Up Close & Personal?: Customer Relationship Marketing at Work

440 Pages·2006·2.57 MB·English

by  Paul R Gamble, Merlin Stone, Paul R. Gamble, Neil Woodcock, Bryan Foss

i
UP CLOSE
& PERSONAL?
ii
To Jean, with love
Paul
To Kathryn
Merlin
To Julia, Callum and Aliya
Neil
To my wife and children, Carol, Simon and Helen, and to our
extended family
Bryan
iii
iv
First published in Great Britain in 1999
Reprinted 2001
Second edition published in Great Britain and the United States in 2003 by Kogan Page Limited
Third edition 2006
Apart from any fair dealing for the purposes of research or private study, or criticism or review, as
permitted under the Copyright, Designs and Patents Act 1988, this publication may only be repro-
duced, stored or transmitted, in any form or by any means, with the prior permission in writing of
the publishers, or in the case of reprographic reproduction in accordance with the terms and
licences issued by the CLA. Enquiries concerning reproduction outside these terms should be
sent to the publishers at the undermentioned addresses:
120 Pentonville Road 525 South 4th Street, #241
London N1 9JN Philadelphia PA 19147
UK USA
www.kogan-page.co.uk
© Paul R Gamble, Merlin Stone and Neil Woodcock, 1999
© Paul R Gamble, Merlin Stone, Neil Woodcock and Bryan Foss, 2003, 2006
The right of Paul R Gamble, Merlin Stone, Neil Woodcock and Bryan Foss to be
identified as the authors of this work has been asserted by them in accordance with the Copyright,
Designs and Patents Act 1988.
The views expressed in this book are those of the individual authors and are not necessarily the
same as those of the Chartered Institute of Marketing.
British Library Cataloguing in Publication Data
A CIP record for this book is available from the British Library.
ISBN 0 7494 4691 9
Library of Congress Cataloging-in-Publication Data
Up close and personal? : customer relationship marketing @ work / Paul
Gamble … [et al.].— 3rd ed.
p. cm.
ISBN 0-7494-4691-9
1. Relationship marketing. 2. Customer relations. I. Gamble, Paul R.
II. Title.
HF5415.55.U6 2006
658.8’12—dc22
2006001621
Typeset by Saxon Graphics Ltd, Derby
Printed and bound in the United States by Thomson-Shore, Inc
v
Contents
Forewords ix
Acknowledgements xi
1 Customer relationship marketing: one more time? 1
The times they are a changin’ 1
Customer relationship marketing is more important than ever before 7
Is customer relationship marketing profitable? 9
Customer-led or market oriented? 12
What’s different about customer relationship marketing? 15
Problems with functional marketing 20
The evolution of customer relationship marketing 22
The basis of a customer relationship marketing audit 25
Gaining a competitive edge 28
The new challenge for CRM 30
So, why do marketers need better customer insights? 36
Personal contact 37
Summary 40
2 Relationships with customers 41
Who is a customer? 41
Levels of relationship 47
The eight building blocks of customer relationship marketing 50
vi Contents
Distorting the buying decision in your favour 57
Business-to-business buying models 62
Customer relationship marketing and the sales process 65
Summary 68
3 Buy-in, policies and plans 69
Buy-in top to bottom 69
Strategy as fit and strategy as stretch 70
Stretching the organization 75
Top down leadership 87
Bottom up management 91
Core process redesign 94
Beginning the transition 99
Summary 102
Checklist for REAP planning 103
4 Measuring the impact 108
Marketing effectiveness 108
Key performance indicator (KPI) measures 115
The KPI hierarchy 117
Quantifying relationship marketing 121
Summary 138
5 Segmentation and the top vanilla offer 140
Traditional and relationship marketing planning 140
Developing the capability for relationship marketing 151
Customer management differentiation 152
Segmentation 154
A practical approach to segmented relationships 163
The top vanilla approach 165
Key principles of top vanilla 166
The risks of top vanilla 170
Summary 170
6 Getting the show on the road 173
The implementation programme 173
Evaluating current practice 175
Developing the business case 179
Customer contact strategy 184
Putting value segmentation into practice 190
Customer management key performance indicators 207
Summary 209
Contents vii
7 Customer loyalty and continuity 210
What is customer loyalty? 210
Loyalty and product type 217
Which customers do you want to be loyal? 220
Customer acquisition – six steps to success 226
Customer retention – six steps to success 230
Loyalty management – six steps to success 233
Are loyalty schemes win-win? 238
Summary 243
8 The customer experience, transparent marketing, and customer
value management 244
Managing the customer experience 244
Do customers want transparent relationships? 253
Customer value management and process contribution assessment 262
Summary 274
9 Customer knowledge management 276
Why manage knowledge? 276
Innovation and knowledge management 281
Tacit knowledge, explicit knowledge and products 287
Implementing knowledge management – critical success factors 292
Making knowledge management a reality – seven steps to success 294
Customer knowledge management and organizational alignment 296
Summary 308
10 Technology and customer management systems 310
Has customer relationship marketing technology delivered
the goods? 310
Basic approaches to customer data management 315
A best practice approach 321
The customer management architecture 331
Summary 333
11 Managing good and bad customers 335
Is it worth having a loyalty programme? 335
What is a good customer? 341
What is a bad customer? 343
Predicting goodness and badness 345
Managing the risk 356
Dealing with complaints 360
viii Contents
The customer perspective 362
Organizational and business customer management strategies 367
Summary 370
12 Justifying the CRM investment 372
Delivering customer value through relationship marketing 372
Satisfying the board 381
Keys to achieving the most from your customer relationship
marketing investments 394
So what next? 399
Customer relationship marketing and marketing revolution 404
Summary 405
Appendix: A complete relationship marketing planning recipe 407
References 415
Index 423
ix
Forewords
The population of the world’s developed economies is getting older (24 of the
world’s ‘oldest’ countries are in Europe, the other is Japan at number three). It is
wealthier, more cynical, more marketing ‘savvy’ and more widely travelled than
ever before. They have definitely ‘been there, done that, got the T-shirt’. Today’s
marketing environment is tougher than ever. Surprisingly, many marketers still use
strategies designed for 30 years ago.
Remember when Ford introduced the model-T and the consumers could get any
colour car as long as it was black? There are still many lessons to be learnt from this
classic marketing failure. Denying the e-business realities of today is providing
your customers a black model-T – it is denying that your customers are looking for
the choices that are out there today! As one leading banker put it, ‘In the future,
customers will need financial services . . . but they won’t need banks.’
In today’s world, markets and industries are defined in terms of customers rather
than products. While market power has shifted to customers, industry boundaries
are collapsing and modular production and marketing systems have become more
important. Products and even brands will cease to be the basis for lasting differenti-
ation. Instead, maximizing the number of transactions with the same loyal customer
by offering a diverse array of products and services has become increasingly
important.
The critical denominator in today’s commercial world is still customer rela-
tionship marketing. However, the time has come to demonstrate clearly to CEOs
that it can produce a real contribution to the bottom line.
Technological innovation is sharply cutting customer interaction costs. It allows
for an increasing reach into new markets without adding high incremental market
entry costs. It allows for specific tailored customer marketing. It allows for
increased responsiveness. It allows for companies to act global and tap into the
‘profit pool’ of markets that are cross-border.
x Forewords
This book clearly leads the way in demonstrating that in the e-business market-
space with changing buying behaviours and new emerging business models no
company can afford to stand still when it comes to customer relationship marketing.
Generating customer loyalty has become a pervasive board-level issue.
Ginni Rometty
General Manager, Global Insurance Sector, IBM Corporation
In his book Information Anxiety, author Richard Saul Wurman points out that more
information has been produced in the last 30 years than during the previous 5,000.
For example, there are 600 million credit cards worldwide and 100 billion credit
card transactions a year in the United States alone. And website hits are generating
mountains of data. Industry experts tell us the amount of information available
today is doubling every five years, and that many companies are able to keep up
with and use less than 7 per cent of the information they produce.
All this has created a revolution in the worldwide business landscape. Companies
of all sizes are experiencing the rise of intense international competition and the
need for faster product cycles. Customers are becoming more independent, and
more demanding. To remain competitive, corporations must be very well informed
about their customers, employees and suppliers. Many are developing new business
models and implementing cutting-edge knowledge management solutions to
manage this explosive growth.
For instance, business intelligence technology, including data warehousing and
data mining, is increasingly playing a key role in sorting everything out – gathering,
managing, analyzing and distributing vast amounts of information in order to gain
insights that drive business decisions and knowledge, which help build lasting rela-
tionships with customers.
But while this book discusses the importance of tapping into the knowledge wealth
that exists in every enterprise, it also goes a step further, talking about the need for buy-
in to a shared set of values. Relationships, if they are to have any meaning, are a two-
way-street. Effective e-business and customer relationship management depend not
only on good technology, but a willingness to listen and respond.
While IBM’s recent success as an e-business company speaks for itself – we
practise what we preach – we continue to hone our ability to truly hear what our
customers have to say and to be responsive to their needs in a timely fashion.
Working with and for IBM, the authors of this book are able to share some of what
we learnt, hopefully to the benefit of companies large and small around the globe.
Ben Barnes
General Manager, Global Business Intelligence Solutions,
IBM Corporation