Rethinking Marketing. That’s the title of an article in the Jan- Feb 2010 issue of Harvard Business Review by Rust, Moorman & Bhalla (subscription required).
The plea ? Reinvent marketing as customer management. Not much new here, but the case is presented well. Highlights :
What reinvention is this ?
Marketing departments are usually designed for the mass market era (‘60s in the U.S. ) with mass market segments, mass media and customer transactions that are impersonal.
However, technology is now making one on one interactions possible. Plus, customers too are beginning to expect a one on one interaction with brands.
What does this mean for marketers ?
Change (From / To)
Pushing products & brands Cultivate (i.e. serve) customers & customer segments
Transactions Customer Lifetime Value
Mass marketing One-to-one marketing
What is the organization set-up required to achieve this?
Have customer managers. This is similar to having account managers in B2B companies. The point being that now even B2C companies need such managers. Customer managers can then target individual customers or target narrow segments.
Have a Chief Customer Officer position (a tricky role); incumbent’s key challenges will be to promote a customer-centric culture, get key people to regularly meet with customers and ensure availability of customer data.
Customer-facing functions like CRM, market research, R & D and customer service must now report to this CCO.
Some tips here :
– make sure CRM is under customer department, not under IT
– get R & D to interact directly with customers
– for better quality, handle customer service in-house
What metrics are needed?
Change from / to :
Product profitability Customer profitability
Sales Customer Lifetime Value (CLV)
Brand equity Customer equity
Market share Customer Equity share
CLV = future profits from customer, at a proper discount rate
Customer Equity = sum of CLV of individual customers
Customer Equity share = customer equity divided by equity of all customers in the market. This is an indicator of the organization’s long-term competitiveness.
To get above customer metrics, companies now need customer data at the individual and customer segment level (i.e. they need customer databases). This data is over and above the usual aggregate level data such as sales and surveys.
In future, customer metrics are expected to become a routine part of financial reporting, just as sales and profit numbers are today. This is another reason why any investment in getting the above customer data will be worth it.
It’s the Chief Customer Officer’s job to improve performance on these metrics.The HBR article featured here says 300 global organizations now have CCOs, up from 30 in 2003. Here is a news item giving a flavour of how new, yet topical this position is.
Customer managers’ should have a broad perspective and training in social sciences. They need to approach people as behavioural scientists would do, as they need to understand what customers need.
Business schools will have to adapt their (marketing) curriculum to create people with this training.
Customer marketing in India
In India, we are not out of the mass market era yet, in view of rural markets and low Internet penetration. Mass market marketing will coexist with one-to-one, customer marketing.
It would appear the maximum progress in customer marketing has been by banking, followed to a lesser extent by the telecom and retail industries.
How far down this path have these industries actually proceeded?
How many organizations have user-friendly websites, programs to register users or members, Facebook Pages, loyalty clubs, lead management systems, opt-in programs for email and sms marketing, feedback and customer satisfaction audit processes and customer segment managers ?
How many, if at all, have a Chief Customer Officer position ?
How many have launched new products on the basis of mining customer data ?
And what of industries outside of banking, finance, retail and telecom ?
Which Indian organizations are leading with best practices ?
What do you think !?