Description
Customer Relationship Management (CRM) focuses on how businesses are undergoing transformation from the traditional mass marketing product centric approach of the industrial age to a customer centric approach of the industrial age. The main objective is to enhance relationships with profitable customers.
Principles of Managing Customer Relationships
Dr. Mallika Srivastava
Assistant Professor, SIBM, Pune
Email: [email protected]
Introduction
Customer Relationship Management (CRM) focuses on how businesses are
undergoing transformation from the traditional mass marketing product centric
approach of the industrial age to a customer centric approach of the industrial age.
The main objective is to enhance relationships with profitable customers. The basic
concept of CRM focuses on how businesses are undergoing a huge cultural shift-
transforming from the mass marketing, product centric approach of the industrial age
to the customer centric culture of the information era where the main objective is to
build relationship with more profitable individual customers. In this new business era
managing individual relationships means an organization which will use the
knowledge gained from these relationships to improve the overall quality of the
customer experience and give value to customers. So it becomes important for an
organization to understand how these relationships are formed and what constitutes
the relationships. Relationship is a state of affair existing between those having
relations or dealings. It could also be defined as state involving mutual dealings
between people or parties. Jim Barnes says that relationship between an organization
and their customers can exist at four different levels:
• Intimate relationship is characterized as personal and friendly and generally
involves the disclosure of personal information.
• Face to face customer relationship may or may not require the customer to
reveal personal information. Such relationships occur in retail store.
• Distant relationships involve less frequent interactions and might occur over the
telephone, online or through videoconferencing.
• No contact relationships rarely or never require a customer to interact with the
organization directly. Customers typically interact with the distributor or agent.
SIBM 16
Volume VI, No. 2 September 2013
Any meaningful relationship between a customer and a business enterprise begins
with the expectations of mutual benefits. Through such a relationship the customers
expect to:
• Realize cost savings
• Improve their decision making ability
• Reduce their risk by developing relationships with trusted companies, services
and products
• Acquire a solution that is tailored for their specific needs and budgets
• Realize the social and other value added benefits such as simplifying their choice
process.
And the motives of the business enterprise include:
• Gaining an advantage that cannot be easily be copied by the competitors
• Reducing the high costs of acquiring new customers
• Improving the forecasting and efficiency of their operations
• Reducing their exposure to risk
IDIC Model for building relationship
For an organization to build and manage relationships with their valuable customers,
it must engage in a four step process called as IDIC. The foundation of effective
Customer Relationship management is to built on an iterative process of learning and
customization. Peppers and Rogers (1993), the proponents of one-to-one marketing
proposed the Identify Differentiate Interact Customize (IDIC) framework to explain
the process of converting existing customers into loyal customers. The four key steps
in IDIC are:
1. Identity: This step requires the company to locate and contact a large number of
its customers directly and ascertain as much detail about them as possible
name, address, contact details, account details etc. Now this kind of information
cannot be collected easily or through a one- time questionnaire based activity.
Every interaction with the customer through any channel should be seen as an
opportunity to learn about them and this knowledge has to be used to serve
them better.
2. Differentiate: Customers need to differentiate on the basis of their value as well
as their needs. The value represents customer's worth to the company-higher
the value, more the company would be interested in retaining them. Though the
best way to estimate the value of the customer is in terms of revenue but this
can become risky if the cost to serve these customers is higher than their
revenue. Thus the ideal measure of customer value would be their contribution
towards profit which might be difficult to measure in many cases.
Some customers are satisfied with very standard products and services while
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Volume VI, No. 2 September 2013
others have very specific needs to be fulfilled. Such customers with specialized
needs can create opportunities for customization. Differentiation should help
the company tailor its offerings to each customer to reflect their values and
needs.
3. Interact: The purpose of interaction or customer interface is to gather as much
information as possible about the customers focusing more on the valuable
customers. These interactions can take place when the customer is making a
transaction, using any service or even while he is making a complaint. The
learning relationship gets smarter with each customer interface.
4. Customize: The last step is the most important as it is based upon all the
information that has been gathered about the customers to offer real value to
them by customizing some aspect of the service related to a product or even
mass customizing the product if required. If the customer is offered a product or
service on the basis of what he has indicated during his interactions, It helps in
improving the ability to fit the product and service to satisfy the needs of this
customer
.
This IDIC framework is useful in understanding the process to be adopted for building
relationship with existing customers. But it is also equally important to know the
stages through which a prospect becomes a customer and then a loyal customer.
Using interactive technology to build relationship
Managing individual customer relationships is a difficult, ongoing process that
evolves as the customer and the organization deepen their awareness and
involvement with each other. Relationship by its very definition is characterised by
two way communication between the two parties. So interacting with the customers
acquires a new importance for a customer centric organization aimed at creating and
cultivating relationship with individual customers. This becomes a mutually beneficial
experience. The interaction in essence becomes collaboration in which an
organization and the customer work together to make the transactions more
beneficial to both. The focus shifts from one way communication or a onetime sale to
a continuous, iterative process the goal of which is to increase the customer
satisfaction and in return developing the relationship with the organization.
Interaction techniques for a customer centric organization:
Dialogue requirements
This two way communication can be referred to as a dialogue. Before an organization
can be considered to be engaged in a genuine dialogue with the customer there are
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Volume VI, No. 2 September 2013
six criteria's that needs to be met:
• Customers and organization have been identified and both are aware of each
other's existence.
• Both of them are able to participate in the dialogue
• Both of them should intention to participate
• Dialogues can be controlled by anyone rather than only one party being
dominated
• A dialogue with an individual customer should be able to change an
organization's behaviour towards that individual, and vice versa.
• A dialogue should be able to picked up where it last left off
Implicit and explicit bargains
Conducting a dialogue with the customers is a form of mental collaboration. For an
organization to engage a customer in a productive, mutually beneficial dialogue, it
must conduct interesting conversations with an individual customer, on his terms,
learning a little at a time, instead of trying to dell more products every time it
converses with the organization. A customer centric organization need not adopt a
self oriented attitude, instead they would use interactive technologies to provide
value to the customers who would help the organizations in sustaining the dialogue
with their active customers. When advertisers sponsor a television program, they are
in effect making an implicit bargain with viewers. Since they did not have any option
to choose from they used to watch the TV commercials but today the scenario is much
different, today's viewers are living in a vastly different environment, they have the
power to tune out commercials at their will. Since the media used here is non
interactive there is no such way which will help the organization review the feedback
of the customer and whether to the first place has he actually viewed it. So now with
these interactive communications technologies the companies can make explicit
bargains with the customers.
Not so long ago it was pretty straightforward companies had the option of interacting
with their customers in various interfaces like retail outlets, by telemarketing, or by
mail. There weren't any other options available. Any communication from customers
was possible only through a person who had the capabilities and training to provide
effective service. Today, we still have those choices available but there are a number
of new ways of communicating with customers which have sprung up.
Integrating across touch points
All the human relationships, including business relationship, are founded on
communication. It is through such communications that people establish
commonness of meaning and understanding. Marketing communications are
SIBM 19
Volume VI, No. 2 September 2013
collectively understood as those communication activities that are used in the context
of marketing a product. The purpose of marketing communication is to add value to
the product that benefits both the customers and the brand.
The essence of IMC is generally to create communication synergies and message
amplification by integrating elements of the marketing communication mix. Many
organisations have created IMC departments in strategic response to a stronger need
for communication effectiveness in a world of increased fragmentation of media and
the tendency for a thinner segmentation of customer base. The development of IMC
has been encouraged by increased accessibility of IT resources and the need for
reinforced loyalty through relationship marketing .The importance of creating and
feeding brand equity through image has also boosted IMC. The overall need for a
better management of customer interfaces has encouraged marketers to develop
CRM practice and the theory of customer equity, which is based on concepts of trust
and lifetime value .This led to reciprocal and in some ways equivalent concepts of
brand equity which is the focus are of advertising and marketing communications
specialists and customer equity which is the focus area of sales, service and CRM
specialists.
So a customer centric organization concentrates not just on the efficiency of the
communication channel used with the customer, but also on the effectiveness of the
customer dialogue. The more the company is aware and remembers about the
customers the more unrewarding it becomes for the customers to defect. The
customer strategic organization ensures that its broadcast and print messages are
not just laterally coordinated across all media but also every customer is
longitudinally coordinated.
Customer interaction and dialogue management
Every customer is unique, there want and needs differ from each other. In the same
way they would even have their preferences for the interaction methods. Some would
prefer email, others might prefer phone or they would prefer combination of
technologies. The level of personalization that the web affords to a customer should
also be available in more traditional customer facing venues. Ideally the company
should be able to learn from each customer what his own preferred Media package
will be, so accordingly the company can design their strategies in order to enhance
the value proposition for the customers.
CRM software solution
Many relationship oriented technologies help the company to understand their key
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Volume VI, No. 2 September 2013
customer groups and customize their products and services for customers.
Companies deploy customer focused technologies like call centre software, self
service web sites to streamline their business processes. A complete customer
focused solution would require many software categories like: Sales Force
automation, campaign management, personalization engines, customer service and
support solutions, reporting and analytical tools, contact centre management etc in
order to help the company develop personalized relationship and connectivity with
the customers.
Case : Me and Meri Maggie Interactive Campaign
Maggi had been in our country since 25 years. The kids who had grown up with maggi
have now become young adults. Nestle wanted to capitalize on the enormous bank of
"maggi memories" by giving customers a chance to have a conversation about the
brand and allowing them to relive and refresh their fond memories, they wanted to
create a better emotion bond between the brand and the consumers. With this
objective in mind Nestle launched an integrated campaign Maggie is not only a good
value proposition but is also strong on the taste front. Nestle wanted to acknowledge
their consumers and their Maggi experiences. The vast reach of digital media was
used as interactive website for the consumers, www.meandmeri.in.
To incorporate its health and wellness slogan — 'Taste bhi, health bhi' — in the noodles
brand, Nestle renovated the two-minute noodles to ensure more calcium and protein
content in the product. The packaging has been tweaked to accommodate the
pictures of consumers whose entries the company chooses. If a consumer has a story
to tell about Maggi, they would put him or her on the packaging, TV or print. Nestle
would continue to innovate and renovate products under the Maggi umbrella. In
2008, two brand extensions — Maggi Bhuna Masala and Maggi Cuppa Mania Instant
Noodles — were added to the portfolio. The Meri Maggi campaign is a step in the
direction of personalizing the Maggi experience for anyone and everyone who has
tasted the snack. Meri Maggi Facebook campaign, was also launched parallel which
was using photos and posts strategically to involve and engage with their fans
Using mass customization to build relationships
Building a relationship with each individual customer is seldom possible for most
businesses. A targeted approach towards various customer groups aims to automate
the maximum personalisation possible between the company and their customers.
For the past years the companies have standardized their products and services to
take advantage of economies of scale. Not only the product the companies have also
standardized their communication about the product, processes and in the process
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Volume VI, No. 2 September 2013
they have also standardized their customers. Technology acts as facilitator for the
customer centric organization to identify its most valuable customers, helps in
remembering everything it learns about each customers and act accordingly based
on the information collected. They improve and streamline the manufacturing and
service delivery processes, so that an organization can deliver individually different
products or services to different individual customers cost efficiently. This is called
Mass customization.
Mass customization goes around the concept “build to order”. Build to order is the
concept when the company does not know demands , there is no forecasting until
orders are placed in hands. The concept of “build to forecast” or “build to stock”was
based on demand forecast. The drawback of this concept was that forecasted
information was not accurate as it depended on past numbers and many
assumptions, thus the outputs of production could not be match with the highly
different demands of mass customization. The gap between production on forecasted
information and real demands increases large costs such as high inventory cost
(components and finished products), material and other resource waste, cash flow
decline, etc. on operating results. In mass customization approach, products are just
built after the company has the orders in hand with the exact quantity and quality
required. In addition, the slight variations in many products require additional
sophistication relative to a more educated and demanding current consumer.
Advantages of mass customization
• It helps in increasing market share and profitability due to increased customers
satisfaction and reduction in inventory cost
• Personalized and tailor made offers to customers helps in increasing the
customer satisfaction ratio
• Increase in loyalty of the customers
• Increase cash flow: Lower inventories, prepayment (thus lower receivables)
• Shorten time of responsiveness (accumulative time from receiving orders to
delivering): organization structure and flexible manufacturing in mass
customization allows the company to adapt to different demands rapidly.
• It has an ability to supply a full line of products or service with lower costs
Approaches to Mass Customization
Joseph Pine, II identifies four approaches to apply mass customization:
• Collaborative customizers: these organizations establish a dialogue to help
customers articulate their needs and then develop customized outputs to meet
these needs. Levi's is an example of this approach. The company uses a
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computer system in its shops with plants. Customer wants (size, model, color...)
will be measured at Levi's shops, and then this information will be computerized
and sent to Levi's plant to produce a custom-fitted pair of jeans. Nike and Dell
are two other examples of this approach.
• Adaptive customizers: customers buy a standard product but they can modify it
by themselves based on their needs. For example, Microsoft offers a package of
software designed to run all activities of small businesses. But if a buyer (a small
business) wants, for instance, to add more accounting functions into the
package. it allows doing that because it uses a popular programming language
that can be used by other programmers.
• Cosmetic customizers: these companies produce a standard product but
present it differently to different customers. For example, Planters packages it
peanuts and mixed nuts in a variety of containers on the basis of specific needs
of its retailing customers such as Wal-Mart, 7-Eleven, and Safeway.
• Transparent customizers: These companies provide custom products without
the customers' knowing that a product has been customized for them. For
example, an online computer might track how each customer uses its service
and then suggest additional features that the customer may find useful. In a
similar fashion, Amazon.com provides book recommendations based on
information about past purchase.
How Mass Customization Works
Companies that specialize in mass customization should have all the resource units
within such a company Paired loosely and set up as network structures. These units
can be comprised of company personnel, teams, industry-specific software, back
office processes and/or manufacturing equipment, depending upon the company, its
resources and its industry sector. In the customization model, all material and
information flows have to be flexible, and organized in modular units. Network
structures are very flexible by nature. They permit the flow of materials and services,
as needed, between company units, making it possible to produce a wide variety of
end products for customers at efficient, cost-effective levels. By changing internal
processes, mass customization is possible. By partnering with great resource
providers in the supply chain, and setting up a generalized production line,
reconfiguration should be flexible and fast in response to changing customer needs,
by only making slight modifications to the basic line. It should be cost effective and it
will be if company resources are set up to be continually reconfigured.
Key for companies is the capability of customizing products for each customer by
utilizing mass components that can be configured into numerous finished products,
and tailoring the end products with efficiencies that approximate mass production.
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The way to accomplish this is through modularity. By keeping an inventory of
interchangeable, modular elements on hand, customers can select the specific
options they need or prefer and companies can assemble them quite efficiently. A
high level of customer interaction is critical in the mass customization model.
Companies have to be prepared to engage in ongoing communication and customer
service. While this is important for every company, it is even more crucial for mass
customizers.
Case: Time Swiss Watches using mass customization
Time Swiss Watches with a well-designed Internet site, www.121time.com uses mass
customization to build relationship with their customers. Consumers can go to the
web site and select very casual, business and elegant watch styles and then
customize every component of the basic style they choose: movement, case, bezel,
dial and hands, crown and strap. Customers can also build watches from scratch
rather than pre-selecting and customizing a specific model. 121Time also invites
customers to further personalize their timepieces with symbol and text engraving and
upgrades; all easily selected from menus. Lastly, wrist sizes can be noted so that the
customer's watch is truly customized in every respect.
Case: Nike using mass customization
Recent trends in technology, innovation, fashion demands in fragmented
marketplace has forced the engineers and designers to respond to new modular
components that are compatible New design software, network teams and strong
supply chain relationships make it possible to continue to update and upgrade
components to give customers the features they truly want. Apparel, as well as
functional, high-end athletic footwear also responds to fashion trends, new design
and innovation. Nike furnishes a great example of mass customized products that are
subject to these changes. The web site, www.nikeid.com, offers customers an
interesting, easily navigable experience. Consumers have an option of selecting a
basic athletic shoe in plain white or in one of the pre-set color palettes, and customize
their selection by making their own color choices and names, favorite icons, or player
numbers if they wear them as members of sports teams. While costing about the
same or a bit more than athletic shoes purchased in a store. the consumers feel quite
gratified on getting an athletic footwear designed based on their specific
requirement.
Case: Mass customization at service Industry: Citibank
Citibank has enhanced its Internet site in 2002 in order to provide easy navigation
and access for consumers, as well as small business and corporate customers.
Citibank provides information and access to its numerous retail banking and financial
services, enabling all of its customers to set up a customized home page, dubbed My
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Volume VI, No. 2 September 2013
Citi, based on their personal preferences and needs. In this way, consumers, private
and business customers both, can set up their “home pages” with the content they
really need, and in a layout that works best for them.At Citibank's Internet site,
customers can review their Citi card and bank account activity and see their balances,
make express payments, pay bills, transfer funds, view online statements, receive
wireless and e-mail alerts, and receive information about exclusive offers for Internet
customers. They can also apply for lines of credits and loans and access Cititrade
services, where they can review their brokerage accounts, buy and sell securities,
screen stocks, conduct research and do financial planning. The ability for private and
business customers to have access to up-to-date information on their credit card and
bank accounts, as well as their portfolios is a great service. While a staggering
breadth and depth of services are available at a large financial institution like Citi,
they have been humanized, made more accessible and more personalized by the
corporate giant's Internet site. With individual home pages set up to access only the
information and services they truly want and need, Citibank has succeeded in offering
mass customization services to its customers on a very large scale.
Concluding Remarks
The single most powerful position in any customer's mind is a position of trust. Thus
earning the customer's trust almost always becomes one of the earliest goals in effort
to build a long term relationship with a customer. The way to achieve is through IDIC
model. The organization that creates a sustaining dialogue with each customer can
learn more about that customer and begin to develop ways to add value that springs
from leveraging customer information and creating a product/service as per his
requirements. An organization cannot simply interact with individual customer and
expect them to be loyal customers. They need to customize the relationship by
modifying the behaviour, communication customizing the products manufactured
and services delivered. A relationship cannot exist without customization.
References
1 Business Standard: Maggi turns 25, Nestle to unveil new campaign
SuviDogra/New Delhi Apr 07,2009,00:11IST
2 Peppers and Rogers Group Consulting in white paper 2001
3. ML Agarwal, “ Customer Relationship Management (CRM) & Corporate
Reneissance”, Jornal of Services research, volume 3, number 2(October 2003-
March 2004)
4. Morgan, Robert M. and Shelly D. Hunt (1994), “The Commitment-Trust Theory
of Relationship Marketing”, Journal of Marketing, 58(3), pp. 20-38
5. Customer Relationship Management at the Speed of Light by Paul Greenberg
SIBM 25
Volume VI, No. 2 September 2013
doc_360468617.pdf
Customer Relationship Management (CRM) focuses on how businesses are undergoing transformation from the traditional mass marketing product centric approach of the industrial age to a customer centric approach of the industrial age. The main objective is to enhance relationships with profitable customers.
Principles of Managing Customer Relationships
Dr. Mallika Srivastava
Assistant Professor, SIBM, Pune
Email: [email protected]
Introduction
Customer Relationship Management (CRM) focuses on how businesses are
undergoing transformation from the traditional mass marketing product centric
approach of the industrial age to a customer centric approach of the industrial age.
The main objective is to enhance relationships with profitable customers. The basic
concept of CRM focuses on how businesses are undergoing a huge cultural shift-
transforming from the mass marketing, product centric approach of the industrial age
to the customer centric culture of the information era where the main objective is to
build relationship with more profitable individual customers. In this new business era
managing individual relationships means an organization which will use the
knowledge gained from these relationships to improve the overall quality of the
customer experience and give value to customers. So it becomes important for an
organization to understand how these relationships are formed and what constitutes
the relationships. Relationship is a state of affair existing between those having
relations or dealings. It could also be defined as state involving mutual dealings
between people or parties. Jim Barnes says that relationship between an organization
and their customers can exist at four different levels:
• Intimate relationship is characterized as personal and friendly and generally
involves the disclosure of personal information.
• Face to face customer relationship may or may not require the customer to
reveal personal information. Such relationships occur in retail store.
• Distant relationships involve less frequent interactions and might occur over the
telephone, online or through videoconferencing.
• No contact relationships rarely or never require a customer to interact with the
organization directly. Customers typically interact with the distributor or agent.
SIBM 16
Volume VI, No. 2 September 2013
Any meaningful relationship between a customer and a business enterprise begins
with the expectations of mutual benefits. Through such a relationship the customers
expect to:
• Realize cost savings
• Improve their decision making ability
• Reduce their risk by developing relationships with trusted companies, services
and products
• Acquire a solution that is tailored for their specific needs and budgets
• Realize the social and other value added benefits such as simplifying their choice
process.
And the motives of the business enterprise include:
• Gaining an advantage that cannot be easily be copied by the competitors
• Reducing the high costs of acquiring new customers
• Improving the forecasting and efficiency of their operations
• Reducing their exposure to risk
IDIC Model for building relationship
For an organization to build and manage relationships with their valuable customers,
it must engage in a four step process called as IDIC. The foundation of effective
Customer Relationship management is to built on an iterative process of learning and
customization. Peppers and Rogers (1993), the proponents of one-to-one marketing
proposed the Identify Differentiate Interact Customize (IDIC) framework to explain
the process of converting existing customers into loyal customers. The four key steps
in IDIC are:
1. Identity: This step requires the company to locate and contact a large number of
its customers directly and ascertain as much detail about them as possible
name, address, contact details, account details etc. Now this kind of information
cannot be collected easily or through a one- time questionnaire based activity.
Every interaction with the customer through any channel should be seen as an
opportunity to learn about them and this knowledge has to be used to serve
them better.
2. Differentiate: Customers need to differentiate on the basis of their value as well
as their needs. The value represents customer's worth to the company-higher
the value, more the company would be interested in retaining them. Though the
best way to estimate the value of the customer is in terms of revenue but this
can become risky if the cost to serve these customers is higher than their
revenue. Thus the ideal measure of customer value would be their contribution
towards profit which might be difficult to measure in many cases.
Some customers are satisfied with very standard products and services while
SIBM 17
Volume VI, No. 2 September 2013
others have very specific needs to be fulfilled. Such customers with specialized
needs can create opportunities for customization. Differentiation should help
the company tailor its offerings to each customer to reflect their values and
needs.
3. Interact: The purpose of interaction or customer interface is to gather as much
information as possible about the customers focusing more on the valuable
customers. These interactions can take place when the customer is making a
transaction, using any service or even while he is making a complaint. The
learning relationship gets smarter with each customer interface.
4. Customize: The last step is the most important as it is based upon all the
information that has been gathered about the customers to offer real value to
them by customizing some aspect of the service related to a product or even
mass customizing the product if required. If the customer is offered a product or
service on the basis of what he has indicated during his interactions, It helps in
improving the ability to fit the product and service to satisfy the needs of this
customer
.
This IDIC framework is useful in understanding the process to be adopted for building
relationship with existing customers. But it is also equally important to know the
stages through which a prospect becomes a customer and then a loyal customer.
Using interactive technology to build relationship
Managing individual customer relationships is a difficult, ongoing process that
evolves as the customer and the organization deepen their awareness and
involvement with each other. Relationship by its very definition is characterised by
two way communication between the two parties. So interacting with the customers
acquires a new importance for a customer centric organization aimed at creating and
cultivating relationship with individual customers. This becomes a mutually beneficial
experience. The interaction in essence becomes collaboration in which an
organization and the customer work together to make the transactions more
beneficial to both. The focus shifts from one way communication or a onetime sale to
a continuous, iterative process the goal of which is to increase the customer
satisfaction and in return developing the relationship with the organization.
Interaction techniques for a customer centric organization:
Dialogue requirements
This two way communication can be referred to as a dialogue. Before an organization
can be considered to be engaged in a genuine dialogue with the customer there are
SIBM 18
Volume VI, No. 2 September 2013
six criteria's that needs to be met:
• Customers and organization have been identified and both are aware of each
other's existence.
• Both of them are able to participate in the dialogue
• Both of them should intention to participate
• Dialogues can be controlled by anyone rather than only one party being
dominated
• A dialogue with an individual customer should be able to change an
organization's behaviour towards that individual, and vice versa.
• A dialogue should be able to picked up where it last left off
Implicit and explicit bargains
Conducting a dialogue with the customers is a form of mental collaboration. For an
organization to engage a customer in a productive, mutually beneficial dialogue, it
must conduct interesting conversations with an individual customer, on his terms,
learning a little at a time, instead of trying to dell more products every time it
converses with the organization. A customer centric organization need not adopt a
self oriented attitude, instead they would use interactive technologies to provide
value to the customers who would help the organizations in sustaining the dialogue
with their active customers. When advertisers sponsor a television program, they are
in effect making an implicit bargain with viewers. Since they did not have any option
to choose from they used to watch the TV commercials but today the scenario is much
different, today's viewers are living in a vastly different environment, they have the
power to tune out commercials at their will. Since the media used here is non
interactive there is no such way which will help the organization review the feedback
of the customer and whether to the first place has he actually viewed it. So now with
these interactive communications technologies the companies can make explicit
bargains with the customers.
Not so long ago it was pretty straightforward companies had the option of interacting
with their customers in various interfaces like retail outlets, by telemarketing, or by
mail. There weren't any other options available. Any communication from customers
was possible only through a person who had the capabilities and training to provide
effective service. Today, we still have those choices available but there are a number
of new ways of communicating with customers which have sprung up.
Integrating across touch points
All the human relationships, including business relationship, are founded on
communication. It is through such communications that people establish
commonness of meaning and understanding. Marketing communications are
SIBM 19
Volume VI, No. 2 September 2013
collectively understood as those communication activities that are used in the context
of marketing a product. The purpose of marketing communication is to add value to
the product that benefits both the customers and the brand.
The essence of IMC is generally to create communication synergies and message
amplification by integrating elements of the marketing communication mix. Many
organisations have created IMC departments in strategic response to a stronger need
for communication effectiveness in a world of increased fragmentation of media and
the tendency for a thinner segmentation of customer base. The development of IMC
has been encouraged by increased accessibility of IT resources and the need for
reinforced loyalty through relationship marketing .The importance of creating and
feeding brand equity through image has also boosted IMC. The overall need for a
better management of customer interfaces has encouraged marketers to develop
CRM practice and the theory of customer equity, which is based on concepts of trust
and lifetime value .This led to reciprocal and in some ways equivalent concepts of
brand equity which is the focus are of advertising and marketing communications
specialists and customer equity which is the focus area of sales, service and CRM
specialists.
So a customer centric organization concentrates not just on the efficiency of the
communication channel used with the customer, but also on the effectiveness of the
customer dialogue. The more the company is aware and remembers about the
customers the more unrewarding it becomes for the customers to defect. The
customer strategic organization ensures that its broadcast and print messages are
not just laterally coordinated across all media but also every customer is
longitudinally coordinated.
Customer interaction and dialogue management
Every customer is unique, there want and needs differ from each other. In the same
way they would even have their preferences for the interaction methods. Some would
prefer email, others might prefer phone or they would prefer combination of
technologies. The level of personalization that the web affords to a customer should
also be available in more traditional customer facing venues. Ideally the company
should be able to learn from each customer what his own preferred Media package
will be, so accordingly the company can design their strategies in order to enhance
the value proposition for the customers.
CRM software solution
Many relationship oriented technologies help the company to understand their key
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customer groups and customize their products and services for customers.
Companies deploy customer focused technologies like call centre software, self
service web sites to streamline their business processes. A complete customer
focused solution would require many software categories like: Sales Force
automation, campaign management, personalization engines, customer service and
support solutions, reporting and analytical tools, contact centre management etc in
order to help the company develop personalized relationship and connectivity with
the customers.
Case : Me and Meri Maggie Interactive Campaign
Maggi had been in our country since 25 years. The kids who had grown up with maggi
have now become young adults. Nestle wanted to capitalize on the enormous bank of
"maggi memories" by giving customers a chance to have a conversation about the
brand and allowing them to relive and refresh their fond memories, they wanted to
create a better emotion bond between the brand and the consumers. With this
objective in mind Nestle launched an integrated campaign Maggie is not only a good
value proposition but is also strong on the taste front. Nestle wanted to acknowledge
their consumers and their Maggi experiences. The vast reach of digital media was
used as interactive website for the consumers, www.meandmeri.in.
To incorporate its health and wellness slogan — 'Taste bhi, health bhi' — in the noodles
brand, Nestle renovated the two-minute noodles to ensure more calcium and protein
content in the product. The packaging has been tweaked to accommodate the
pictures of consumers whose entries the company chooses. If a consumer has a story
to tell about Maggi, they would put him or her on the packaging, TV or print. Nestle
would continue to innovate and renovate products under the Maggi umbrella. In
2008, two brand extensions — Maggi Bhuna Masala and Maggi Cuppa Mania Instant
Noodles — were added to the portfolio. The Meri Maggi campaign is a step in the
direction of personalizing the Maggi experience for anyone and everyone who has
tasted the snack. Meri Maggi Facebook campaign, was also launched parallel which
was using photos and posts strategically to involve and engage with their fans
Using mass customization to build relationships
Building a relationship with each individual customer is seldom possible for most
businesses. A targeted approach towards various customer groups aims to automate
the maximum personalisation possible between the company and their customers.
For the past years the companies have standardized their products and services to
take advantage of economies of scale. Not only the product the companies have also
standardized their communication about the product, processes and in the process
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they have also standardized their customers. Technology acts as facilitator for the
customer centric organization to identify its most valuable customers, helps in
remembering everything it learns about each customers and act accordingly based
on the information collected. They improve and streamline the manufacturing and
service delivery processes, so that an organization can deliver individually different
products or services to different individual customers cost efficiently. This is called
Mass customization.
Mass customization goes around the concept “build to order”. Build to order is the
concept when the company does not know demands , there is no forecasting until
orders are placed in hands. The concept of “build to forecast” or “build to stock”was
based on demand forecast. The drawback of this concept was that forecasted
information was not accurate as it depended on past numbers and many
assumptions, thus the outputs of production could not be match with the highly
different demands of mass customization. The gap between production on forecasted
information and real demands increases large costs such as high inventory cost
(components and finished products), material and other resource waste, cash flow
decline, etc. on operating results. In mass customization approach, products are just
built after the company has the orders in hand with the exact quantity and quality
required. In addition, the slight variations in many products require additional
sophistication relative to a more educated and demanding current consumer.
Advantages of mass customization
• It helps in increasing market share and profitability due to increased customers
satisfaction and reduction in inventory cost
• Personalized and tailor made offers to customers helps in increasing the
customer satisfaction ratio
• Increase in loyalty of the customers
• Increase cash flow: Lower inventories, prepayment (thus lower receivables)
• Shorten time of responsiveness (accumulative time from receiving orders to
delivering): organization structure and flexible manufacturing in mass
customization allows the company to adapt to different demands rapidly.
• It has an ability to supply a full line of products or service with lower costs
Approaches to Mass Customization
Joseph Pine, II identifies four approaches to apply mass customization:
• Collaborative customizers: these organizations establish a dialogue to help
customers articulate their needs and then develop customized outputs to meet
these needs. Levi's is an example of this approach. The company uses a
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computer system in its shops with plants. Customer wants (size, model, color...)
will be measured at Levi's shops, and then this information will be computerized
and sent to Levi's plant to produce a custom-fitted pair of jeans. Nike and Dell
are two other examples of this approach.
• Adaptive customizers: customers buy a standard product but they can modify it
by themselves based on their needs. For example, Microsoft offers a package of
software designed to run all activities of small businesses. But if a buyer (a small
business) wants, for instance, to add more accounting functions into the
package. it allows doing that because it uses a popular programming language
that can be used by other programmers.
• Cosmetic customizers: these companies produce a standard product but
present it differently to different customers. For example, Planters packages it
peanuts and mixed nuts in a variety of containers on the basis of specific needs
of its retailing customers such as Wal-Mart, 7-Eleven, and Safeway.
• Transparent customizers: These companies provide custom products without
the customers' knowing that a product has been customized for them. For
example, an online computer might track how each customer uses its service
and then suggest additional features that the customer may find useful. In a
similar fashion, Amazon.com provides book recommendations based on
information about past purchase.
How Mass Customization Works
Companies that specialize in mass customization should have all the resource units
within such a company Paired loosely and set up as network structures. These units
can be comprised of company personnel, teams, industry-specific software, back
office processes and/or manufacturing equipment, depending upon the company, its
resources and its industry sector. In the customization model, all material and
information flows have to be flexible, and organized in modular units. Network
structures are very flexible by nature. They permit the flow of materials and services,
as needed, between company units, making it possible to produce a wide variety of
end products for customers at efficient, cost-effective levels. By changing internal
processes, mass customization is possible. By partnering with great resource
providers in the supply chain, and setting up a generalized production line,
reconfiguration should be flexible and fast in response to changing customer needs,
by only making slight modifications to the basic line. It should be cost effective and it
will be if company resources are set up to be continually reconfigured.
Key for companies is the capability of customizing products for each customer by
utilizing mass components that can be configured into numerous finished products,
and tailoring the end products with efficiencies that approximate mass production.
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The way to accomplish this is through modularity. By keeping an inventory of
interchangeable, modular elements on hand, customers can select the specific
options they need or prefer and companies can assemble them quite efficiently. A
high level of customer interaction is critical in the mass customization model.
Companies have to be prepared to engage in ongoing communication and customer
service. While this is important for every company, it is even more crucial for mass
customizers.
Case: Time Swiss Watches using mass customization
Time Swiss Watches with a well-designed Internet site, www.121time.com uses mass
customization to build relationship with their customers. Consumers can go to the
web site and select very casual, business and elegant watch styles and then
customize every component of the basic style they choose: movement, case, bezel,
dial and hands, crown and strap. Customers can also build watches from scratch
rather than pre-selecting and customizing a specific model. 121Time also invites
customers to further personalize their timepieces with symbol and text engraving and
upgrades; all easily selected from menus. Lastly, wrist sizes can be noted so that the
customer's watch is truly customized in every respect.
Case: Nike using mass customization
Recent trends in technology, innovation, fashion demands in fragmented
marketplace has forced the engineers and designers to respond to new modular
components that are compatible New design software, network teams and strong
supply chain relationships make it possible to continue to update and upgrade
components to give customers the features they truly want. Apparel, as well as
functional, high-end athletic footwear also responds to fashion trends, new design
and innovation. Nike furnishes a great example of mass customized products that are
subject to these changes. The web site, www.nikeid.com, offers customers an
interesting, easily navigable experience. Consumers have an option of selecting a
basic athletic shoe in plain white or in one of the pre-set color palettes, and customize
their selection by making their own color choices and names, favorite icons, or player
numbers if they wear them as members of sports teams. While costing about the
same or a bit more than athletic shoes purchased in a store. the consumers feel quite
gratified on getting an athletic footwear designed based on their specific
requirement.
Case: Mass customization at service Industry: Citibank
Citibank has enhanced its Internet site in 2002 in order to provide easy navigation
and access for consumers, as well as small business and corporate customers.
Citibank provides information and access to its numerous retail banking and financial
services, enabling all of its customers to set up a customized home page, dubbed My
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Citi, based on their personal preferences and needs. In this way, consumers, private
and business customers both, can set up their “home pages” with the content they
really need, and in a layout that works best for them.At Citibank's Internet site,
customers can review their Citi card and bank account activity and see their balances,
make express payments, pay bills, transfer funds, view online statements, receive
wireless and e-mail alerts, and receive information about exclusive offers for Internet
customers. They can also apply for lines of credits and loans and access Cititrade
services, where they can review their brokerage accounts, buy and sell securities,
screen stocks, conduct research and do financial planning. The ability for private and
business customers to have access to up-to-date information on their credit card and
bank accounts, as well as their portfolios is a great service. While a staggering
breadth and depth of services are available at a large financial institution like Citi,
they have been humanized, made more accessible and more personalized by the
corporate giant's Internet site. With individual home pages set up to access only the
information and services they truly want and need, Citibank has succeeded in offering
mass customization services to its customers on a very large scale.
Concluding Remarks
The single most powerful position in any customer's mind is a position of trust. Thus
earning the customer's trust almost always becomes one of the earliest goals in effort
to build a long term relationship with a customer. The way to achieve is through IDIC
model. The organization that creates a sustaining dialogue with each customer can
learn more about that customer and begin to develop ways to add value that springs
from leveraging customer information and creating a product/service as per his
requirements. An organization cannot simply interact with individual customer and
expect them to be loyal customers. They need to customize the relationship by
modifying the behaviour, communication customizing the products manufactured
and services delivered. A relationship cannot exist without customization.
References
1 Business Standard: Maggi turns 25, Nestle to unveil new campaign
SuviDogra/New Delhi Apr 07,2009,00:11IST
2 Peppers and Rogers Group Consulting in white paper 2001
3. ML Agarwal, “ Customer Relationship Management (CRM) & Corporate
Reneissance”, Jornal of Services research, volume 3, number 2(October 2003-
March 2004)
4. Morgan, Robert M. and Shelly D. Hunt (1994), “The Commitment-Trust Theory
of Relationship Marketing”, Journal of Marketing, 58(3), pp. 20-38
5. Customer Relationship Management at the Speed of Light by Paul Greenberg
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doc_360468617.pdf