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Follow Us- Ian Gordon
The old rules - the four P's of marketing (product, place, promotion and price) - do not provide a way forward for today's marketer. If few market segments offer shelter from the competitive storm,
where can one focus? Deciding on which customers to focus is the most important act in the new marketing. Presenting the 11C's of relationship marketing.
A business relationship requires identification of good customers, who want a reciprocal relationship to create new value for mutual long-term benefit. Relationship marketing is an on-going process of identifying and creating new value with individual customers, and then sharing the benefits over a lifetime of association. It involves understanding, focusing and management of on-going collaboration between suppliers and selected customers for mutual value creation and sharing through interdependence and organizational alignment.
But with which customers should a meaningful relationship be formed? Just the biggest? The most profitable? The ones that will be most profitable tomorrow? Or those most amenable to a relationship? Deciding on which customers to focus is the most important act in the New Marketing.
This New Marketing has become essential. Marketers have learned the Old Rules they learned in business school do not sufficiently describe today's marketplace. Indeed, signs indicate the Old Rules could take us down the wrong road.
The following scenarios are resplendent in some markets:
- Few companies enjoy long-lasting, meaningful product or service differentiation
- Targeting market segments provides neither relief from competition nor material value creation for customers
- "Consumer pull," where advertising and other promotion is used to foster demand, has been substantially replaced by "trade push," in which distribution channels help sell the product or service. The problem is that the channels are so diffuse, complex and competitive, they look much like marketplace competition.
- Companies increasingly are going direct to market rather than incurring the cost and challenge of using channel intermediaries.
- Price is used tactically to help secure short-term advantage amid chaotic competition in the marketplace.
Focusing on customers
Increasingly, marketers are thinking less about markets and more about customers. Technology and process innovation makes it possible for companies of all sizes to rethink their value chain and work with customers in new ways to create the value each wants. Dell has been doing this for years. Since 1983, Dell has had two simple ideas: sell direct to individual customers and make computers to order, rather than for inventory.
Competitors have found copying Dell's approach challenging, because it sometimes means abandoning or de-emphasizing dealers, stranding assets and re-inventing themselves. Dell now applies its approach business-to-business, making it easy for big companies to buy, setting up intranets that conform to the customer's procurement practices, for example.
What Dell is demonstrating is that individual customers, successfully engaged, can create tremendous value for the company and its shareholders.
If the four P's of marketing no longer work well, what will replace them? Consider the "11 C's," eleven areas for renewed marketing. We discuss each "C" briefly below. We also suggest what might be done in each area to develop a relationship-marketing plan that could replace the traditional marketing plan:
Customer. Which customers will be served, which will be rejected and which will be managed to better profit? The company should identify its best, average and worst customers and ensure that each receives appropriate value.
Absurd though it sounds, most companies’ reward their worst customers and penalize the best by giving both average value. Sometimes this comes from not fully allocating customer costs. Formulate objectives and strategies for each customer.
Categories. Define the scope of product and service offerings to be provided to customers. Will you sell only what you make? Or will you sell what the customer considers appropriate to buy from you?
Capabilities. Plan the range of capabilities that will exist within the company. Capabilities include process, technology, people and knowledge/insight. What new capabilities are needed to identify your best customers, see how they are doing, predict what they will buy next and ensure that you make life easy for them?
Cost, profitability and value. Focus on customer profitability to improve it, rather than the old traditions of measuring only product, product line and divisional profitability, customer costs and customer value perceptions. It can be quite in order to sell product at a loss to better the overall relationship. Miss Mew cat food's tuna flavor was costly and unprofitable. But because cats loved it, it improved the profitability of the company's overall range of flavors. In many companies, selling unprofitable products still keeps the accountants awake at night, even if the relationship is profitable overall.
Control of the contact to cash processes. Manage and control the processes associated with contacts at the account and ensure that cash is collected. Above all, identify TIME in all processes and make time one of the key metrics in the company. How long does it take to go to market? How long to get the product to the customer once in receipt of order? How long to get the order? And so on. These are non-traditional roles for the marketer, but quite appropriate for the relationship marketer.
Collaboration and integration. Integrate the customer's technology, people and business processes with your company's. In short, if you can tell where your firm ends and the customer's starts, relationship marketing has probably not yet been fully implemented. Amcan Castings makes castings for companies like Chrysler. Their engineers work alongside Chrysler's. Design and development is collaborative and the purchase process is continuous.
Customization. We need to unlearn mass production and the principles of Henry Ford. When we can produce mass customized products at better than mass production costs, why would we produce standardized offerings, inventory them and then discount them because they are not selling? Engage individual customers and give them the value they want. Ever wonder why the word "customer" includes the "custom"?
Communications, interaction and positioning. Tailor two-way communication to the customer's ears and actions. Have a strategy for interacting with customers, not just through traditional one-way communication of television or newspapers, but by giving each customer an opportunity to communicate with the company as each wishes, including over the Internet. We no longer target customers without them targeting us.
Customer measurements. Measure time in for each aspect of customer engagement, from inquiry to order fulfillment to cash remittance. Track profitability for each customer, best, average and worst, and decide who to invest in, who to reward and who to fire. Track customer satisfaction with a metric that allows simple year-to-year comparisons to be made.
Customer care. A customer care philosophy removes the notion that customer service is only "after-the-sale." In business-to-business markets, have a strategy for customer care that includes a charter to govern the relationship to which both supplier and customer commit.
Chain of relationships. Manage all stakeholders who create the value customers want. Most importantly, ensure that your employee relationships align with customer relationships. Relationship marketing requires that organizations consider issues like these and choose the customers on whom to focus, formulate strategies for relationships and build the abilities within the company to deliver the value customers want.
Companies asking themselves these questions may find that before they can plan relationship marketing, they require more work to assess customers' profitability and perceptions. Some companies may need to build better databases about their customers. Others will also need to examine their HR strategies in a new, customer-centric light.
Thinking differently
The Old Rules of marketing are mostly broken and ineffective, providing a poor basis for making a company a winner. After all, there are only so many good customers to go round, and all competitors want them. The four P's of marketing made little or no provision for this. The new competition will be quite different than the historical basis for winning.
Competition will increasingly be for four things: access to the best customers, being a "low-time" producer, winning the right new employees, and creating new ideas - as Apple says, "think different." Relationship marketing can help companies to win relationships with customers and with the other stakeholders who together make a great customer relationship possible.
The bottom line
Successful marketing in the new economy can be furthered by replacing obsolete ideas with relationship marketing abilities, which will improve efficiency and create meaningful relationships with good customers.
This article is reproduced with permission from XIT Strategies Inc at
www.energizeyourchannel.com