Managing Touchpoints and the Customer Journey PDF

mar keti ng.uni - gr a z.at Managing Touchpoints and the Customer Journey Univ.-Prof. Dr. Thomas Foscht 1  mar keti ng.uni - gr a z.at...

mar keti ng.uni - gr a z.at Managing Touchpoints and the Customer Journey Univ.-Prof. Dr. Thomas Foscht 1  mar keti ng.uni - gr a z.at What is the course about? (1)  Buzzwords: customer centricity, customer engagement, customer management, customer focus, customer engagement, customer experience, customer journey, customer orientation, one-to-one marketing  But no matter what term is used, the central premise is that an enterprise should seek to engage its customers, one at a time, in long-lasting, mutually valuable relationships, based on trust.  An enterprise must be able to see itself through a customer's own eyes.  It must learn how to experience what each different customer experiences, and then take steps to ensure that this experience becomes better, easier, more convenient, and even more enjoyable for the customer, over the lifetime of that customer's relationship with the business.  mar keti ng.uni - gr a z.at What is the course about? (2)  The overall objectives are to understand why and how the marketing model has changed so significantly – why it makes sense to treat different customers differently – and to give students the knowledge and understanding required to evaluate and perform the kinds of marketing tasks associated with  customer relationship management  customer experience  customer journey  and touchpoint management. 4  mar keti ng.uni - gr a z.at What is CRM? Not… „Any customer can have a car painted any color he wants, as long as it is black“ Henry Ford 5  mar keti ng.uni - gr a z.at CRM – is it maybe?  „Customer is king“  „Customer is always right“  „We place the customer at the core of all we do“ etc. 6  mar keti ng.uni - gr a z.at CRM – is it maybe?  What is a customer? „A customer is the most important person ever in this company. (…) we are dependent on him. A customer is not an interruption of our work, he is the purpose of it. (…) A customer is not someone to argue with – nobody ever won an argument with a customer. A customer is a person who brings us his wants. It is our job to handle them profitably to him and to ourselves.“ Leon Leonwood Bean Kotler/Armstrong 2020 © Pearson 7  mar keti ng.uni - gr a z.at So, what is CRM? (1)  A company should reward those who are most profitable to make them stay and it should give stimulating incentives to those who are not profitable yet.  CRM is the strategic process of selecting customers that a firm can most profitably serve and shaping interactions between a company and these customers. The ultimate goal is to optimize the current and future value of customers for the company.  Managing customer relationships is what companies do to optimize the value of each customer, because they understand the customer's perspective and what it is—and should be—like to be a customer. Source: Peppers, D./Rogers, M. (2022) Kumar, V./Reinartz, W. (2018) 8  mar keti ng.uni - gr a z.at CRMSo, what is CRM? (2)  An important part of CRM is to  a) identify different types of customers and  b) to develop specific strategies to interact with them.  Examples of such specific strategies are:  Better relationships with profitable customers  Locating and enticing new customers that will be profitable  Finding appropriate strategies to deal with unprofitable customers, including the termination of relationships  Detect and possibly reactivate “dormant” (but previously profitable?) customers (“sleeping/dead accounts”)  mar keti ng.uni - gr a z.at Evolution of CRM „Any customer can have a car painted any color he wants, as long as it is black.“ Henry Ford (around 1920) vs. „If we are not customer driven, our cars won‘t be either.“ Donald E. Petersen, Chairman of the Ford Motor Company from 1985-1989 10  mar keti ng.uni - gr a z.at Life before the Industrial Revolution… ©2022 Don Peppers and Martha Rogers, used with permission to accompany Managing Customer Experience and Relationships: A Strategic Framework, 4th edition (Wiley, 2022). 11  mar keti ng.uni - gr a z.at Customer-centricism: So old that it’s “new” ©2022 Don Peppers and Martha Rogers, used with permission to accompany Managing Customer Experience and Relationships: A Strategic Framework, 4th edition (Wiley, 2022). 12  mar keti ng.uni - gr a z.at For most of the 20th Century, marketing was “one to many”  Mass production: assembly lines produced uniform products  Mass distribution: supermarkets, retail stores displayed the products  Mass media: TV, magazine, and newspaper ads promoted the products Advertising was designed to highlight the distinct benefits of individual products Every product was treated differently, but every customer was treated the same Source: Peppers, D./Rogers, M. (2022)  mar keti ng.uni - gr a z.at Customer-centric vs. product-centric: New technologies have changed the dimension of competition Customer Needs Satisfied Customer relationship Share of management customer Customer Centric Traditional mass marketing Product Centric Market share Source: Peppers, D./Rogers, M. (2022) Customers Reached  mar keti ng.uni - gr a z.at Customer-centric vs. product-centric: New technologies have changed the dimension of competition Customer Needs Satisfied Treating different Share of customers differently customer Customer Centric Treating different products differently Product Centric Market share Source: Peppers, D./Rogers, M. (2022) Customers Reached  mar keti ng.uni - gr a z.at Customer-centric vs. product-centric: New technologies have changed the dimension of competition Customer Needs Satisfied Collaborate with customers, Share of via two-way, interactive media customer Customer Centric Sell products to customers, using one-way, mass media Product Centric Market share Source: Peppers, D./Rogers, M. (2022) Customers Reached  mar keti ng.uni - gr a z.at Customer-centric vs. product-centric: New technologies have changed the dimension of competition Customer Needs Satisfied Keep customers longer Share of and grow them bigger customer Customer Centric Get more customers Product Centric Market share Source: Peppers, D./Rogers, M. (2022) Customers Reached  mar keti ng.uni - gr a z.at Increasing the value of the customer base Acquire more customers GET Retain profitable customers longer KEEP Win back profitable customers Eliminate unprofitable customers Up-sell additional products in a solution GROW Cross-sell other products to customers Referrals and word-of-mouth benefits Reduce the cost to serve customers Source: Peppers, D./Rogers, M. (2022) 18  mar keti ng.uni - gr a z.at A marketing continuum Product-centric Customer-centric  Organization set up around product portfolios  Organization aligned to serve the needs of a  Value created by product expertise and „the selected set of consumers brand“ (brand equity)  Building long-term relationships with highly  Best possible product/market offering to valuable customers serve customer needs  „The customer“ does not exist, every customer is different – celebrate it! 19  mar keti ng.uni - gr a z.at Driving forces in favor of relationship orientation Recent changes with respect to…  Consumers  Technology  Growing consumer diversity  Storage technology  Time scarcity  Information technology  Value consciousness  Information availability  Marketing function  Decrease in loyalty  Media dilution and multiplication of channels  Decreasing marketing efficiency and effectiveness  Marketplace  Increasing competition  Fragmented markets  Product parity 20  mar keti ng.uni - gr a z.at Consumers: Demographic Changes and Increasing Consumer Diversity  Aging populations, especially in developed countries  Falling birth rates  Strong differences in median ages between developed and undeveloped countries  Increasing diversity in term of ethnicity  Closer integration facilitates immigration  Markets become more segmented  Increasing individualization  Increasing number of working women  Increasing number of single households as well as single parents  mar keti ng.uni - gr a z.at Consumers: Behavioral Changes (1)  Increased use of social media  Customers increasingly engage in word of mouth on social media platforms  Enables companies to gain insights and to receive prompt feedback  Allows marketers to execute new forms of advertising and communication  Increased use of apps  There are many different types of apps e.g., utilities, social networks, and games  More and more companies develop apps to establish a mobile presence and to communicate to their customers  Use of Real time data  Internet and mobile devices allow consumers to stay connected at any in time and to receive information instantaneously  This leads to a generally faster pace in consumers’ lives  mar keti ng.uni - gr a z.at Consumers: Behavioral Changes (2)  Need for convenience and the rise of self-service  Companies have to empower consumers to perform minor services themselves by offering convenient self-service options  Still, companies have to be available in case problems occur  Increased demand for experiences and authenticity  Customers become more demanding – goods and services are no longer sufficient  Companies need to create memorable events that engage the customer  Consumers become increasingly sceptical towards marketing  Increased health and sustainability consciousness  Companies should not only care about profits but also operate responsible  Consumers demand more healthy and organic products  mar keti ng.uni - gr a z.at Consumers: Behavioral Changes (3) Customers take greater demands on firms It becomes increasingly hart for companies to satisfy the customer Companies have to engage the customer and respond to their individual needs to thrive in this new environment  mar keti ng.uni - gr a z.at Changes with respect to the Marketplace  More intense competition between firms for customers  Fragmentation of markets  Diminishing product-quality differentiation To maintain market share, companies need to realign their business strategy to become customer-centric  mar keti ng.uni - gr a z.at Changes with respect to the Marketing Function (1)  Media dilution and channel multiplication  Proliferation of communication media focused on the customer  Direct-to-consumer channels - email, telephone  Interactive media - internet, interactive TV etc.  Video on-demand and YouTube are on the rise  Reduced need for techniques focused on price alone due to  Availability of new data collection and communication tools  Marketing processes such as loyalty programs  mar keti ng.uni - gr a z.at Changes with respect to the Marketing Function (2)  Increasing marketing costs and decreasing advertising effectiveness Source: Teixeira (2014)  mar keti ng.uni - gr a z.at Changes with respect to the Marketing Function (3)  Decreasing marketing efficiency and effectiveness  Lower efficiency and effectiveness due to  Prior focus on price and short-term transactions  Proliferation of new contact channels  Increased or flat cost of contact  Decreased customer response Pressure on the marketing function Marketing in danger of being restricted to advertising and media planning  mar keti ng.uni - gr a z.at Implications of Changes in the Business Environment  Greater demand to learn about  Customer preferences  Product and service customization  Focus on customer-centric instead of product-centric strategies  Marketers need a management approach that  Realizes increasing customer heterogeneity  Addresses marketing accountability  Puts available data successfully into practice  Uses customer profitability as a key objective function Customer value management  mar keti ng.uni - gr a z.at Link Between CRM and Customer Value  Customer Value:  The economic value of the customer relationship to the firm  CRM:  Practice of analyzing and utilizing marketing databases and leveraging communication technologies to determine corporate practices and methods that will maximize the lifetime value of each individual customer to the firm  Adoption of CRM with customer value at its core strategy helps us define CRM from a customer value perspective  mar keti ng.uni - gr a z.at Benefits of the Customer Value Management Approach  A successful data-based CRM system, with customer value as its driving metric, empowers a company to perform ten actions leading to a strategic advantage:  Integrate and consolidate customer information  Provide consolidation information across all channels  Manage customer cases  Personalization  Automatically and manually generated new sales opportunities  Generate and manage campaigns  Yield faster and more accurate follow-up  Manage all business processes  Give top managers a detailed and accurate picture  Instantly react to changing market environments  mar keti ng.uni - gr a z.at From Value for Customers to Value from Customers: The Satisfaction-Loyalty-Profit Chain  Increased customer satisfaction will lead to greater customer retention, which is often used as a proxy for customer loyalty, which then is expected to lead to greater profitability Product Performance Customer Retention / Revenue / Service Performance Satisfaction Loyalty Profit Employee Performance Value for the customer Value from the customer Source: “Strengthening the satisfaction-profit chain”, Adapted from: Eugene W Anderson, Vikas Mittal. Journal of Service Research, Nov 2000. Vol 3, Iss.2, p. 107.  mar keti ng.uni - gr a z.at What characterizes a customer “relationship?”  Mutuality – both parties in a relationship must be involved  Interaction – relationship springs from interactions between the two parties  Iterative – interactions build an ever-increasing context, over time  Ongoing benefit – both parties in a relationship continue to benefit  Behavior change – each party changes behavior in some way  Unique – every relationship is different from others, and uniquely individual  Trust – a relationship develops and requires trust between the parties  mar keti ng.uni - gr a z.at Conceptualizations of CRM  Functional level: focuses on technology  Developing sales force automation in the sales function  Developing campaign management in the marketing function  Customer facing front-end level: focuses on total customer experience  Building a single-view of customers across contact channels  Distributing customer intelligence to all customer-facing functions  Strategy level: focuses on customer satisfaction  Freeing CRM from technological underpinnings  Describing CRM as a process to implement customer centricity in the market and to build shareholder value  Understanding that knowledge about customers affects the entire organization  STRATEGIC CRM 35 mar keti ng.uni - gr a z.at  mar keti ng.uni - gr a z.at CRM Perspectives CRM at the CRM at the CRM at the Functional Customer- Company-Wide Level Facing Level Level  Set of processes  Set of activities  Strategic to execute that provide a Orientation to marketing functions single-view of the implement customer like sales force customer across all centricity within the automation or contact channels entire organization marketing campaign  Customer and create management intelligence obtained shareholder value is available across all customer-facing functions  mar keti ng.uni - gr a z.at Strategic CRM  Successful strategic CRM is a complex set of activities that together form the basis for a sustainable and hard-to-imitate competitive advantage  Strategic CRM shapes interactions between companies and customers to allow the maximization of customers’ lifetime value  Recognizes differences between customers with respect to their economic value to the firm as well as their expectations from the firm  Elements of CRM Strategy mar keti ng.uni - gr a z.at  mar keti ng.uni - gr a z.at CRM vision  Company needs clear vision of what they aim to achieve with their customer relationship management efforts  CRM vision is to build an organization in a manner that all actions are geared towards maximizing lifetime value of each customer  Involves acquiring and retaining strategically important customers and develop, communicate, and deliver value propositions that meet or exceed customers expectations  mar keti ng.uni - gr a z.at Culture of Customer Orientation  Defined as the set of organizational values, beliefs, and strategic actions that enable the implementation of customer management principles  Characterized by a top management belief and commitment that the customer is at the center of activity  This belief needs to be reflected in the culture, the organizational structure and the reward system to be credible  mar keti ng.uni - gr a z.at Integration and Alignment of Organizational Processes (1)  Comprises organization wide creation and synchronization of processes and systems enabling the implementation of customer management principles  Firmly incorporates needs of the customer and goals of the firm into product and service delivery  Strategic CRM works best for organizations that are organized around cross-functional processes rather than functional silos  mar keti ng.uni - gr a z.at Integration and Alignment of Organizational Processes (2)  Characterized by an understanding that value provided to target customers should be what drives all processes  Individual processes work in sync with common goal of attracting and retaining target customers  Customer management compatible incentives drive employee and organizational goals simultaneously  Processes are designed in such a manner that they automate a feedback  mar keti ng.uni - gr a z.at Data and Technology Support  Collecting and analyzing complex customer information is an important part of CRM  Data and technology support as an enabler for effective CRM  Characterized by the capability of leveraging data to actionable information  Makes customer management processes not only more efficient but also more effective  Helps to create entirely new processes and channels based on online and mobile applications  Firms that are able to generate intelligence and act on it will derive a competitive advantage  mar keti ng.uni - gr a z.at Characteristics of Marketing-Driven CRM Implementation  Activities and processes that constitute analytical CRM  Activities and processes that constitute operational CRM  A firm’s ability to understand the value of the customer to the firm and the variety of needs different customers have  An acquisition and retention process that continuously aligns the offering with customer needs and values  An ability to continuously improve what the company offers by learning about its customers  mar keti ng.uni - gr a z.at CUSTOMER EXPERIENCE ALONG THE CUSTOMER JOURNEY 4 45 5  mar keti ng.uni - gr a z.at Customer Experience defined  Multiple definitions of customer experience exist in the literature.  In general, scholars and practitioners have come to agree that the total customer experience is a  multidimensional construct that involves cognitive, emotional, behavioral, sensorial, and social components (Schmitt 1999, 2003; Verhoef et al. 2009).  experience may relate to specific aspects of the offering, such as a brand or technology, and  it consists of individual contacts between the firm and the customer at distinct points in the experience, called touch points.  built up through a collection of these touch points in multiple phases of a customer's decision process or purchase journey Customer experience is a multidimensional construct focusing on a customer's cognitive, emotional, behavioral, sensorial, and social responses to a firm's offerings during the customer's entire purchase journey. Source: Lemon, K. N., & Verhoef, P. C. (2016). Understanding customer experience throughout the customer journey. Journal of Marketing, 80(6), 69-96.46464646 46  mar keti ng.uni - gr a z.at Process Model for Customer Journey and Experience Source: Lemon/Verhoef (2016) 47  mar keti ng.uni - gr a z.at Process Model for Customer Journey and Experience Source: Lemon/Verhoef (2016) 48  mar keti ng.uni - gr a z.at Customer Journey  A customer journey refers to the entire experience and interactions that a customer has with a brand, product, or service throughout their entire lifecycle as a customer. It encompasses all the touchpoints and phases of the customer's relationship with the business, from the initial awareness and consideration stages through the purchase decision, post-purchase support, and potential future engagement. https://www.zendesk.com/blog/fantastic-voyage-customer-journey- mapping-well-worth-effort/ 49  mar keti ng.uni - gr a z.at Touchpoints  Touchpoints are specific interactions or points of contact that occur between a customer and a business or brand during the customer journey. These interactions can happen at various stages of the customer journey, and they play a crucial role in shaping the customer's overall experience and perception of the brand. Touchpoints can be both physical and digital, and they encompass various forms of communication and engagement.  Understanding and managing these touchpoints is crucial for businesses because they can greatly influence customer perceptions, satisfaction, and loyalty. By mapping the customer journey and identifying these touchpoints, companies can tailor their marketing, sales, and customer service efforts to create a more positive and consistent customer experience. https://www.ecr.digital/whitepaper/omni-shopper-journey- guidebook-englisch/ 50  mar keti ng.uni - gr a z.at Example of Touchpoints during a Customer Journey https://www.ecr.digital/whitepaper/omni-shopper-journey- guidebook-englisch/ 51  mar keti ng.uni - gr a z.at Touchpoints by Buying Stage  Touchpoints can occur during all three phases of the customer journey, that is, before purchase (pre-purchase phase), during the purchasing process (purchase phase), and after the purchase has been completed (post- purchase). Here are some examples of touchpoints that can typically appear during an a FMCG shopper journey: https://www.ecr.digital/whitepaper/omni-shopper-journey- guidebook-englisch/ 52  mar keti ng.uni - gr a z.at Touchpoints by Channels  Internet and digital marketing offer a wide array of digital touchpoints, making a categorization by channels is useful. A basic distinction can be made between offline and online touchpoints. In addition, some touchpoints can involve more than one channel so that they can be characterized as “omni-channel” touchpoints. Especially omni- channel touchpoints allow gaining shopper insights in both directions, i.e., from online to offline and from offline to online. Here are some examples: https://www.ecr.digital/whitepaper/omni-shopper-journey- guidebook-englisch/ 53  mar keti ng.uni - gr a z.at Touchpoints by Creator (1)  Usually, companies create a large number of touchpoints themselves. They also cooperate with other companies to disseminate them among shoppers, for example with advertising media. However, consumers and shoppers can also create touchpoints. These are very difficult to control, but from the customer’s viewpoint, they can be very effective.  Paid touchpoints are created by placing paid advertisements in different media. In this case, the consumer perceives the touchpoint not directly as coming from the company, but via the medium in which the advertisement is posted. This usually increases the reach of touchpoints. In classic advertising, control of the touchpoint is high; in digital advertising, the placement of advertisements depends on the media’s algorithms which may limit control over what the touchpoint looks like.  Owned touchpoints are managed and controlled by the respective company or companies (if done collaboratively). Control over such touchpoints is usually high.  The final category is earned touchpoints. These touchpoints are entirely created by customers or other organizations independently and without any compensation by the marketer. Such touchpoints can be very effective, as shoppers usually trust other customers to a larger extent than companies. On the other hand, control over the touchpoints themselves is very limited, as companies cannot directly influence customers’ expressions concerning a product or company. https://www.ecr.digital/whitepaper/omni-shopper-journey- guidebook-englisch/ 54  mar keti ng.uni - gr a z.at Touchpoints by Creator (2) https://www.ecr.digital/whitepaper/omni-shopper-journey- guidebook-englisch/ 55  mar keti ng.uni - gr a z.at Touchpoints by Sentiment  Being part of the customer experience, touchpoints leave impressions the customer. Such impressions are likely to be associated with feelings and emotions. Sentiment denotes whether these feelings are positive or negative. Although manufacturers and retailers strive to trigger positive emotions by touchpoints, there is no guarantee for touchpoints not to be perceived indifferently or even negatively. Therefore, we distinguish between positively perceived touchpoints (“Love Points”) and negatively experienced touchpoints (“Pain Points”) (Schüller, 2016). https://www.ecr.digital/whitepaper/omni-shopper-journey- guidebook-englisch/ 56  mar keti ng.uni - gr a z.at Communication Touchpoints along the Customer Journey Source: Chaffey/Ellis-Chadwick (2019): Digital Marketing 57  mar keti ng.uni - gr a z.at Customer Journey Analysis  In a customer journey analysis, firms focus on how customers interact with multiple touch points, moving from consideration, search, and purchase to postpurchase, consumption, and future engagement or repurchase.  The goals of the analysis are to describe this journey and understand the customer's options and choices for touch points in multiple purchase phases.  Customer journey analysis has its roots in both service management and multichannel management  Service blueprinting maps out the entire service delivery process from back-office internal processes to front-facing customer interactions. The methodology is often somewhat internally oriented in that it typically builds employee insights (e.g., through ideation or brainstorming) into the service delivery process and service design. Service blueprinting can provide a solid starting point for customer journey mapping.  Customer journey analysis should understand and map the journey from the customer perspective and, therefore, requires customer input. Source: Lemon/Verhoef (2016) 58  mar keti ng.uni - gr a z.at Customer Journey Mapping  A journey map is a visualization of the steps that a person goes through in order to reach a goal.  Customer (or buyer or user) journey mapping is the process of creating a visual map of all the touchpoints throughout a customer’s journey with your company, from discovery, to purchase, to post-purchase and retention. Customer Journey Mapping https://www.signavio.com/post/customer-journey-mapping/#h- what-is-customer-journey-mapping-cjm 59  mar keti ng.uni - gr a z.at Steps in Customer Journey Mapping  Research: Gather data on customer interactions, touchpoints, and feedback.  Persona Creation: Develop customer personas to represent different segments.  Mapping: Create a visual representation of the customer journey.  Identify Touchpoints: Pinpoint areas where customers interact with your brand.  Emotions and Pain Points: Mark emotional highs and lows, pain points, and opportunities.  Analysis: Analyze the map to find areas for improvement.  Action Plan: Develop strategies to enhance the customer experience. Persona Creation 60 61 Persona Creation mar keti ng.uni - gr a z.at  mar keti ng.uni - gr a z.at Benefits of Customer Journey Mapping  Enhanced Customer Experience: Understand and meet customer needs and expectations.  Increased Customer Loyalty: Improve retention and build brand loyalty.  Better Marketing and Sales: Targeted marketing and sales strategies.  Efficiency and Cost Reduction: Streamline operations and reduce costs. 62  mar keti ng.uni - gr a z.at Applications of Customer Journey Mapping  Product Development: Create products tailored to customer needs.  Customer Support: Improve support and issue resolution.  Marketing Strategy: Develop targeted marketing campaigns.  Website/App Optimization: Enhance user experience online. 63  mar keti ng.uni - gr a z.at Format or style of journey maps  There is no one format or style for developing journey maps, however most journey maps include these elements:  Persona (or actor): the typical customer or user the map is about.  Scenario: the desired action or goal the persona is trying to accomplish.  Actions: steps completed by the persona and by others during the journey.  Motivations: user thoughts, emotions, why the persona did something.  Moments of truth: points of pain or delight that make or break the journey for the persona.  Opportunities: where the journey can be improved. Opportunities make the map actionable. Have a look here! https://www.signavio.com/post/customer-journey-mapping/#h- what-is-customer-journey-mapping-cjm 64  mar keti ng.uni - gr a z.at An example of a customer journey map Quelle: Chaffey/Ellis-Chadwick (2019): Digital Marketing 65  mar keti ng.uni - gr a z.at Software tool: Custellence 66  mar keti ng.uni - gr a z.at Define, for whom you create the customer journey. Describe that person in a few words. What journey do you depict? What is the desired goal the person is trying to accomplish? What is the motivation what are the needs of the person in each step? What do they think? What are their emotions? Are there any points of pain or delight that make or break the journey for the person? What touchpoints does the person come into contact with? What can the company do/improve to make the journey an enjoyable experience? 67  mar keti ng.uni - gr a z.at Outcomes of Customer Journey Maps  The outcomes of customer journey mapping are varied.  Most at least provide insights into the company that help to bring a reality forward that it's not what a company has designed and wants to sell but what the customer wants to buy.  In addition, it exposes where to spend resources to ensure that the company is competitive and has its finger on the customers' pulse.  Some of the more tactical outputs tend to be:  Low-hanging fruit. Quick fixes or opportunities that don't require a lot of time or resources to provide revenue or customer engagement/retention.  Performance metrics/dashboard recommendations. What key pivot points really make a difference versus sometimes too inwardly facing metrics.  Input into standard operating procedures (SOP) document. How you should be interacting, over what channel, and with what messaging and cadence. This ties to communication and precision campaign plans as well.  Road map initiative charters. Next steps for bigger projects.  Post-project planning for continuous improvement. Mapping will be revisited at frequent intervals to ensure that there is progress and to reveal other areas requiring improvement or offering opportunity. Source: Peppers/Rogers (2022) 68  mar keti ng.uni - gr a z.at Managing Touchpoints and the Customer Journey WS 2024/25 1 2 MANAGING RELATIONSHIPS 2 mar keti ng.uni - gr a z.at  mar keti ng.uni - gr a z.at Focus on Relationship Equity  Shifting the focus from product sales transactions to relationship equity.  But: not all customers are equal.  Enterprises need to decide early on which customers they want to have relationships with, which they do not, and what type of relationships to nurture  differentiation  The advantages growing Learning Relationships with valuable and potentially valuable customers:  much of what is sold to the customer may be customized to his precise needs, the enterprise can, for example, potentially charge a premium (as the customer may be less price sensitive to customized products and services in exchange for convenience or specificity) and increase its profit margin.  The product or service is worth more to the customer because he has helped shape and mold it to his own specifications. The product or service, in essence, has become decommoditized and is now uniquely valuable to this particular customer. 3  mar keti ng.uni - gr a z.at Learning Relationships  The customer experience, based on interaction with the customer using information not available to competitors improves the customer relationship, increases loyalty and lifetime value of the customer, and positively influences other customers as well.  The foundation for growing a profitable customer-strategy enterprise lies in establishing stronger relationships with individual customers, paving a path to profitability by focusing on the different experiences of individual customers and fostering stronger relationships with them over time.  The challenge is understanding how best to establish these relationships, optimize them, and create more value from customers. Learning Relationships provide a ready path for generating long-term, competitively strong customer value.  The key is to design products, services, and communications that customers value, and on which a customer and a marketer will have to collaborate for the customer to receive the product, service, or benefit.  Learning Relationships have less to do with creating a fondness on the part of a customer for a particular product or brand and more to do with a company's capability to remember and deliver based on prior interactions with a customer. 4  mar keti ng.uni - gr a z.at Managing Customer Relationships Analytical CRM Operational CRM …customers as uniquely … customers, by their …more cost - …some aspect of the addressable individuals value and their needs, efficiently and company’s behavior or individually effectively offerings Customer Insight Customer Experience 5 ©2022 Don Peppers and Martha Rogers, used with permission to accompany Managing Customer Experience and Relationships: A Strategic Framework, 4th edition (Wiley, 2022)  mar keti ng.uni - gr a z.at Managing Customer Relationships …customers as uniquely … customers, by their …more cost - …some aspect of the addressable individuals value and their needs, efficiently and company’s behavior or individually effectively offerings Customer Insight Customer Experience 6 ©2022 Don Peppers and Martha Rogers, used with permission to accompany Managing Customer Experience and Relationships: A Strategic Framework, 4th edition (Wiley, 2022)  mar keti ng.uni - gr a z.at Individual Information requires Customer Recognition (1)  Relationships are possible only with individuals  identifying, individually, the party at the other end of the relationship.  Enterprises need to  organize the enterprise's various information resources so that the company can take a customer-specific view of its business  ensure that the company has a mechanism for tagging individual customers not just with a product code that identifies what's been sold but also with a customer code that identifies the party that the enterprise is doing business with  recognize a customer when they come back, in person, by phone, online, by mobile app, or wherever.  know and remember each customer in as much detail as possible—including the habits, preferences, and other characteristics that make each customer unique We recognize you Through any location or medium or device Across time We remember what we learn about you We can see you as an individual, not just as part of a group Even if we don’t know your name 7 ©2022 Don Peppers and Martha Rogers, used with permission to accompany Managing Customer Experience and Relationships: A Strategic Framework, 4th edition (Wiley, 2022)  mar keti ng.uni - gr a z.at Individual Information requires Customer Recognition (2)  Identification doesn't require having a customer's name or driver's license number so long as the customer can be accurately identified by login credentials, or by mobile phone number, email address, membership number, or in any other reliable manner.  To engage in an ongoing, individual relationship, the enterprise must be capable of knowing that this particular individual on the website right now is the same individual who came to the website yesterday, or who bought from the store last week, or who returned a product a month ago by mail.  “Treating different customers differently.”  Step 1: How Much Customer Identification Does a Company Already Have?  Inventory of customer data  Save in one place!  Purchase data?  Step 2: Get Customers to Identify Themselves, and Make Sure to Identify Customers Accurately Through Any Channel  Collect data through contests/events/loyalty programs  Link all data to purchase/service transaction behavior  Analyze past behavior 8 ©2022 Don Peppers and Martha Rogers, used with permission to accompany Managing Customer Experience and Relationships: A Strategic Framework, 4th edition (Wiley, 2022)  mar keti ng.uni - gr a z.at What does “identify” mean?  Identification Activities  Decide what information will comprise each actual customer's identity: Is it a username, email address, mobile phone number, mobile app identity, account number?  Customer's identity must be used to link the customer to all their transactions and interactions with enterprise, at all points of contact, among all different operating units and divisions, across all product lines, and through time. The goal is to see each customer as one complete customer, and not as a series of independent events, people, or contacts.  The customer's identity must be integrated into the information systems. E.g., frequent-flyer identities need to be integrated into the flight reservations data system.  The customer who returns to a different part of the organization needs to be recognized as the same customer, not a different one. In other words, the customer who visits the website today, goes into the store or the bank branch tomorrow, and calls the toll-free number next week needs to be recognized as the same customer, not three separate events or visitors.  Identifying information must be linked, stored, and maintained in one or several electronic databases.  All customer data, including customer-identifying data, is subject to change and must be regularly verified, updated, improved, or revised.  Customer identities must serve as the key inputs for analyzing individual customer differences.  The data in databases must be made available to the people and functions within the enterprise that need access to it.  It is critical to secure this information to prevent its unauthorized use. 9 ©2022 Don Peppers and Martha Rogers, used with permission to accompany Managing Customer Experience and Relationships: A Strategic Framework, 4th edition (Wiley, 2022)  mar keti ng.uni - gr a z.at What data do we need when we identify a customer?  Data used to identify customers  Descriptive data, sometimes still referred to as demographic data includes details such as age, income, education level, marital status, household composition, gender, home ownership, livelihood, and so on.  Behavioral data, such as purchase and buying habits, clickstream data gleaned from the way a website visitor clicks through the firm's website, interactions with the company, chosen communication channels, language used, product consumption, and company share of wallet.  Attitudinal data, reflecting attitudes about products, such as satisfaction levels, perceived competitive positioning, desired features, and unmet needs as well as lifestyles, brand preferences, social and personal values, opinions, and the like. 10 ©2022 Don Peppers and Martha Rogers, used with permission to accompany Managing Customer Experience and Relationships: A Strategic Framework, 4th edition (Wiley, 2022)  mar keti ng.uni - gr a z.at Why is identification important?  The central purpose of collecting customer information is to enable the development of closer, more profitable relationships with individual customers by creating consistently better experiences for each of them  build Learning Relationships  These relationships will be facilitated by the availability to the enterprise of information that will make the customer's next transaction simpler, faster, or cheaper.  Make a customer feel they are valued by the company  Become more efficient in serving a customer  Good for the company  Good for the customer 11  mar keti ng.uni - gr a z.at Managing Customer Relationships …customers as uniquely … customers, by their …more cost - …some aspect of the addressable individuals value and their needs, efficiently and company’s behavior or individually effectively offerings Customer Insight Customer Experience 12 ©2022 Don Peppers and Martha Rogers, used with permission to accompany Managing Customer Experience and Relationships: A Strategic Framework, 4th edition (Wiley, 2022)  mar keti ng.uni - gr a z.at Value Creation (1)  All value created by a business comes from customers.  Without a customer or client, at some level, no business can create any shareholder value at all.  By definition, a business exists to create and serve customers and, in so doing, to generate economic value for its stakeholders.  Some customers will create more value for a business than others will, and understanding the differences among customers, in terms of the value they each will or could create, is critical to managing individual customer relationships.  The entire value proposition between an enterprise and a customer can be captured in terms of  the value the customer provides for the firm and  the value the firm provides for the customer (i.e., what needs the firm can meet for the customer). 13 ©2022 Don Peppers and Martha Rogers, used with permission to accompany Managing Customer Experience and Relationships: A Strategic Framework, 4th edition (Wiley, 2022)  mar keti ng.uni - gr a z.at Value Creation (2) Customer Customer Customer drive which generate Needs Behaviors Value 50 Convenience 40 Comfort 30 Price 20 10 0 An individual customer’s The individual customer’s The value created by an needs are the internally observable behaviors (buying, individual customer’s held motivations that upgrading, asking for service, observable behaviors will drive the behaviors of interacting, etc.) are what generate be different for different that customer value for the enterprise customers 14 ©2022 Don Peppers and Martha Rogers, used with permission to accompany Managing Customer Experience and Relationships: A Strategic Framework, 4th edition (Wiley, 2022)  mar keti ng.uni - gr a z.at Customer Value is a future-oriented Variable  Knowing which customers are most valuable and least valuable to the enterprise will enable a company to prioritize its competitive efforts, allocating relatively more time, effort, and resources to those customers likely to yield higher returns.  To think about customer valuation, therefore, we need to use two different but related concepts:  Actual Lifetime Value: “The net present value of the future financial contributions attributable to a customer, behaving as we expect him to behave -- knowing what we know now, and with no different actions on our part.”  Potential Lifetime Value: “The net present value of the future financial contributions that could be attributed to a customer, if through conscious action we succeed in changing the customer’s behavior.”  A firm's opportunity for organic growth is directly related to the unrealized potential values of its current and future customers  Growing Share of Customer  Unrealized potential value: the amount by which the enterprise could increase the value of a particular customer if it applied some effort to do so  to have a greater and greater share of that customer's business. (Share of customer (SOC): divide a customer's actual value by the customer's potential value) 15  mar keti ng.uni - gr a z.at Assessing a Customer's Potential Value  What questions/aspects should be looked into, to assess a particular customer's potential value?  How much of the customer's business currently goes to your competition but might be pried away with the right approach or relationship?  How much more of a customer's business could you capture if you modify your treatment of them? If you improve their experience with you?  How many more product lines might the customer buy from you? What other services or products could you sell the customer if you had the products available?  The customer has needs you know about and cater to, but how can you identify the needs you don't yet know about?  How much could you reduce the cost of serving this customer, while maintaining their satisfaction?  How much could this customer be worth in terms of referrals, social sharing, and other nonmonetary contributions? How does this customer treat people in their social networks—and how much positive social influence do they have as a result? How might this translate into profitable word of mouth? Don‘t forget the customer's perspective! Potential value has to do with the customer's need. This is important: The outside limit of any customer's value is defined by the customer's need, not by your current product or service offering. 16  mar keti ng.uni - gr a z.at Different Customers have different Values  Increasing a customer's value encompasses the central mission of an enterprise: to get, keep, and grow its customers.  When it understands the value of individual customers relative to other customers, an enterprise can allocate its resources more effectively, because it is quite likely that a small proportion of its most valuable customers will account for a large proportion of the enterprise's profitability.  This is an important principle of customer differentiation, and at its core is what is known as the Pareto principle, which asserts that 80% of any enterprise's business comes from just 20% of its customers. The Pareto principle: 80% of any enterprise's business comes from just 20% of its customers. 17  mar keti ng.uni - gr a z.at ABC Analysis to segment customers  ABC analysis is a method of analysis that divides the subject up into three categories: A, B and C.  The segmentation allows you to pinpoint your most valuable customers. It then allows you to examine them separately so that you can form a plan of action. When you can look at things in three different categories, it is easier to allocate your resources in a more strategic way.  Category A represents the most valuable customers that you have. These are the customers that contribute heavily to your overall profit without eating up too much of your resources. This category will be the smallest category reserved exclusively for your biggest money makers.  Category B represents your middle of the road customers. Many wrongly approach this group as those who contribute to the bottom line but aren’t significant enough to receive a lot of attention. Category B is all about potential. The members of this category can, with some encouragement, be developed into category A customers.  Category C is all about the hundreds of tiny transactions that are essential for profit but don’t individually contribute much value to the company. This is the category where most of your customers will live. It is also the category where you must try to automate sales as much as possible to drive down overhead costs. Click here for more information on how to perform an ABC Analysis. Source: https://www.cleverism.com/complete-guide-abc-analysis- customer-segmentation-inventory/ 18  mar keti ng.uni - gr a z.at Example of the ABC customer analysis (1)  A company wants to determine which customers should be allowed access to a special service hotline in the future. To do this, the customers must be qualified in terms of the sales they have generated.  First, a list of all customers is created. The next step is to determine how many orders were placed in the period under review, what the average order value was and what impact this has on total sales. Now the ABC analysis is carried out.This only makes sense if the sales achieved differ, i.e. if different customers have contributed to different levels of sales. If they are largely the same, the ABC classification does not work. If there are differences in customer orders, this may look as follows: Rank Customer Number of orders Average order value Turnover Class 1 Schmitt 54 1.300 Euro 70.200 Euro A 2 Müller 29 1.050 Euro 30.450 Euro B 3 Lüdenscheid 38 370 Euro 14.060 Euro C 4 Meier 3 400 Euro 1.200 Euro C 5 Hornbek 20 1.100 Euro 22.000 Euro B  The tabular analysis can now be presented in the form of a diagram, a staircase diagram or a Lorenz curve.  For our example company, this means that the customer Schmitt with the highest turnover share is included in the new service hotline. 19  mar keti ng.uni - gr a z.at Example of the ABC customer analysis (2)  Other ways of rewarding the A customer could be discounts, faster delivery times or special invitations to events or demonstrations.  Each company decides for itself where to draw the line for the categorization of A, B and C; there are no external guidelines.  B and C customers, who account for a smaller proportion of sales, must also be considered. It is now necessary to determine whether these are "support-intensive", i.e. whether they tie up a high level of resources through inquiries, telephone calls, complaints, etc., which do not have a positive effect on sales. These tie up resources that do not have a positive impact on sales.  However, at this point we have reached a weak point in ABC customer analysis. The bare figures say nothing about the reasons for customer behavior. For example, the customer Meier may be someone who has a high order potential, but this cannot yet be recognized at the time of the analysis. It is possible that the C-customer Meier will soon become an A-customer. However, the ABC customer analysis does not initially provide any information about this. 20  mar keti ng.uni - gr a z.at Customer value categories (1) Unrealized Potential LTV  Every customer has an actual value and a potential value. Most Growable Super growth Customers  By visualizing the customer base in HIGH Objective: Invest to terms of how customers are distributed maximize growth; Differentiate by customer across actual and potential values, needs Objective: Retain and invest managers can categorize customers into different value profiles, based on the Low maintenance Most Valuable Customer type of financial goal the enterprise wants to achieve with each customer. LOW Objective: Retention, Objective: automate account management  For instance, one of a company's goals processes for a customer with a high unrealized potential value would be to grow its share of customer (in order to realize Below Zero LOW HIGH some of this value), while one of the Customers Actual LTV goals for a customer with low actual Revise the value value and low potential value would be proposition to minimize servicing costs. 21  mar keti ng.uni - gr a z.at Differentiate customers by needs (1)  The reason any single customer creates value for a business is that a customer sees the business as a way to meet that particular customer's own individual needs.  Individual customer valuation methods are fairly well established as an important stepping-stone for managing the customer-strategy. But differentiating customers based on their needs is in some ways a more challenging goal, not so widely practiced by companies in a formal way.  Needs differentiation of customers involves using feedback from an identifiable, individual customer to predict that customer's needs better than any competitor can who doesn't have that feedback.  It is what a customer needs from an enterprise that is the driving force behind the customer's behavior. Needs represent the why (and often, the how) behind a customer's actions. How customers want to buy may be as important as why they want to buy. 22  mar keti ng.uni - gr a z.at Differentiate customers by needs (2)  Only by knowing what a customer needs a product's features and attributes to do for them can the enterprise truly understand the customer experience, not from the perspective of the product that was sold, but from the perspective of the customer that bought it.  The point is that by taking each different customer's own individual perspective—by seeking to understand each different customer's needs beyond any demographic measurements—will more easily be able to influence customer behavior by meeting their needs better, and changing the future behavior of a customer by becoming more valuable to them is the key to realizing additional value from that customer.  Companies now have comprehensive systems and processes to capture and store customer data covering almost every aspect of a customer's relationship with a firm. Descriptive characteristics such as gender, age and income, along with behavioral and transactional data such as interactions, purchases, payments, and service requests—all this information can be captured and stored by the enterprise. 23  mar keti ng.uni - gr a z.at Differentiate customers by needs (3)  The customer's needs are based on the customer's own life and emotions, memories, thoughts, and beliefs.  Customer's actual behaviors are observable. The enterprise can work backward from a customer's observable behaviors in order to make inferences about the most likely needs that drove those behaviors.  Every single activity undertaken by a customer to evaluate, purchase, use, and/or dispose of any good or service offered by a company is subject to being observed and captured in a transactional record—a data record that can be used to deduce the particular needs that underlie this behavior or collection of behaviors.  When we talk about a customer's need we're talking about what the customer wants, prefers, or wishes. By contrast, customer behavior consists of what a person does in order to satisfy this internally felt need. As we said, behaviors are the what of a customer's actions, but needs are the why behind those observable behaviors. 24  mar keti ng.uni - gr a z.at Needs Drive Behaviors Different Customer Behaviors indicate Different Customer Needs Convenience Comfort Price By observing an individual customer’s While we can never know an individual behaviors an enterprise can infer what customer’s observable needs particular needs on the customers’s part precisely, the more behaviors we actually drove those behavior. observe for any customer, the more accurately we can infer them. 25 ©2022 Don Peppers and Martha Rogers, used with permission to accompany Managing Customer Experience and Relationships: A Strategic Framework, 4th edition (Wiley, 2022)  mar keti ng.uni - gr a z.at Categorizing customers by their needs (1)  In order to take action based on different customers and their different needs, we must categorize our customers into different groups based on these needs.  Clearly, for most enterprises serving thousands, or millions, of customers, it would be too costly to treat every single customer with a custom-designed set of product features or services. Instead, by using information technology firms categorize customers into finer and finer groups, based on what is known about each customer, and then match each group with an appropriately mass-customized product-and-service offering.  There are many dimensions and nuances to customer needs. For consumers, there are deeply held beliefs, psychological predispositions, life stages, moods, ambitions, and the like. 26  mar keti ng.uni - gr a z.at Categorizing customers by their needs (2)  Market segmentation is a highly developed, sophisticated discipline, but it is based primarily on products and the appeal of product benefits rather than on customers and their broader set of needs. To address customers as different types of customers it is necessary to think beyond market segmentation per se  place customers into portfolios based primarily on type of need.  A market segment is made up of customers who have a similar attribute, while a customer portfolio is made up of customers who have similar needs.  A customer can easily be a member of multiple segments (i.e., the segment of male customers, and the segment of middle-class customers, and the segment of unmarried customers), but he should be a member of one and only one customer portfolio, because it is the portfolio that will determine how the enterprise treats that customer, when it strives to treat different customers differently. If a customer were a member of two different portfolios, he would be treated as if he were two different customers. 27  mar keti ng.uni - gr a z.at Understanding needs  Can be situational in nature  Can be dynamic and change over time  Customers have different intensities of needs and different needs profiles  Customer needs often correlate with customer values  The most fundamental needs are psychological  Some needs are individual; some are shared by others  There is no single best way to differentiate customers by their needs 28  mar keti ng.uni - gr a z.at Managing Customer Relationships Analytical CRM Operational CRM …customers as uniquely … customers, by their …more cost - …some aspect of the addressable individuals value and their needs, efficiently and company’s behavior or individually effectively offerings Customer Insight Customer Experience 29 ©2022 Don Peppers and Martha Rogers, used with permission to accompany Managing Customer Experience and Relationships: A Strategic Framework, 4th edition (Wiley, 2022)  mar keti ng.uni - gr a z.at Interact to Learn and Collaborate  The enterprise is no longer merely talking to a customer during a transaction and then waiting (or hoping) the customer will return again to buy. Interacting with individual customers becomes a mutually beneficial experience.  The enterprise learns about the customer so it can understand their value to the enterprise and their individual needs.  The customer learns about becoming a more proficient consumer or purchasing agent for a business.  The focus shifts from a one-way message or a onetime sale to a continuous, iterative process, which moves both customer and enterprise from a transactional approach to a relationship- based approach.  The goal of the process is to be more and more satisfying for the customer, as the enterprise's Learning Relationship with that customer improves.  The result of this collaboration, if it is to be successful, is that both the customer and the enterprise will benefit and want to continue to work together.  This is no longer about generating messages about your organization. This is about generating feedback. 30 ©2022 Don Peppers and Martha Rogers, used with permission to accompany Managing Customer Experience and Relationships: A Strategic Framework, 4th edition (Wiley, 2022)  mar keti ng.uni - gr a z.at Dialogue with the customer  Conducting a dialogue with a customer might mean handling a customer inquiry or gathering background information on the customer.  Many customers are simply not willing to converse with enterprises.  For an enterprise to engage a customer in a productive, mutually beneficial dialogue, it must conduct interesting conversations with an individual customer, on their terms, learning a little at a time, instead of trying to sell more products every time it converses with them.  Ubiquitous interactivity is one of the three technological developments (along with databases and mass customization capabilities) that have allowed large enterprises serving millions of customers to build individual relationships with these customers, one customer at a time.  Two-way interactivity makes it possible for the customer to gain access to information about the products offered by an enterprise all by herself, not just by turning to the company's own website, but by soliciting others' opinions and experiences, or consulting review website.  The customer no longer has to rely on advertising and marketing messages at all or rely on making a phone call or having a face-to-face conversation when they have a question about the enterprise's product or service. They expect to find an answer to their question on the website. 31 ©2022 Don Peppers and Martha Rogers, used with permission to accompany Managing Customer Experience and Relationships: A Strategic Framework, 4th edition (Wiley, 2022)  mar keti ng.uni - gr a z.at Golden questions to find out about needs  Ideal: ask every customer to complete an extensive questionnaire with respect to a customer's goals, plans, preferences, and desires  Golden Questions:  Interactions that reveal information about an individual customer's underlying need or potential value.  Don’t have to be questions. They can also be interactions that offer customers choices or options that are designed to help the enterprise learn about a customer's needs or other characteristics.  Pet shop: “Last year, did you give your pet a holiday present?”  To incentivize owners to sign up for the program, a car company was prepared to offer a gift for joining. Market research showed that while most owners were in fact young men, a substantial minority were mothers, often with young children, while others were larger families, where this car served as a second car. New members could choose one of three gifts: racing gloves, or a package of three children's videos, or a collapsible umbrella and road atlas  Choice of gift constituted a Golden Question, revealing a great deal about the new member and how to better serve them in the future. 32  mar keti ng.uni - gr a z.at Complaining customers: Hidden assets? (1)  Customers generally contact an enterprise of their own volition for only three reasons: to get information, to obtain a product or service, or to make a suggestion or a complaint.  96% of customers who have complaints don't voice them to the enterprise directly; however, more than half voice their complaints to others.  Customers who have complaints about customer service issues tell an average of 15 of their friends, family members, and even casual acquaintances.  And with ever more frequency they also post such complaints on social media, where they will often be seen by hundreds or more. 33 ©2022 Don Peppers and Martha Rogers, used with permission to accompany Managing Customer Experience and Relationships: A Strategic Framework, 4th edition (Wiley, 2022)