customer management strategy in business markets
TRANSCRIPT
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Customer ManagementStrategy in Business Marke
Presented by:
Rahul Medhi - 131245Rushabh Gosar - 131248Saurabh Sane - 131249Shreyans Jain - 131250
Shreyans Nahata - 131251
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Customer Management Strategy inBusiness Markets
1. Differentiate
Between and
Select
Opportunitiesto Serve
2. Understand the
Impact of
Selection
Decisions on theFirm
3. Build and
Manage the
Buyer Benefit
Stack and SetPrice
4. Locate Or
Stream o
Customer
the Loyal
Ladder anManage
Relations
Impact of Orders
and Transactional
Customers on Firms
Resources and
Capacity
Impact of OrderStreams and
Customers
Relationships on
Firms Skills and
Capabilities
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The Divergent Effects of Orders aCustomers
In most business markets there is a disconnect betwCustomer Choice and Order Selection
If not managed properly, it can create problems betwMarketing and Manufacturing department
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Typology of Buyer Benefits
Economic,
TangibleBenefits
Economic,
IntangibleBenefits
Non-economic,Tangible
Benefits
Non-
economicBenefits
Economic Benefits
Non-economic
Benefits
Vendors Ability to Communicate the
Benefit to the Customer
Hi Lo
Hi
Lo
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Economic, Tangible Benefits
Both buyer and seller can easily measure and financially quathese benefits
The ease of communicating and buyers willingness to accepthese benefits attractive.
These benefits are easy to offer and equally easy for compet
also offer These benefits are differentiators only when the product or
truly unique.
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Non-economic, Tangible Benefits
These are benefits that are readily perceived by buyers, but have difficulty in quantifying them
For example, market reputation, brand name etc.
Buyers reward the vendor for these benefits by
Specifying there product in RFQs
Pay a price premium
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Economic, Intangible Benefits
These benefits are quantifiable by vendors but difficult for tto verify.
Vendors use three approaches to prove their claim
Benchmark Studies
Pilot Test
Money-back guarantees
These benefits are key to achieving differentiation from com
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Non-economic, Intangible Benefit
These benefits are difficult for both seller and buyers alike tand quantify
Buyers need to experience such benefits to appreciate them
Eg. Claims like trust us
These benefits help in establishing
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Buyer Benefit Stack
It helps vendors mobilize and communicate buyer benefstacking the benefit elements one in top of the other
This facilitates the vendors understanding of the level animportance of buyer benefits being offered.
To successfully communicate buyer benefits the vendor
identify the motivation and power bases of all the DMUmembers
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Buyer Benefit Stacka)
X Y Z
b)
X Y Z
c)X Y Z
1 2 3 41
2
1
2
1
2
1
2
3
4
1
2
3
4
1
2
3
4
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Using the buyer benefit stack to SPrice
Money left on
the table
Vendors Profit
Costs incurred by the
vendor
Price
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Customer Loyalty Loyalty has been defined as a buyers commitment to
consistently rebuy or re-patronize a preferred product orservice despite situational influences and competitivemarketing efforts.
Favorable behaviors that is shown by loyal customers
Greater Propensity to repurchase
Word of Mouth effect Resistance to customers blandishments
Pay a price premium
Collaborate with vendor to improve performance and develop newproducts.
Invest in relationship
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The Loyalty LadderLoyalty behaviors are inter-dependent and customers display different behaviors in
order defined by their underlying loyalty level.
Willing to pay Premium
Enthusiastic Advocate
Actively seeks to expand relationship
Invests in relationship
Buys a bundle of products
Switcherwill buy if the price is right
Skeptic- willing to be convinced
Cynic- wont buy
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Managing Customer Relationships Usthe Loyalty Ladder
MVC Partner
Switcher Underperforming Customer
Relationship
Position on the
Loyalty Ladder
Cost of Customer Management Effort
Low High
Sellers need to figure out whether it makes sense for them to invest, maintain or
Divest in customer relationships and order streams.
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Switchers
Customers who only wants basic unbundled product offering (no VAS)from the vendor.
This reduces vendors Customer Management Effort Cost so suchcustomers expects lower prices.
These customers view the product as commodity and so are likely toswitch vendors if they are not able to get lower price.
Primary focus in these relationships is in the management of costs. So company can have a long term contract in return for lower prices or
alternatively, migrating these customers to new products andtechnologies by de-commoditizing the relationship
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Underperforming CustomerRelationships When vendors mis-manage switchers, they become underperforming
customers.
Vendors due to some factors accept extremely low margins from largecustomers.
ExampleLarge Volume customers, Showcase Accounts
These customers can be migrated to Switchers identifying vendors servicesand efforts which customer does not require.
These can also be migrated to partner quadrant by first communicating thetrue benefit stack to them. The best time for this is when vendor is able tooffer other sources of value addition as well.
A vendor can even fire a customer- If vendor is providing unique value andnot getting paid for it, and customer is unlikely to get this value free fromanyone else and is likely to come back after having realized this.
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Partners
Expensive to serve , but returns are also high
Customers expects long term commitment
Demands latest and best products ,and are ready to pay a premium
Customers in this quadrant can quickly move to underperfquadrant, hence vendors should be proactive in terms of rcommoditization cycles.
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Most Valuable Customers (MVC)
More inexpensive to serve than partners
Vendor is more efficientreduces CME without reducing tbenefits
Grateful customersValue relationship with the vendor anto pay a price premium
Advocates and reference accounts to the vendors.
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Moving customers in the loyalty &CME Framework Identify the customer management activities required to s
relationship at each rung
Quantify the buyer benefits at each rung relative to adjace
Calculate the cost of moving the customer from one rung t
Analysis of customers current position by identifying the p
competitive effort , ineffective account management by vepersonnel, or individualistic customer factors
Using the loyalty ladder and buyer benefit stack , vendor ccustomer migration along the ladder.
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CaseletWESCO Turning switchers to MVC
Industrial customers followed a transactional approach tosuppliers and distributors-bid for the lowest price - switche
WESCOs National Accounts Program-
Objective: migrate switchers to collaborators with a long term relaorientation.
Th WESCO S (C d )
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The WESCO Story (Contd)
Wesco offered lowest prices initially to sign up to the NA p
Cost to serve was higher initially and prices offered was lo
Key NA customers: Low Cost & Low Price
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CMR- Migrating from profits to losseRelationship Termination
CMR Enterprises- Cabinet and Furniture manufacturer
Served both commercial and residential customers
Commercial business is based on past performance gettingto bid for customers next projects
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Example: Blackstone Homes
Blackstone: Regional residentialcontractor
Offered CMR to become the exclusivecabinet supplier
Point A: Both firms felt Blackstonewould become the partner customerfor CMR (Point B)
Due to customization and on-timedelivery regardless of changes, CMRincurred cost (absorbed it).
Example: Blackstone Homes
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Example: Blackstone Homes(Contd) CMR asked for a cover of its
additional cost which
Blackstone didnt appreciatedand agreed to a nominalincrease
Relationship is not profitableand eventually it was
terminated. Later, Blackstone tried alternate
suppliers unsuccessfully andcame back to CMR.
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Conclusions Survival of every business depends on customer satisfactio
to the competition.
Revenues received must exceed Customer Management ef Monitoring customer health is a pre-requisite for managin
customers for profits.
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Thank You