Loyalty Must Pay

1
Loyalty Must Pay!
Getting a grip on the elusive customer in the era
of convergence

• Tim Cole
• Business Technology Publicist
• Author The Customer Cartel
• Senior Partner, KCP Kuppinger Cole Partner

2
Loyalty
3
Change
4
Adapt or die!
5
The Totally Networked Economy
6
New Ways to Reach the Customer
The Internet will remain primarily a
distribution channel. It will not create new
business models. Gunter Thielen CEO,
Bertelsmann AG
7
The Customer Chooses the Channel Not the Vendor!
wholesale
online
TV
mobile
mail-order
retail
B2B
customer A
customer C
customer B
8
The perfect market? Deconstructing the purchasing
process
online
wholesale
TV
mobile
mail-order
retail
B2B

• unbundling product info and transactions
• shops become showrooms (Apple, Sony, Dell)
• the Google factor price transparency
• eBay Co. customer participation in
  pricing
• online shops lowest transaction costs
• online B2B procurement better deals, new
  suppliers
• Internet may become preferred transaction
  channel (airlines)
• role and value of brands may change

Prof. Mohanbir Sawheney, Kellogg School of
Management, Chicago
9
The New Value of Brands
founded1886 (119 years) brand value 67.5
bill.
founded1998 (7 years) brand value 8.5 bill.
founded1998 (7 years) brand value 5.7 bill.
source Business Week/Interbrand
10
Key Differentiators

• Innovation
• Service
• Customer Knowledge

11
He Who Knows His Customer Best Wins

• ...but Information isn't knowledge

12
Creating Customer Knowledge
Individual customer preferences are registered
Preference profiles are consolidated into
communities of affinity
Collaborative filter provides analysis and
optimization
Customer chooses from optimized offering
Vendor optimizes offering to accomodate
communities of affinity
Cole/Gromball The Customer Cartell
13
(No Transcript)
14
Loyalty must pay (for the customer)
Customer tells you what he wants
Save me time
FEEDBACK
15
Loyalty must pay (for the vendor)
customer value
customer volume
Customer Lifecycle
customer retention
time
cost of customer acquisition

• Goal of CRM is
• Reduce customer acquisition costs
• Maximize volume per customer
• Maximize customer lifecycle
• Maximize Return on Customer Relationship (ROCR)

16
Technology is No Substitute for a Good Customer
Strategy

• The extended enterprise coordinates corporate
  business processes and customer strategies in
  order to increase long-term customer loyalty and
  profitability.

17
Customers As Corporate Assets

• CRM only creates a rear mirror view of the
  customer
• 50 of CRM projects fail (Gartner)
• CAM identifies business opportunities to create
  lasting customer relationships

18
CAM Smarts

• Gathering customer knowledge is crucial (CEO)
• Assigning value to customer relations is top
  managements job (CFO)
• Market share is less important than share of
  customer (Sales)
• IT should focus on creating and administrating
  customer profiles (CIO)
• Marketing mix should be examined with view
  towards cost/performance as well as ability to
  generate customer knowledge (Marketing)
• Cross branding and cross selling are key issues
  (all)

19
New perspective exploring the customer universe
All departments contribute input to create a
consolidated view of the customer and to develop
a comprehensive strategy to identify new
opportunities
20
case study 1large industrial manufacturer
21
Scanning and Worldwide Integration
regions
explore market
identify oppor-tunities
customer universe
sales channels
implement solutions
field

• focus on customer
• assign tasks
• create tools
• knowledge factory
• seek transparency

create solutions
operations
22
Example Cross-Selling within existing clients by
identifying previously unrecognized client
demand
Over 60 manufacturing locations worldwide

23
Example Evaluating Performance From The Customer
Perspective
24
Example New product ideas and additional
applications internal development versus
acquisition
25
Results (strategic)

• blind spots eliminated
• priorities adjusted
• product portfolio corrected
• synergies created
• hidden sales potential discovered

26
Results (operative)

• chance to increase sales to customer by 186 in
  two years
• 9 million in North America alone
• sales forcast for customer adjusted by 5.7
  million in 2004
• By adopting method for all customers, sales could
  increase by up to 300 million

27
The evolution of markets
Phase 1 Traditional marketplace customer finds
vendor
28
Phase 2 B2B/B2C marketplace/portal customers
and vendors find each other
29
vendor
Phase 3 C2B2C market vendors identifies and
satisfies customer demand
30
Lessons learned

• In a perfect market, knowing your customer is
  essential for survival
• Treat your customer as an asset, not a hazard
• Identify new business opportunities and adapt
  quickly!

31
Loyalty will pay for you!
32
Thank you!

• questions tim_at_cole.de
• slides www.cole.de