Managing Customer Experience and Relationships

A Strategic Framework

Don Peppers, Martha Rogers

• Publisher: Wiley
• Year: 2016
• ISBN:
  9781119239819
• Edition: 3
• Topic: Business
• Subtopic: Processo decisionale
• Index: Business

Boost profits, margins, and customer loyalty with more effective CRM strategy

Managing Customer Experience and Relationships, Third Edition positions the customer as central to long-term strategy, and provides essential guidance toward optimizing that relationship for the long haul. By gaining a deep understanding of this critical dynamic, you'll become better able to build and manage the customer base that drives revenue and generates higher margins. A practical framework for implementing the IDIC model merges theory, case studies, and strategic analysis to provide a ready blueprint for execution, and in-depth discussion of communication, metrics, analytics, and more allows you to optimize the relationship on both sides of the table. This new third edition includes updated examples, case studies, and references, alongside insightful contributions from global industry leaders to give you a well-rounded, broadly-applicable knowledge base and a more effective CRM strategy. Ancillary materials include a sample syllabus, PowerPoints, chapter questions, and a test bank, facilitating use in any classroom or training session.

The increased reliance on customer relationship management has revealed a strong need for knowledgeable practitioners who can deploy effective initiatives. This book provides a robust foundation in CRM principles and practices, to help any business achieve higher customer satisfaction.

• Understand the fundamental principles of the customer relationship
• Implement the IDIC model to improve CRM ROI
• Identify essential metrics for CRM evaluation and optimization
• Increase customer loyalty to drive profits and boost margins

Sustainable success comes from the customer. If your company is to meet performance and profitability goals, effective customer relationship management is the biggest weapon in your arsenal—but it must be used appropriately. Managing Customer Experience and Relationships, Third Edition provides the information, practical framework, and expert insight you need to implement winning CRM strategy.

Part I
Principles of Managing Customer Experience and Relationships

The Learning Relationship works like this: If you’re my customer and I get you to talk to me, and I remember what you tell me, then I get smarter and smarter about you. I know something about you my competitors don’t know. So I can do things for you my competitors can’t do, because they don’t know you as well as I do. Before long, you can get something from me you can’t get anywhere else, for any price. At the very least, you’d have to start all over somewhere else, but starting over is more costly than staying with me, so long as you like me and trust me to look out for your best interests.

Chapter 1
Evolution of Relationships with Customers and Strategic Customer Experiences

No company can succeed without customers. If you don’t have customers, you don’t have a business. You have a hobby.

—Don Peppers and Martha Rogers

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Think about it: By definition, customers are every company’s source of revenue. No company will ever realize income from any other entity except the customers it has now and the customers it will have in the future. Brands don’t pay money. Products don’t. Sales regions don’t. Thus, in many ways, a firm’s most valuable financial asset is its customer base, and, given our new and unfolding technological capabilities to recognize, measure, and manage relationships with each of those customers individually, and to create and improve their experiences with our companies, a forward-thinking firm must focus on deliberately preserving and increasing the value of that customer base. Customer strategy is not a fleeting assignment for the marketing department; rather, it is an ongoing business imperative that requires the involvement of the entire enterprise. Organizations manage their customer experiences and relationships effectively in order to remain competitive. Technological advancements have enabled firms to manage customer relationships more efficiently and to create better customer experience, but technology has also empowered customers to inform themselves and one another and to demand much more from the companies they do business with. The goal of this book is not just to acquaint the reader with the techniques of managing customer experiences and relationships. The more ambitious goal of this book is to help the reader understand the essence of customer strategy and how to apply it to the task of managing a successful enterprise in the twenty-first century.

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The dynamics of the customer-enterprise relationship have changed dramatically over time. Customers have always been at the heart of an enterprise’s long-term growth strategies, marketing and sales efforts, product development, labor and resource allocation, and overall profitability directives. Historically, enterprises have encouraged the active participation of a sampling of customers in the research and development of their products and services. But until recently, enterprises have been structured and managed around the products and services they create and sell. Driven by assembly-line technology, mass media, and mass distribution, which appeared at the beginning of the twentieth century, the Industrial Age was dominated by businesses that sought to mass-produce products and to gain a competitive advantage by manufacturing a product that was perceived by most customers as better than its closest competitor. Product innovation, therefore, was the important key to business success. To increase its overall market share, the twentieth-century enterprise would use mass marketing and mass advertising to reach the greatest number of potential customers.

As a result, most twentieth-century products and services eventually became highly commoditized. Branding emerged to offset this perception of being like all the other competitors; in fact, branding from its beginning was, in a way, an expensive substitute for relationships companies could not have with their newly blossomed masses of customers. Facilitated by lots and lots of mass-media advertising, brands have helped add value through familiarity, image, and trust. Historically, brands have played a critical role in helping customers distinguish what they deem to be the best products and services. A primary enterprise goal has been to improve brand awareness of products and services and to increase brand preference and brand loyalty among consumers. For many consumers, a brand name has traditionally testified to the trustworthiness or quality of a product or service. Today, though, more and more, customers say they value brands, but their opinions are based on their “relationship with the brand”—so brand reputation is actually becoming one and the same with customers’ experience with the brand, product, or company (including relationships).¹ Indeed, consumers are often content as long as they can buy one brand of a consumer-packaged good that they know and respect.

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For many years, enterprises depended on gaining the competitive advantage from the best brands. Brands have been untouchable, immutable, and inflexible parts of the twentieth-century mass-marketing era. But in the interactive era of the twenty-first century, enterprises are instead strategizing how to gain sustainable competitive advantage from “brands” that create the best customer experience, based on the information they gather about customers.

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For many years, enterprises depended on gaining the competitive advantage from the best brands. Brands have been untouchable, immutable, and inflexible parts of the twentieth-century mass-marketing era. But in the interactive era of the twenty-first century, firms are instead strategizing how to gain sustainable competitive advantage from the information they gather about customers. As a result, enterprises are creating a two-way brand, one that thrives on customer information and interaction. The two-way brand, or branded relationship, transforms itself based on the ongoing dialogue between the enterprise and the customer. The branded relationship is “aware” of the customer (giving new meaning to the term brand awareness) and constantly changes to suit the needs of that particular individual. In current discussions, the focus is on ways to redefine the “brand reputation” as more customer oriented, using phrases such as “brand engagement with customer,” “brand relationship with customer,” and the customer’s “brand experience.” Add to this the transparency for brands and rampant ratings for products initiated by social media, and it’s clear why companies are realizing that what customers say about them is more important than what the companies say about themselves.

Roots of Customer Relationships and Experience

Once you strip away all the activities that keep everybody busy every day, the goal of every enterprise is simply to get, keep, and grow customers. This is true for nonprofits (where the “customers” may be donors or volunteers) as well as for-profits, for small businesses as well as large, for public as well as private enterprises. It is true for hospitals, governments, universities, and other institutions as well. What does it mean for an enterprise to focus on its customers as the key to competitive advantage? Obviously, it does not mean giving up whatever product edge or operational efficiencies might have provided an advantage in the past. It does mean using new strategies, nearly always requiring new technologies, to focus on growing the value of the company by deliberately and strategically growing the value of the customer base.

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What does it mean for an enterprise to focus on its customers as the key to competitive advantage? It means creating new shareholder value by deliberately preserving and growing the value of the customer base.

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To some executives, customer relationship management (CRM) is a technology or software solution that helps track data and information about customers to enable better customer service. Others think of CRM, or one-to-one, as an elaborate marketing or customer service discipline. We even recently heard CRM described as “personalized e-mail.”

To us, “managing customer experience and relationships” is what companies do to optimize the value of each customer, and “managing customer experiences” is what companies do because they understand the customer’s perspective and what it is—and should be—like to be our customer. This book is about much more than setting up a business Web site or redirecting some of the mass-media budget into the call-center database or cloud analytics or social networking. It’s about increasing the value of the company through specific customer strategies (see Exhibit 1.1).

Exhibit 1.1 Increasing the Value of the Customer Base

Companies determined to build successful and profitable customer relationships understand that the process of becoming an enterprise focused on building its value by building customer value doesn’t begin with installing technology, but ...