The Customer Marketing Method

How to Implement and Profit from Customer Relationship Management

Adam Curry, Jay Curry

• Publisher: Free Press
• Year: 2002
• ISBN:
  9780743203579
• Topic: Commerce
• Subtopic: Marketing
• Index: Marketing

Today the hottest new area of marketing is Customer Relationship Management (CRM) -- the discipline of identifying, attracting, and retaining a company¹s most valuable customers. Drawing upon more than ten years of testing, tryout, and implementation in hundreds of companies, CRM expert Jay Curry, and his Internet-expert son, Adam Curry, have written a clear, step-by-step guide to profiting from this exploding movement, with strategies that are aimed at the small and medium-sized business owners who need them most.
Jay Curry explains how CRM can help managers boost profits by implementing a customer-focused strategy. Using easy-to-understand graphics, he introduces the customer pyramid -- segmented as "Top, " "Big, " "Medium, " and "Small" -- to help the reader visualize, analyze, and improve customer profitability. Success comes to those who follow this three-step Customer Marketing Strategy: (1) get new customers into your pyramid; (2) move customers higher into your pyramid; (3) keep the customers in the pyramid. Combining practical how-to directives with vital CRM reference information, the book includes a case study, "InterTech, " that allows readers to see customer-focused strategy in action.
The final third of this practical, easy-to-read book is devoted to the Internet. Here Adam Curry introduces the "Permission Pyramid" and the "e-Customer Marketing Pyramid" to explain the nature of "virtual customer relationships" and how to use them to create, keep, and upgrade customers. This section includes mini-cases and tips to help managers use the Internet to complement current marketing and sales activities and ends with guidelines to test out the new paradigms of e-commerce.
Throughout The Customer Marketing Method, the emphasis is always on practical steps to "make it happen." It is essential and timely reading for owners of small and medium-sized businesses as well as managers of small business units within larger firms.

Part One

How to Profit from Customer Relationship Management With Customer Marketing

Chapter 1

“What Business Are You In?”

Has a consultant ever asked you this simple but profound question?

If so, he may have been trying to appear wise and all-knowing.

But more likely he was trying to see if you are product oriented or market oriented.

If you answer the question “What business are you in?” in relation to your primary product or service with, for example,

“We sell shoes.”

“We are accountants.”

“We build houses.”

then you probably are rather product oriented. And this can be dangerous.

As Theodore Levitt pointed out in “Marketing Myopia,” his classic Harvard Business Review article published in 1960, the presidents of American railway companies in the early 1900s, if asked, would have answered the question like this:

“We are in the business of operating trains.”

The result of this narrow, product-oriented thinking was that virtually every U.S. rail company went bankrupt or faced serious problems because they missed out on the rapid growth of the airlines and the development of a sophisticated highway system as a way to get things and people from place A to place B.

For the railroads, a better answer would have been

“We are in the transportation business.”

Another example is IBM. Thomas Watson, Jr., son of the IBM founder, tells in his book, Father, Son & Co., how IBM almost missed out on the computer revolution in the early 1950s. Many IBM-ers—including his forceful father—would have answered the question this way:

“We are in the business of supplying punch card machinery.”

The old-guard IBM-ers were making huge profits selling the machines that processed the cards carrying the famous “Do not fold, spindle, or mutilate” admonition. They simply refused to believe in the benefits of magnetic tape as a medium to store data and in computers to process that data. Watson Jr., hearing major customers such as Time, Inc. complain about the costs of storing and managing millions of punch cards, realized just in time that IBM’s answer to the question should be

“We are in the business of data processing.”

By exploiting and developing computer technology as a better, faster, and cheaper way to process data, IBM became one of the largest and most successful companies in the world. (They have had ups and downs since then, but at the end of the day, IBM listens to their customers. That’s why they are a leader in e-commerce today.)

As these examples indicate, a market orientation is much healthier for you and your business in this fast-changing world.

But now the politically correct answer is

“We are in business to make customers, keep customers, and maximize customer profitability.”

Business owners and managers have rediscovered the customer. And so should you—if you haven’t already.

Your company’s revenues, profits, and market share and your salary—come ultimately from only one source: your customers!

No matter what product or service you provide—be it candy bars, computers, insurance, or temporary help—customers are the heart of your business. When you get right down to it, the one single thing a company needs to be in business is a customer!

• You don’t need money to be in business.

• You don’t need to have an idea to be in business.

• You don’t need a store, factory, or office location to be in business.

• You don’t need personnel to be in business.

• You don’t even need a product or service to be in business.

All these things help, of course. But without a customer, you’re not in business.

If you have just one customer, you are in business.

If you have a lot of good customers, you have a successful business.

If your company is successful—and I hope it is—I’m willing to bet you have developed a solid base of good customers who do nice things like this:

• Buy more from you—even if your prices are (somewhat) higher than the competition’s.

Obviously, you can’t gouge people and expect to get away with it. But think about that small grocery store or specialty clothing store where they know your name or the service is pleasant. Sure, you pay a bit more. But you keep coming back.

• Recommend you to colleagues, family, friends.

There’s no better promotional message than a recommendation from a satisfied customer. People talk about their experiences with suppliers—both good and bad. A recent study showed that Information Technology managers rate advice from colleagues as one of the most important sources of information for buying a system—and that more than 60% of IT managers give advice privately to colleagues outside their own organization!

Imagine—the IT manager of Proctor & Gamble meets the IT manager of Unilever at a computer conference. They don’t talk about soap. They talk about who’s doing what to whom in the IT community—and their experiences, good and bad, with suppliers.

While a good customer will generate a lot of business for you, a dissatisfied customer can hurt you badly. Who was it who said: “For every complaint there are 10 others who didn’t make the effort to tell you of their dissatisfaction. And since every dissatisfied customer gripes to an average of 6 people, every complaint represents 60 people who are walking around with a negative image of your company.”

• Make you the “standard” for the organization or family.

What could be better than having the boss at your customer site send out a memo to all employees: “All [name of your product or service] must be ordered from [name of your company]” Good customers write memos like that.

• Try out your new products and help you make them better.

Good customers are usually willing to invest their time and effort to help you develop and improve your (new) products and services. In the case of software and sophisticated technology, customer involvement in research and development of new products can be worth millions of dollars or more in man-hours and expertise. And the beauty part is this: As customers become involved in your business, they tend to become better customers!

• Use your support, service, and other facilities.

Service, support, training, add-ons. These often highly profitable products and services are usually offered to customers with whom you have a good relationship.

Do you believe that getting, keeping, and maximizing the profitability of good customers is so essential for the continuity of your business?

Then you will probably want to know how customer pyramids can help you understand and manage your customers better than you now do.

Read all about them in the next chapter.

Chapter 2

All About Customer Pyramids

A customer pyramid is a useful tool to help you visualize, analyze, and improve the behavior and profitability of your customers.

You can also use a customer pyramid to create more customer awareness among managers and staff in your company. Replace the sterile monthly sales charts on the company cafeteria walls with customer pyramids that graphically illustrate what is really happening in the real world each month: the up-down/in-out behavior of your customers.

Figure 2.1

The following are the basic elements of a customer pyramid (see Figure 2.1):

• Active Customers—persons or companies that have purchased goods or services from your company within a given period, say, the last 12 months.

• Inactive Customers—persons or companies that have purchased goods or services from your company in the past but not within the given period. Inactive customers are an important source of potential revenue—and also a source of information about what you need to do to prevent your Active Customers from becoming Inactive Customers!

• Prospects—persons or companies with whom you have some kind of relationship—but they have not yet purchased any goods or services. Examples of Prospects are people who have responded to a mailing and requested your brochure; companies that have issued you a request for bid; contacts met at a trade fair. The Prospects, of course, are persons and companies you expect to upgrade to Active Customer status in the near future.

• Suspects—persons or companies that you could be able to serve with your products and services—but you do not yet have a relationship with them. Normally, you seek to begin a relationship with Suspects and qualify them as Prospects, with the longer-term goal of converting them to Active Customers.

• The Rest of the World—persons or companies that simply have no need or desi...