integrate chicago - j. bryan bennett

Five Steps to Better Customer ManagementINTEGRATE CHICAGO 2016PROFESSOR J. BRYAN BENNETT

Proprietary & Confidential 1 Copyright 2016, J. Bryan Bennett

Agenda Introduction to Customer Management Five Steps Walk-Thru Pre-Case Study Q & A Case Study Final Q & A


What is Customer Management?

A process for maximizing customer value which leads to better company profitability Part quantitative, part subjective If properly implemented, it becomes a self-sustaining cycle◦ “Circle of Life”


www.insight-data.com

Customer Management “Circle of Life”

Understanding

Value

SegmentationExperience

Acquisition


Why Is It Important? Increases profitability by reducing costs and improving efficiency Competitors are after your best customers Extremely important in a down economy


Five Steps to Better Customer Management1. Customer Understanding2. Value Analysis3. Segmentation / Grouping4. Customer Experience5. Acquisition


Step 1 - Customer Understanding

Who is the customer based on: ◦ Behavior

◦ What products or services do they purchase?◦ Frequency of purchases◦ Years as customer

◦ Demographics◦ Lifestage◦ Gender◦ Age◦ Geography


Benefits A better understanding of the customer will enable you to tailor your products and services to meet their needs◦ New versus established customers◦ Type of products / services purchased◦ One-time purchase versus long-term contract◦ Potential upsell and cross sell


Implementation Build a database of these key attributes Sources:

◦ Accounting system◦ Loyalty Program

◦ Surveys◦ Needs to be input if not electronic◦ Low response rates

◦ Purchased data◦ Very accurate if from good source◦ Electronic format


Step 2 - Value Analysis Determining value of customer to your organization◦ Lifetime value = present value of the profitability of

customer over the life of the relationship◦ Hard to know length of time without long history

◦ Simplified lifetime value = average profitability of customer over a specific length of time◦ Recommend at least 3 years◦ Profits fluctuate year to year


Benefits Enables organization to be able to treat customers based on value to the organization◦ High value customers treated best (customer

experience)◦ Mid value customers motivated to become high

value customers◦ Low value customers either motivated to move up

or move out◦ Can be a trap


Implementation Annual revenues over time period selected Annual expenses

◦ Direct costs of products or services

Average net for years on books equals customer value


Step 3 - Segmentation / Grouping

Heart of customer management A grouping of customers based on similar characteristics for more efficient management◦ Dimensions can include:

◦ Behavior◦ Customer value◦ Buying patterns◦ Demographics◦ Lifestage

Enables marketers to better target treatment and message◦ An established customer may not purchase the same product or

services of a new customer


Benefits Market to customers based on their similar needs and behavior◦ Not marketing to customers who may not be interested in

your product/service, channel, suggested usage, etc.◦ Higher likelihood they will purchase when you speak to their

needs or situation◦ Builds stronger customer relationships

Better targeting leads to reduced marketing costs and increased response◦ Maximizes Profits


Implementation Segmentation examples

◦ Behavior◦ Frequency of purchases◦ Number of products / services purchased

◦ Versus time on books◦ Speaks to a customer’s loyalty

◦ Demographic◦ Descriptive information about a customer, i.e. age, gender, income

◦ Other types include:◦ Product usage, geographic


Behavior Segmentation Purpose is to group customers into cells built around purchasing behavior◦ Marketers then group customers into combined

‘cells’ based on similar individual recency, frequency and monetary (RFM) determinations

◦ May use time on books versus products / services purchased for service organizations, i.e. insurance companies


Purchase Behavior Segmentation RFM Example

# Customers Mths Recency of Purchases (times since last purchase)

0 1 2 3 4 5 6

Frequency

of Purchases

5x 501 423 345 256 179 108 97

4x 635 756 890 954 1,086 1,101 1,194

3x 755 802 989 1,059 1,159 1,214 1,365

2x 812 908 1,054 1,134 1,325 1,421 1,502

1x 947 1,074 1,265 1,379 1,453 1,587 1,632


Purchase Behavior Segmentation RFM Example

Customer Value by Cell

Mths Recency of Purchases (times since last purchase)

0 1 2 3 4 5 6

Frequency of Purchases

5x $ 3,238 $ 2,694 $ 2,098 $ 1,583 $ 1,039 $ 750 $ 423

4x $ 2,404 $ 2,102 $ 1,593 $ 1,203 $ 934 $ 643 $ 325

3x $ 2,001 $ 1,830 $ 1,428 $ 1,148 $ 850 $ 583 $ 221

2x $ 1,404 $ 1,332 $ 1,294 $ 1,048 $ 743 $ 340 $ 109

1x $ 830 $ 632 $ 593 $ 450 $ 302 $ 199 $ (50)


Purchase Behavior SegmentationLoyalty Example

# Products/Services

Years on Books High Mid-High Mid Mid-Low Low

5+ Years 44 65 43 29 21

4 Years 51 75 67 43 39

3 Years 37 54 60 59 34

2 Years 26 34 41 36 32

1 Year 24 32 39 43 51


Purchase Behavior SegmentationStrategic Implications

Purchase behavior segmentations provide the company the best opportunity to manage their customer base◦ Can motivate customers to make additional purchases, cross

sell or upsell◦ Motivate top segment customers to stay there◦ Motivate mid-segment customers to become top customers◦ Motivate some low-segment customers to buy more or buy somewhere

else◦ Keep profitable ones to cover overhead

Loyalty segmentations change as customer purchase additional products and stay on books longer


Demographic Segmentation

A grouping of customers based on one or more common characteristics◦ Age◦ Annual Income◦ Geography◦ Gender


Rogaine Hair Growth Product

Demographic segmentation to better understand who was buying the product Results:

◦ 85% male; 15% female◦ Skewed older in age◦ Florida had highest % than any other states


Rogaine Hair Growth Product

Segments Included:◦ Young Studs◦ Grandpas◦ Old Blue Hairs

Led to introduction of Rogaine for Women◦ Couldn’t determine if women were purchasing for

themselves or a significant other◦ Women do have a balding problem also

◦ 80% of men; 30% of women


Demo Segmentation Implications

Can manage customers similarly based on their particular segment◦ A single customer may not have the same needs as a

married customer with children

Customers are more likely to respond when they are managed in the context of their circumstances◦ Translates into more income and a stronger customer

relationship◦ More profits


Step 4 - Customer Experience

Treat the customer based on their value to your organization wherever and whenever they interact with the you.◦ From the salesperson to the customer service

personnel. ◦ Can result in more cross sell and upsell

opportunities


Benefits If treated appropriately, customers will become an advocate for your company or services Show customers your appreciation for their loyalty or volume of business


Implementation Make sure customer is treated appropriately (based on value) whenever and wherever that customer interacts with your company Incent customers to continue at their value level or change behavior to become better customer Empower employees to make reasonable decisions regarding customer treatment◦ ATT vs Barnett Bank


Step 5 - Customer Acquisition

Using the profile of the current best customers, identify and focus their sales efforts on prospects with potential to become high valued customers


Benefits Learn what is required to satisfy current customers’ needs◦ Goal is to attract customers that are a good fit for

your organization◦ Every customer portfolio is different

Organization is not ‘wasting’ money chasing potential customers that will add little or no value


Implementation Analyze (understand) who current best customers are◦ Use demographics to select prospects likely to

become high value customer

Organization saves money by better targeting of acquisition efforts


Five Steps to Better Customer Management Review

1. Customer Understanding2. Value Analysis3. Segmentation / Grouping4. Customer Experience5. Acquisition


www.insight-data.com

Customer Management “Circle of Life”

Understanding

Value

SegmentationExperience

Acquisition


Pre – Case StudyQuestions?


Case StudyFOUR CUSTOMERS


Customer #1 Profile Wile E. Coyote Has extensive data needs

◦ Used for tracking and analyzing Road Runner behavior

Uses all of your services◦ Especially cloud backup since things often get

blown up

Very loyal customerLOONEY TUNES, and all related characters and elements are trademarks of and © Warner Bros. Entertainment Inc.


Customer #2 Profile Bugs Bunny Has extensive data needs to track carrot locations

Needs tech support for frequent repairs of his mobile devices◦ Gets dirt in them

No service contract◦ Pays hourly as needed

Loyal customerLOONEY TUNES, and all related characters and elements are trademarks of and © Warner Bros. Entertainment Inc.


Customer #3 Profile Road Runner Has extensive mobile needs

◦ Uses mobile hotspots throughout the desert

◦ Mostly lots of mobile services◦ Mapping◦ Simulations◦ Cloud storage

New customerLOONEY TUNES, and all related characters and elements are trademarks of and © Warner Bros. Entertainment Inc.


Customer #4 Profile Taz Very low tech

◦ Has old smartphone◦ Needs constant repair services◦ Buys annual service contract

In 3rd year as customer

LOONEY TUNES, and all related characters and elements are trademarks of and © Warner Bros. Entertainment Inc.


Case Study – Customer ValueCustomer Name Average Annual Profitability

Wile E. Coyote $3,289

Bugs Bunny $1,529

Road Runner $2,593

Taz $792


Case Study – Customer Value Ranking

Customer Name Average Annual Profitability

Wile E. Coyote $3,289

Road Runner $2,593

Bugs Bunny $1,529

Taz $792


Case Study – Segmentation

Customer Level /Years of Books High Mid-High Mid Mid-Low Low

5+ Wile E. Coyote

4 Bugs Bunny

3 Taz

2

1 Road Runner


Case Study – Customer Experience

All four customers call in with a problem at about the same time Who is routed to Tier 1 customer service first? Which customer would be the next highest priority?


Case Study – Acquisition Which customer do you target your acquisition efforts on?

•Daffy Duck•Has one mobile device•Calls with simple problems, i.e., how to send a text•Low data usage & little overages•Constant repair services

•Pepe LePeuw•Has several mobile devices to stay in contact all the females he has loved all over the world•Unlimited data•Needs mobility solutions and cloud storage



Summary Implementing all 5 processes would be the best solution Implementing some of the processes will also help

◦ Better understand your customers to provide targeted services

◦ Improve retention through better customer service◦ Acquire customers with higher potential

Just do something◦ Retaining your current customers is a lot cheaper than

acquiring new ones.


Questions?


Contact Information E-mail: [email protected] Blog / Website: www.jbryanbennett.com LinkedIn: www.linkedin.com/in/jbryanbennett Twitter: @jbryanbennett Facebook: J Bryan Bennett


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