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"To be sure, most companies use customer relationship management and other technologies to get a handle on customers, but no amount of technology can really improve the situation as long as companies are set up to market products rather than cultivate customers," says Ronald Rust, Christine Moorman and Guarava Bhalla in "Rethinking Marketing" from Harvard Business Review.

They go on to state, "To compete in this aggressively interactive environment, companies must shift their focus from driving transactions to maximizing customer lifetime value." I totally agree. Mass marketing is far too crude for most businesses. A more intelligent focus on retaining more of the ideal type customers and the use of pull, inbound marketing will get a business further. More companies are headed to "building relationships" and that's where all must inevitably go if they hope to remain competitive.


Strategy for Cultivating Customers

Strategic Business Acceleration with CRM Here is a summary of the articles main points for the execution of a customer cultivation strategy,




1. Perform market research beyond the marketing department.

Look into all areas of the organization that touch customers - finance (source of customer payments) and distribution (source of timing and services).

2. Change the scope of analysis.

Move the scope from an aggregate view to an individual view of customer activities and value.

3. Shift attention to acquiring customer input.

Customer input will drive improvement in customer focused metrics such as CLV - customer lifetime value and customer equity.

4. Bring the customer into R&D design process.

Use customer input in the design process to make sure product decisions reflect the real world needs. This is especially true where manufacturers introduce many new products. Increase the R&D's and marketing groups' ability to translate customer input about features and value into hit product offerings.

5. Consider an online community.

There are user communities popping up every day to feed a pent-up demand for communications and a sense of community. Create an online community that brings users and your key players together. This creates new value through the collaboration of users and producers.

6. Review call-center full impact.

Make sure that the cost savings of a call-center overseas and possible cultural differences don't damage the businesses ability to interact with its customers and have a negative impact on the quality of customer relationships.

7. Place a new focus on customer metrics.

There is a new focus on customer metrics- a shift from marketing products to cultivating customers. Focus less on product profitability and more on customer profitability.

8. Less attention to current sales and more to CLV.

Companies need to pay less attention to current sales and more to customer lifetime value. The customer lifetime value metric evaluates the future profits generated from a customer, properly discounted to reflect the time value of money. Lifetime value focuses on the company's long term health. In the near future companies will report intangible assets on financial statements. Leading indicators such as customer-centric metrics, customer retention rates, and the value of customer and brand assets will affect the value of business so these must be known and understood.

9. Less attention to current market share and more to customer equity.

Rust, Moorman, and Bhalla state that companies need to pay less attention to current market share and more attention to customer equity share (the value of a company's customer base divided by the total value of customers in the market).

So given the increasing importance of customer level information, a company must become adept at tracking information at several levels - individual, segment, and aggregate. Different strategic decisions require different levels of information, so companies typically need multiple sources to meet their needs.

"Rethinking Marketing" by Rust, Moorman, and Bhalla was originally published in Harvard Business Review, January 2010. Reprint R1001F.


For your business, what point above is the most important to focus on NOW?

Topics:   Customer Experience Improvement Building Stronger Relationships Growing Your Stronger Business Business Drivers for CRM

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