MG3605 DATABASE AND

CUSTOMER RELATIONSHIP
MARKETING
CUSTOMER STRATEGY & ANALYSIS

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 CLASSES VS COURSEWORK
Lecture Study Theme Parts of the report:
1 Introduction
2. Analysis of customer base
Consumer Loyalty & Customer and selection of target
2
focused strategy customer
Segmentation by value and
3 3. Selection of segmentation
response bases
4 Customer data 4. Plan the customer
database
5 Targeting approaches
6 Incentives
7 Media 5. CRM programme
8 Creative execution
9 Testing and Budgeting
10 Revision and Q&A
11 Coursework clinic
Coursework due on 5th April 2022
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 LEARNING
OBJECTIVES
UNDERSTAND THE KEY STEPS IN DEVELOPING A CUSTOMER
FOCUSED STRATEGY
ASSESS WHEN TO FOCUS ON CUSTOMER VS PRODUCT
DECIDE HOW TO PRIORITISE RETENTION VS. ACQUISITION
GOALS
DECIDE WHICH CUSTOMERS TO TARGET
DECIDE HOW TO TARGET CUSTOMERS NEW TO BRAND VS.
NEW TO MARKET
IDENTIFY AREAS THAT NEED REVISION OR CONSOLIDATION

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TWO VERY DIFFERENT APPROACHES:

Customer centered marketing

Product centered marketing

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THE FOUR KEY DECISIONS OF A CUSTOMER
FOCUSED STRATEGY:

Decision 1: Role of product vs customer centered

marketing
Decision 2: Customer retention vs. acquisition

Decision 3: Who to retain and how

Decision 4: Who to attract and how

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PRODUCT VS. CUSTOMER
WHEN TO COMPETE BASED ON PRODUCT VALUE
VS. WHEN TO COMPETE BASED ON CUSTOMER 6

VALUE?
PRODUCT VS. CUSTOMER
WHEN TO COMPETE BASED ON PRODUCT VALUE VS WHEN TO COMPETE BASED ON
CUSTOMER VALUE?

Market penetration Market

development

Product Diversification
development

Ansoff’s Matrix 7
PRODUCT
VS.
CUSTOMER
FOCUS ON CRM WHEN…

• PROFITABILITY
DEPENDS ON
LOYALTY OF
EXISTING
CUSTOMERS

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PRODUCT VS. CUSTOMER
FOCUS ON CRM WHEN…
• PARETO PRINCIPLE APPLIES TO THE RELATIONSHIP BETWEEN
CUSTOMERS AND PROFIT

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Source: http://mirekcerny.com/2015/08/29/8020-rule-pareto-principle/
 PRODUCT VS. CUSTOMER
FOCUS ON CRM WHEN…
• PROFITABILITY DEPENDS ON LOYALTY OF EXISTING
CUSTOMERS
• PARETO PRINCIPLE APPLIES TO THE RELATIONSHIP
BETWEEN CUSTOMERS AND PROFIT
• INTERNET ACTIVITY IS LIKELY TO BE HIGH – E.G., WEB-
BASED SALES, INFORMATION SEARCH, VIRAL
MARKETING…
• THERE IS SCOPE FOR DIFFERENTIATING PRODUCT
OFFERING
• HIGH GROSS MARGIN OF SALES AND/ OR CUSTOMER
LIFETIME VALUE
• TARGET AUDIENCE IS RELATIVELY SMALL AND WELL
DEFINED
• THERE IS SCOPE TO GATHER CUSTOMER INFORMATION
DETAILS AND HOLD THEM ON A DATABASE
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Product vs. customer
Business objectives

Operational Acc & finance …

Marketing objectives
objectives objectives

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Product vs. customer Muhtar Kent, Chairman and CEO
of The Coca-Cola Company:
“Long-term high single-digit EPS
growth target … our operating
Business objectives income metric to profit before
tax”

Operational Acc & finance …

Marketing objectives
objectives objectives

Source: http://www.coca-colacompany.com/press-center/press-releases/the-coca-cola-company-announces-actions-to-drive-
stronger-growth
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Product vs. customer Muhtar Kent, Chairman and CEO
of The Coca-Cola Company:
“Long-term high single-digit EPS
growth target … our operating
Business objectives income metric to profit before
tax”

Operational Acc & finance …

Marketing objectives
objectives objectives

General marketing
CRM objectives
objectives

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Product vs. customer Muhtar Kent, Chairman and CEO
of The Coca-Cola Company:
“Long-term high single-digit EPS
growth target … our operating
Business objectives income metric to profit before
tax”

Operational Acc & finance …

Marketing objectives
objectives objectives

General marketing
CRM objectives
objectives
• Branding • Targeted advertising to sell more to existing
• New product development customers (e.g., restaurants)
• Increase unit price • Get existing customers to recommend product to their
• New retail outlets friends (e.g., Share a Coke campaign)
• etc… • Etc… 14
 THE FOUR KEY DECISIONS OF A
CUSTOMER FOCUSED STRATEGY:

Decision 1: Role of product vs customer centered marketing

Decision 2: Customer retention vs. acquisition

Decision 3: Who to retain and how

Decision 4: Who to attract and how

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EXISTING VS. NEW CUSTOMERS
GIVEN THAT WE HAVE LIMITED RESOURCES, HOW DO WE
PRIORITISE BETWEEN CUSTOMER RETENTION VS ACQUISITION?

Existing New

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EXISTING VS. NEW CUSTOMERS
• ACQUISITION VS. RETENTION TEST:
• ESTABLISH THE LOWEST COST OF
ACQUIRING A NEW CUSTOMER
• ESTABLISH HOW MUCH TO SPENT TO
OBTAIN THE SAME SALE FROM AN
EXISTING CUSTOMER
• IF 1 > 2 = FOCUS ON RETENTION
• IF 1 < 2 = FOCUS ON ACQUISITION
• WEAKNESS: SHORT TERM VS LONG TERM
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VIEW
EXISTING VS. NEW CUSTOMERS
WHAT WE MEAN…

Existing New

• Defend market share by keeping existing customers ( ? )

• Improve existing customer profitability by increasing existing customers’
spend ( ? ) 18
EXISTING VS. NEW CUSTOMERS
WHAT WE MEAN…

Existing New

• Defend market share by keeping existing customers (true friends)

• Improve existing customer profitability by increasing existing
customers’ spend (barnacles) 19
EXISTING VS. NEW CUSTOMERS
WHAT WE MEAN…
Existing
• Defend market share by keeping existing
customers (true friends)
• Improve existing customer profitability by
increasing existing customers’ spend (barnacles)
New
• Improve existing market share by acquiring
customer from direct competitors (butterflies)
• Grow the market by acquiring customers from
new market development (strangers)
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EXISTING VS. NEW CUSTOMERS
WHAT SEEMS EASIEST: KEEP EXISTING CUSTOMERS OR
BRING NEW ONES TO THIS MARKET?

Existing New

• Defend market share by keeping existing • Improve existing market share by acquiring
customers (true friends) customer from direct competitors (butterflies)
• Improve existing customer profitability by • Grow the market by acquiring customers from
increasing existing customers’ spend (barnacles) new market development (strangers)
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EXISTING VS. NEW CUSTOMERS Low
CRM managers’ order of priorities:
1. Defend market share, by keeping existing
customers (true friends)

Cost, difficulty, information

2. Improve existing customer profitability, by
increasing existing customers’ spend
(barnacles)

needs, risk…
3. Improve existing market share, by
acquiring customer from direct competitors
(butterflies)
4. Grow the market, by acquiring customers
from new market development (strangers)
Why in this order??? High
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THE FOUR KEY DECISIONS OF A CUSTOMER
FOCUSED STRATEGY:
Decision 1: Role of product vs customer centered
marketing
Decision 2: Customer retention vs. acquisition

Decision 3: Who to retain and how

Decision 4: Who to attract and how

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3. CUSTOMER RETENTION

• TWO STEPS:
• WHICH CUSTOMERS DO WE WANT TO
KEEP?
• VALUABLE CUSTOMERS
• CURRENT (BEHAVIOURAL
LOYALTY)
• POTENTIAL (ATTITUDINAL
LOYALTY) 24
3. CUSTOMER RETENTION
BUTTERFLIES TRUE FRIENDS
Profitable, but variety- Drive majority of overall
High seeking or brand-switching profits. Good fit between
Profitability customers. company’s offerings and
customers’ needs.

STRANGERS BARNACLES
No profit. Poor fit between Low contribution to the
Low company’s offerings and overall profits.
Profitability customers’ needs.

Focus of loyalty programmes

One-off Loyal
Customers Customers
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 CUSTOMER
RETENTION

WHAT CAN WE OFFER TO

THOSE CUSTOMERS SO
THAT THEY CONTINUE
BUYING FROM US AND/OR
THEY INCREASE THEIR
SPEND?

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3. CUSTOMER RETENTION
BUTTERFLIES TRUE FRIENDS
Focus on profiting from Type 2: Encourage
High every transaction (e.g., attitudinal loyalty:
Profitability luggage, meals…). delighting customers, and
personalised interactions.
STRANGERS BARNACLES
Cease or limit marketing Type 1: Encourage
initiatives. (e.g., no behavioural loyalty: cross-
Low
Profitability advertising, low cost selling, up-selling, and/or
channels). increasing the size of
wallet.
Focus of loyalty programmes
One-off Loyal
Customers Customers
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THE FOUR KEY DECISIONS OF A CUSTOMER
FOCUSED STRATEGY:
Decision 1: Role of product vs customer centered
marketing
Decision 2: Customer retention vs. acquisition

Decision 3: Who to retain and how

Decision 4: Who to attract and how

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CUSTOMERS
ACQUISITION

• TWO STEPS:
• WHICH CUSTOMERS
DO WE WANT TO
ATTRACT?
• THOSE THAT
HAVE THE
POTENTIAL FOR
BEHAVIOURAL
OR
ATTITUDINAL
LOYALTY

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HOW TO
ATTRACT
CUSTOMERS
• TARGETING OPTIONS:
• CUSTOMERS
IDENTIFY THEMSELVES

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 ATTRACTING NEW
CUSTOMERS
• TARGETING OPTIONS:
• CUSTOMERS IDENTIFY THEMSELVES
• CUSTOMERS SIMILAR TO EXISTING
ONES

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 ATTRACTING NEW CUSTOMERS

• TARGETING OPTIONS:
• CUSTOMERS IDENTIFY
THEMSELVES
• CUSTOMERS SIMILAR
TO EXISTING ONES
• AFFINITY MARKETING

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HOW TO ATTRACT CUSTOMERS

Two steps:
2. What can we offer those customers to make them
switch from a competitor, or to enter the market?

• Comparative advantages • Barriers to entry

• Switching costs
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ATTRACTING NEW CUSTOMERS
• The formal product is important but other factors
are at work, too, such as:
• Trust (through Brand, referrals…)
• Quality assurance (e.g., warranties)
• Convenience (e.g., data transfers)
• Financial incentives (e.g., trade-ins)
Augmented product =>
support attributes

Expected product =>

valued attributes

Core product =>

benefit(s) sought
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e.g., insurance cancellations, frequent
product returns, promotional purchases
only, etc…
OR destroy value for other customers
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