a time

to as many customers as possible


Differentiates products from

competitors
Sells to customers
Finds a constant stream of new

customers
Makes sure each product is

profitable, even at expense of


customer confidence
Uses mass media to build brand and

announce products

Customers by definition only source

of revenue
Sells as many products as possible
to one customer at a time
Differentiates customers from each
other

Collaborates with customers


Finds a constant stream of new
business from established customers
Makes sure each customer is
profitable, even if loses money on
occasional product or transaction
Uses interactive communication to
determine needs and communicate
individually

Managing Customer Relationships: A Strategic Framework, Second Edition


Don Peppers and Martha Rogers

Learning Relationship:
Definition
A Learning Relationship is one where the
customer teaches an enterprise about his
or her preferences and the enterprise
tailors its response to those preferences,
such that it becomes more worthwhile for
the customer to remain loyal than to switch
to a competitor for any price.

Managing Customer Relationships: A Strategic Framework, Second Edition


Don Peppers and Martha Rogers

Benefits of Learning Relationship


Customer loyalty
The customer learns more about his or her

preferences
The enterprise learns more about its own
strengths and weaknesses

Managing Customer Relationships: A Strategic Framework, Second Edition


Don Peppers and Martha Rogers

The Technology Revolution and the


Customer Revolution
Increased enterprises ability to connect

with customers one-to-one


Increased customers expectations to be
treated as an individual

Managing Customer Relationships: A Strategic Framework, Second Edition


Don Peppers and Martha Rogers

Where Is a Firm on the Customer


Strategy Map?

Interacting

Quadrant
III
Database
Marketing

Quadrant
IV
1to1Lear
ning
Relations
hips

Quadrant
I
Mass
Marketing

Quadrant
II
Niche
Marketing

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

Customer Retention and Enterprise


Profitability
Reichheld and Sasser (1990) found that a

customers profitability increased with


length of retention, based on four factors:
1. Increased purchases
2. Reduced operating costs
3. Referrals to other customers
4. Price premium (conversely, new customers
usually pay lower introductory prices)
Additional benefit of retention: acquiring

new customers is costly


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

Becoming a Customer-Strategy
Enterprise
Becoming a customer-strategy enterprise

requires a unified view of the customer


across the five principal business functions:
1. Financial
2. Production, logistics, and service delivery
3. Marketing communications, customer
service, and interaction
4. Sales distribution and channel
management
5. Organizational management strategy
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers