Tag: University of Mumbai BMS Notes

Customers as Strangers:

Strangers are those customers who have not yet had any transactions with a firm and may not even be aware of the firm. At the industry level, strangers may be conceptualized as customers who have not yet entered the market, at the firm level, they may include customers of competitors. clearly the firm has no relationship with the customer at this point. Consequently, the firm’s primary goal with these potential customers is to initiate communication with them in order to attract them and acquire their business.

Customers as Acquaintances:

Once customer awareness and trial are achieved, familiarity is established and the customer and the customer and the firm become acquaintances, creating the basis for an exchange relationship. A primary goal for the firm at this stage of the relationship is satisfying the customer. In the acquaintance stage, firms are generally concerned about providing a value proposition to customers comparable with that of competitors. For a customer, an acquaintanceship is effective as long as the customer is relatively satisfied and what is being received in the exchange is perceived as fair value.

Customers as Friends:

As a customer continues to make purchases from a firm and to receive value in the exchange relationship, the firm begins to acquire specific knowledge of the customer’s needs, allowing it to create an offering that directly addresses the customer’s situation. The provision of a unique offering, and thus differential value, transforms the relationship from acquaintance to friendship. A primary goal for firms’ goal for firms at the friendship stage of the relationship is customer retention.

Customers as Partners:

As a customer continues to interact with a firm, the level of trust often deepens and the customer may receive more customized product offerings and interactions. The trust developed in the friendship stage is a necessary but not sufficient condition for a customer firm partnership to develop. That is the creation of trust leads to the creation of commitment and that is the condition necessary for customers to extend the time perspective of a relationship.

When companies connect with customers’ emotions, the payoff can be huge. Consider these examples: After a major bank introduced a credit card for Millennials that was designed to inspire emotional connection, use among the segment increased by 70% and new account growth rose by 40%. Within a year of launching products and messaging to maximize emotional connection, a leading household cleaner turned market share losses into double-digit growth. And when a nationwide apparel retailer reoriented its merchandising and customer experience to its most emotionally connected customer segments, same-store sales growth accelerated more than threefold.

Given the enormous opportunity to create new value, companies should pursue emotional connections as a science and a strategy. But for most, building these connections is more guesswork than science. At the end of the day they have little idea what really works and whether their efforts have produced the desired results.

Our research across hundreds of brands in dozens of categories shows that it’s possible to rigorously measure and strategically target the feelings that drive customers’ behavior. We call them “emotional motivators.” They provide a better gauge of customers’ future value to a firm than any other metric, including brand awareness and customer satisfaction, and can be an important new source of growth and profitability.

At the most basic level, any company can begin a structured process of learning about its customers’ emotional motivators and conducting experiments to leverage them, later scaling up from there. At the other end of the spectrum, firms can invest in deep research and big data analytics or engage consultancies with specific expertise. Companies in financial services, retail, health care, and technology are now using a detailed understanding of emotional connection to attract and retain the most valuable customers. The most sophisticated firms are making emotional connection part of a broad strategy that involves every function in the value chain, from product development and marketing to sales and service.

Although brands may be liked or trusted, most fail to align themselves with the emotions that drive their customers’ most profitable behaviors. Some brands by nature have an easier time making such connections, but a company doesn’t have to be born with the emotional DNA of Disney or Apple to succeed. Even a cleaning product or a canned food can forge powerful connections.

The process, in brief, looks like this: Applying big data analytics to detailed customer-data sets, we first identify the emotional motivators for a category’s most valuable customers. High-value automobile customers, for example, might want to “feel a sense of belonging” and “feel a sense of freedom.” Next we use statistical modeling to look at a large number of customers and brands, comparing survey results about people’s emotional motivators with their purchase behavior and identifying spikes in buying that are associated with specific motivators. This reveals which motivators generate the most-profitable customer behaviors in the category. We then quantify the current and potential value of motivators for a given brand and help identify strategies to leverage them.

The model also allows us to compare the value of making strong emotional connections with that of scoring well on standard customer metrics such as satisfaction and brand differentiation, thus highlighting the potential gains from looking beyond traditional measures. We find that customers become more valuable at each step of a predictable “emotional connection pathway” as they transition from (1) being unconnected to (2) being highly satisfied to (3) perceiving brand differentiation to (4) being fully connected.

Although customers exhibit increasing connection at each step, their value increases dramatically when they reach the fourth step: Fully connected customers are 52% more valuable, on average, than those who are just highly satisfied. In fact, their relative value is striking across a variety of metrics, such as purchases and frequency of use.

Emotional motivators for a given brand or industry vary with a person’s position in the customer journey.

In banking, the desire to “feel secure” is a critical motivator when attracting and retaining customers early on. When cross-selling products later, the wish to “succeed in life” becomes more important. To maximize results, companies must align their emotional-connection strategies with their specific customer-engagement objectives acquisition, retention, cross-selling, and so on.

1. Target connected customers.

We set out to answer two basic questions: How valuable were the retailer’s fully connected customers, and could the company attract more of them? We used statistical techniques to measure the strength of customers’ emotional connections with the retailer and with its competitors. The process began with surveys to discern how consumers related to key motivators in the category and with analysis to see which motivators best predicted purchase behavior. We then modeled the financial impact of building emotional connections with customers at each step on the pathway from unconnected to fully connected.

Our analysis showed that although fully connected customers constituted just 22% of customers in the category, they accounted for 37% of revenue and they spent, on average, twice as much annually ($400) as highly satisfied customers. Enhancing emotional connection could be a viable growth strategy if the retailer could attract fully connected customers from competitors, transform satisfied customers into fully connected ones, or both.

2. Quantify key motivators.

Next, by analyzing tens of thousands of Flourishers across the category, we quantified the impact of more than 40 motivators on the group’s purchasing, spending, loyalty, and advocacy. We identified the most important category motivators—the ones that bore the strongest relationship to purchases and assessed the retailer’s competitive position in each. The financial analysis and modeling showed that further investments to strengthen the customer experience around the desires to “feel a sense of belonging,” “feel a sense of thrill,” and “feel a sense of freedom” the motivators driving category purchase behavior and for which the retailer already had the strongest position were likely to yield the highest ROI. Those motivators therefore became the focus of specific customer-experience investments.

3. Optimize investments across functions.

To maximize opportunities from emotional connection, companies must look beyond the marketing department. The retailer examined every function and customer touchpoint to find ways to enhance high-ROI emotional motivators. This brought four major investment areas into focus: stores, online and omnichannel experiences, merchandising, and message targeting.

Merchandising.

Merchandise selection, from the broad category level to specific labels, can be optimized to drive emotional connection. The retailer now tracks the purchasing habits of Flourishers nationwide through point-of-sale data collected from hundreds of retailers by independent research companies. By applying the Flourisher segmentation to these POS databases, it has modeled the segment’s purchase behavior across more than 20 product categories and 100 labels and learned which of the approximately 10 competitive retailers these consumers buy from. The resulting insights have exposed gaps in merchandise important to Flourishers, and the retailer is working with its manufacturers to rebalance its mix.

Message targeting

Having identified its Flourisher customers, the retailer can now send them personalized messages designed to resonate with the emotional motivators that drive behavior at each stage of the customer journey. For example, when Flourishers are initially considering the retailer, “having fun” while shopping is paramount. At the point of purchase, “helps me feel creative” emerges as key. Working from such insights, the retailer has developed a series of messages targeting Flourishers and timed according to their position in the journey: A rules engine sends out e-mails tailored to browsing, transacting, and servicing interactions. Response rates to this direct-marketing campaign are 40% to 210% higher than historical averages.

The Management Imperative

Embracing an emotional-connection strategy across the organization requires deep customer insights, analytical capabilities, and, above all, a managerial commitment to align the organization with the new way of thinking. It’s important that marketing not hoard the strategy as “its” domain (although the function can and should use emotional connection to demonstrate the direct financial impact of its spending). Instead, marketing must partner with other functions, teaching and socializing emotional connection. The retailer we profiled now uses emotional connection to drive alignment across the operations management team, the C-suite, and the boardroom. At the outset the CEO identified emotional connection as a strategy to restore profitable growth. The CFO and the chief strategy officer then “sized the financial prize,” leading the heads of marketing, stores, customer experience, and merchandising to collaborate on an integrated strategy.

The advent of big data analytics brings clarity, discipline, and rigor to companies’ long-held desire to connect with the customer emotions that truly matter. Emotional connections no longer have to be a mystery they can be a new source of real competitive advantage and growth.

CRM helps the business in closing deals faster through quicker and more efficient responses to customer needs and customer information. The organizations have to implement CRM Systems effectively.

Customer Loyalty:

Firms can gain loyalty of the customer by regularly understanding their needs and meeting their needs. Customer develops regular association with the firm due to the products and marketing style of a firm that is of customers liking.

1. A CRM system consists of a historical view and analysis of all the acquired or to be acquired customers. This helps in reduced searching and correlating customers and to foresee customer needs effectively and increase business.
2. CRM contains each and every bit of details of a customer, hence it is very easy to track a customer accordingly and can be used to determine which customer can be profitable and which not.
3. In CRM system, customers are grouped according to different aspects according to the type of business they do or according to physical location and are allocated to different customer managers often called as account managers. This helps in focusing and concentrating on each and every customer separately.
4. A CRM system is not only used to deal with the existing customers but is also useful in acquiring new customers. The process first starts with identifying a customer and maintaining all the corresponding details into the CRM system which is also called an ‘Opportunity of Business’.

The Sales and Field representatives then try getting business out of these customers by sophistically following up with them and converting them into a winning deal. All this is very easily and efficiently done by an integrated CRM system.

5. The strongest aspect of Customer Relationship Management is that it is very cost-effective. The advantage of decently implemented CRM system is that there is very less need of paper and manual work which requires lesser staff to manage and lesser resources to deal with. The technologies used in implementing a CRM system are also very cheap and smooth as compared to the traditional way of business.
6. All the details in CRM system is kept centralized which is available anytime on fingertips. This reduces the process time and increases productivity.
7. Efficiently dealing with all the customers and providing them what they actually need increases the customer satisfaction. This increases the chance of getting more business which ultimately enhances turnover and profit.
8. If the customer is satisfied they will always be loyal to you and will remain in business forever resulting in increasing customer base and ultimately enhancing net growth of business.

Provide Better Customer Service:

CRM system gives advantages such as the ability to personalize relationship with customers. CRM maintains Customer Profiles, there by treating each client as an individual and not as a group. This way every employee can be better informed about each customer’s specific needs and transaction profiles.

Better Customer Service improves the responsiveness and understanding which helps in building Customer loyalty. It also helps the company in getting continuous feedback from the Customers on the Product they have brought.

Increase Customers Revenues:

Regular updation of customer information will help a firm to keep on revising its product and marketing strategy. Adaptation of product and its marketing to match the changing needs of a customer make the organisation customer friendly resulting in increase the sales and revenue.

Discover New Customers:

CRM systems help the organization in identifying potential Customers by keeping a track of the profiles of their existing client, the business can easily come up with a strategy to determine the kind of people they should target so that it returns them maximum revenue.

“Cross Sell” and “Up Sell”:

CRM system facilitates Cross-selling (offering customers complimentary products based on their previous purchases) and Up-Selling (offering customers premium products in the same category) It helps them to gain a better understanding of customers and anticipate their purchases.

For Example- (Cross sell – A Bluetooth head set along with the smart phone and up sell – Surf Detergent has introduced Surf Excel a better-quality product.

It offers a win situation for everyone that is:

1. Customer is benefited as he gets product of his choice.
2. Retailer is benefited as he has less difficulty in selling the product.
3. Manufacturer is benefited due to regular sales.

Benefits

The following are the benefits of adopting CRM processes:

• Develop better communication channels
• Collect customer related data
• Create detailed profiles of individual customers
• Increased customer satisfaction
• Access to customer account history, order information, and customer information at all touch points
• Identify new selling opportunities
• Increased market share and profit margin
• Increased revenues
• More effective reach and marketing
• Improved customer service and support
• Improved response time to customer requests for information
• Enhanced customer loyalty
• Improved ability to meet customer requirements
• Improved quality communication and networking
• Reduced costs of buying and using product and services
• Better stand against global competition

At the most basic level, CRM software consolidates customer information and documents into a single CRM database so business users can more easily access and manage it.

Over time, many additional functions have been added to CRM systems to make them more useful. Some of these functions include recording various customer interactions over email, phone, social media or other channels; depending on system capabilities, automating various workflow automation processes, such as tasks, calendars and alerts; and giving managers the ability to track performance and productivity based on information logged within the system.

• Marketing Automation: CRM tools with marketing automation capabilities can automate repetitive tasks to enhance marketing efforts at different points in the lifecycle. For example, as sales prospects come into the system, it might automatically send the prospects marketing materials, typically via email or social media, with the goal of turning a sales lead into a full-fledged customer.
• Sales force automation: Sales force automation tools track customer interactions and automate certain business functions of the sales cycle that are necessary to follow leads and attract and obtain new customers.
• Contact center automation: Designed to reduce tedious aspects of a contact center agent’s job, contact center automation might include prerecorded audio that assists in customer problem-solving and information dissemination. Various software tools that integrate with the agent’s desktop tools can handle customer requests in order to cut down on the time of calls and to simplify customer service processes.
• Geolocation technology, or location-based services: Some CRM systems include technology that can create geographic marketing campaigns based on customers’ physical locations, sometimes integrating with popular location-based GPS apps. Geolocation technology can also be used as a networking or contact management tool in order to find sales prospects based on a location.
• Workflow automation: CRM systems help businesses optimize processes by streamlining mundane workloads, enabling employees to focus on creative and more high-level tasks.
• Lead management: Sales leads can be tracked through CRM, enabling sales teams to input, track and analyze data for leads in one place.
• Human resource management (HRM): CRM systems help track employee information, such as contact information, performance reviews and benefits within a company. This enables the human resource department to more effectively manage the internal workforce.
• Analytics: Analytics in CRM help create better customer satisfaction rates by analyzing user data and helping create targeted marketing campaigns.
• AI: Artificial intelligence (AI) technologies, such as Salesforce Einstein, have been built into CRM platforms to automate repetitive tasks, identify customer buying patterns to predict future customer behaviors and more.

Customer response is the reaction by the organization to the queries and activities of the customer. Dealing with these queries intelligently is very important as small misunderstandings could convey unalike perceptions. Success totally depends on understanding and interpreting these queries and then working out to provide the best solution. During this situation if the supplier wins to satisfy the customer by properly answering to his queries, he succeeds in explicating a professional and emotional relationship with him.

Responses have numerous combinations of features and aspects by which questionnaires can be easily produced.

Following are the situations a customer can fall into after they get responses.

• Customers can be totally satisfied by the type of response with a positive feeling towards the respondent.
• They can be totally satisfied but without any sort of strong feeling towards the respondent.
• Slightly satisfied with the responses but with or without any feelings towards the respondent, depending on the efforts and type of responses provided by the respondent.
• They can also be totally dissatisfied by the responses but no hard feelings towards the respondent as the respondent could have delivered the things correctly and efficiently.
• They can also be totally dissatisfied by the responses and with negative feelings towards the respondent as the respondent could have messed everything.

As discussed above the customer can fall under any of these situations and develops a perception in his mind regarding the organization depending on the quality and types of responses he gets from the respondent. If the organization succeeds in satisfying the customer then he wins in developing and maintaining a relationship with that customer and can easily retain him. Contrarily, if the customers find the quality of responses as low and unsatisfactory and supplier’s attitude as unfamiliar and negative then they will surely diverge their way to other organization for better alternatives. By this the organization could finally loose the business with that customer. Hence, customer response is very important aspect for all organizations to create business relationship and good customer satisfaction and loyalty with their customers. In the same way, for customers it’s a very essential way to judge their suppliers and determine if they can be good suppliers for them or not.

Good customer response is an essential asset for an organization and directly or indirectly always helps them to grow substantially in business. For example, a customer buys toothpaste from a shop. After opening it he finds the tube half empty from inside. He immediately sends a notification to the manufacturer by launching a complaint. The company in turn promptly sends an apology letter with a new tube of toothpaste. The customer will obviously become happy and satisfied with the prompt response and the fruitful service provided by the manufacturer. This satisfied customer will propagate the concern shown by the manufacturer for even this small deal to all his friends and family. By this quick and positive response, the manufacturer turned that customer to a business ambassador to increase the sales and productivity of business.

Before developing the strategies for customer responses, it is important to understand the master plan which indicates how the responses should be modeled according to customer’s attitude which is different in different situations. Giving the right response at right time is the only key factor for successfully building the relationships with customers and influencing them to have long-term business deals.

After emphasizing on customer response and its advantages it is also important to know how to measure these responses and what can be achieved after accurate measurement. For this it is necessary for an organization to incorporate following performance indicators:

• Productive Performance Indicator: The productive performance indicator determines the number of customer orders processed per human-hour. This order processing must be done is such a way that the time taken for processing is minimal to increase the productivity. Strategies used in customer service automation can bring immediate improvements in call center automation, internet ordering, contact management automation, EDI’s etc. Web integrated customer response systems cuts off the need to hire more employees as everything is automated.
• Financial Performance Indicator: The key financial performance indicator is Total Response Cost (TRC). By the use of TRC organization can easily compute the cost incurred for customer responses workflow, assets used, infrastructure used within organization, medium charges like internet and phone, income of executives etc. Some extended use of TRC is also to indicate the profitable aspects like which response was profitable and which was not. It can also compute which customers are profitable for the organization and which are not and which are they who can continue to give more profit in future. Total response cost is a powerful system which helps improving the financial aspects of organization by limiting the investments made by the organization and always keeps a check on customer response to enhance financial features.
• Quality Performance Indicator: The Primary quality performance indicator is Order Entry Accuracy (OEA) and First Time Fill Rate (FTFR). OEA is formulated as specific orders produced by customers per total order produced. FTFR is calculated by total products delivered per total products requested. There are many other indicators which help measuring quality performance of customer responses like Invoice Accuracy and Order Status communication accuracy. Invoice accuracy tool keeps a regular check on Invoice automation system and measure the accuracy of them. It is generally formulated as the total invoices with accurate match of items, prices and quantities etc per total invoices received. More the percentage produced by these tools more is the customer response value. It is necessary to measure quality performance so that the customers receive best services and customer satisfaction index always remain on top.
• Response Cycle Time Indicator: Response cycle time indicator is indicated by Order Processing Time (OPT). This calculates the time taken for the order; from time it was entered till the time it is delivered. One more important indicator called Order Entry Time (OET) is also installed which calculates the time taken from intimation of order until the order is captured or entered in the CRM system. This shows the time elapsed in the telephonic conversation or internet. By this the overall entry time taken by the executive to enter the details in the systems can be calculated. This is an important factor and can be used for increasing the productivity and for trying to reduce the time taken for order processing. Lesser the time taken to process the orders and entering the relevant information in the system, more are the chances to consume large number of customers in a given specific interval of time.

The responses can be provided through any of the following media:

1. Face to Face Interaction: Face to face interaction is the most efficient medium and provides the probability to judge the emotions and body language of the respondent. When a customer visits the supplier’s premises and supplier receives him respectfully and spends some time with him, giving him all the attention, listing patiently for the purpose of his visit and determining feasible actions, then the customer feels high and confident towards the supplier’s gesture. Hence it is important that the supplier should pay full attention towards the customer. If in between he receives any call or indulges himself in other works, then it creates an indication to the customer that he is unwanted or the supplier does not want to attend him efficiently. Such a thing creates negative or wrong feelings in customer’s mindset towards the supplier and acts as a staggering block in future business relationship. It is also seen that most of the senior members of the organization does not find any time to interact with the customers face to face which is not the correct approach as customers are

The key revenue generators of business and attention should always be given to them to understand their needs and make them satisfied. The way the suppliers present themselves during a face to face conversation or interaction reflects their sincerity and commitment to the customers. In case they fail to provide such interaction, they may have to pay a heavy price both in short as well in long run.

2. Telephone Communication: Telephone communication is also effective and plays an important role. A telephone call should always be answered when a customer calls, and if by any chance it is missed a return call should always be made. Sometimes the supplier does not want to entertain the calls from aggressive and irritating types of customers. This could also happen when the supplier has any sort of commitment with the customer which he is not fulfilling due to some unrealistic reasons. By doing this the situation does not tend to solve but aggravates in course time. The key is to talk to them and explain the actual situation and reasons by taking them into confidence. By doing this the customer will always think that supplier is promptly attending his calls and is concerned about him. It is also important to interpret the purpose of the caller, what the customer is actually asking for and then after patiently listening and analyzing the facts a correct and satisfied response must be provided. If the details asked by the customer over a call are not answerable instantly, then the call can be hung up by telling that details will be provided to him as soon as possible. Thereafter it is necessary to take those points of customer’s queries into consideration and analyze those to come up with exact details. These details should be provided to him by calling him again. Efficient telephonic interaction always pays off when responses are given effectively.
3. Writing Communication (Post, Fax, Email): The writing communication should always be acknowledged immediately and should be replied in detailed format. The advantage of written communication over face to face and telephonic communication is that it is least misinterpreted as it is saved and can be read many times. But the disadvantage is that it lacks in total communication. Hence it is always important to send the written response in details so that any of the relevant point is not omitted in the response.

Cross-Selling

Cross-selling is the action or practice of selling an additional product or service to an existing customer. In practice, businesses define cross-selling in many different ways. Elements that might influence the definition might include the size of the business, the industry sector it operates within and the financial motivations of those required to define the term.

The objective of cross-selling can be either to increase the income derived from the client or to protect the relationship with the client or clients. The approach to the process of cross-selling can be varied.

Cross-selling products and services to existing clients is one of the primary methods of generating new revenue for many businesses, including financial advisors. This is perhaps one of the easiest ways to grow their business, as they have already established a relationship with the client and are familiar with their needs and objectives.

However, advisors need to be careful when they use this strategy a money manager who cross-sells a mutual fund that invests in a different sector can be a good way for the client to diversify their portfolio. But an advisor who tries to sell a client a mortgage or other product that is outside the advisor’s scope of knowledge can lead to problems in many cases.

Unlike the acquiring of new business, cross-selling involves an element of risk that existing relationships with the client could be disrupted. For that reason, it is important to ensure that the additional product or service being sold to the client or clients enhances the value the client or clients get from the organization.

In practice, large businesses usually combine cross-selling and up-selling techniques to increase revenue.

Though there are some ethical issues with most cross-selling, in some cases they can be huge. Arthur Andersen’s dealings with Enron provide a highly visible example. It is commonly felt that the firm’s objectivity, being an auditor, was compromised by selling internal audit services and massive amounts of consulting work to the account.

Though most companies want more cross-selling, there can be substantial barriers:

• A customer policy requiring the use of multiple vendors.
• Different purchasing points within an account, which reduce the ability to treat the customer like a single account.
• The fear of the incumbent business unit that its colleagues would botch their work at the client, resulting with the loss of the account for all units of the firm.

Examples

• A Life Insurance company suggesting its customer sign up for car or health insurance.
• A wholesale mobile retailer suggesting a customer choose a network or carrier after one purchase a mobile.
• A television brand suggesting its customers go for a home theater of its brand.
• A laptop seller offering a customer a mouse, pen-drive, and/or accessories.
• A hospitality brand offering tours and experiences to guests after booking the accommodation

Up–Selling

Upselling is the practice of encouraging customers to purchase a comparable higher-end product than the one in question, while cross-selling invites customers to buy related or complementary items. Though often used interchangeably, both offer distinct benefits and can be effective in tandem. Upselling and cross-selling are mutually beneficial when done properly, providing maximum value to customers and increasing revenue without the recurring cost of many marketing channels.

Upselling often employs comparison charts to market higher-end products to customers. Showing visitors that other versions or models may better fulfill their needs can increase AOV and help users walk away more satisfied with their purchase. Companies that excel at upselling are effective at helping customers visualize the value they will get by ordering a higher-priced item.

Upselling is a sales technique where a seller invites the customer to purchase more expensive items, upgrades, or other add-ons to generate more revenue. While it usually involves marketing more profitable services or products,[1] it can be simply exposing the customer to other options that were perhaps not considered (A different technique is cross-selling in which a seller tries to sell something else). In practice, large businesses usually combine upselling and cross-selling to maximize revenue.

Examples

• Selling an extended service contract for an appliance
• Suggesting that a customer opt for higher specifications in a new computer
• Selling luxury options on a vehicle, such as leather upholstery
• Suggesting that a customer purchase a more extensive car wash package
• Asking the customer to choose a larger meal size at a fast-food restaurant

Cross-selling and upselling are similar in that they both focus on providing additional value to customers, instead of limiting them to already-encountered products. In both cases, the business objective is to increase order value inform customers about additional product options they may not already know about. The key to success in both is to truly understand what your customers value and then responding with products and corresponding features that truly meet those needs.

Techniques

Many companies teach their employees to upsell products and services and offer incentives and bonuses to the most successful personnel.

A common technique for successful upsellers is becoming aware of a customer’s background, budget and other budgets, allowing the upsellers to understand better what that particular purchaser values, or may come to value.

Another way of upselling is by creating fear over the durability of the purchase, particularly effective on expensive items such as electronics, where an extended warranty can offer peace of mind.

Customer Profitability

Customer profitability refers to the net profit a company earns from an individual customer after deducting all costs associated with serving that customer. These costs include marketing expenses, order processing, customer service, delivery, and after-sales support. Not all customers generate equal profits. Some customers buy frequently and require less service, while others demand more attention but contribute little revenue. By identifying profitable and unprofitable customers, organizations can develop different strategies for each group and improve overall financial performance.

Purpose of Customer Profitability

• Identify Valuable Customers

The main purpose of customer profitability analysis is to identify which customers generate the highest profit for the organization. Not all customers contribute equally; some purchase regularly and require minimal service, while others demand high support but produce low revenue. By evaluating profitability, companies can recognize high-value customers and give them priority service, personalized attention, and loyalty benefits, thereby strengthening long-term relationships and ensuring consistent income.

• Improve Resource Allocation

Organizations have limited resources such as time, manpower, and money. Customer profitability helps businesses allocate these resources effectively. High-profit customers receive more attention, better service, and customized communication, while routine services are used for less profitable customers. This ensures efficient utilization of company resources and prevents unnecessary expenditure on customers who provide low returns.

• Support Marketing Strategy

Customer profitability guides marketing planning and promotional decisions. Companies can focus marketing campaigns on profitable segments rather than the entire market. Targeted promotions, loyalty programs, and special offers are designed for customers who provide maximum revenue. This improves marketing effectiveness and increases return on investment.

• Enhance Customer Retention

By knowing profitable customers, businesses can develop special retention strategies for them. Personalized services, priority support, and rewards encourage customers to remain loyal. Retaining profitable customers ensures stable revenue and reduces acquisition costs. Therefore, profitability analysis directly supports long-term relationship building.

• Control Service and Operational Costs

Some customers generate high service costs due to frequent complaints, returns, or support requests. Customer profitability analysis helps identify such cases. Companies can streamline service processes, introduce self-service options, or modify service levels to control expenses. Managing service costs improves overall organizational efficiency.

• Pricing and Product Decisions

Customer profitability helps firms set appropriate pricing policies. Businesses may introduce premium services for profitable customers or adjust prices for costly customer segments. It also helps in deciding which products to promote, improve, or discontinue based on customer contribution. This ensures better product planning and financial performance.

• Increase Customer Lifetime Value

The analysis helps companies develop strategies to increase long-term value from customers. Businesses encourage repeat purchases, cross-selling, and up-selling to profitable customers. Over time, customers generate more revenue and become long-term assets for the company. This increases the overall customer lifetime value and strengthens profitability.

• Improve Decision Making

Managers use profitability data to make informed decisions regarding marketing, service, and investment. Instead of relying on assumptions, they depend on actual customer contribution. Data-based decisions reduce risk and improve operational planning. Thus, customer profitability analysis supports effective managerial decision-making.

• Strengthen Competitive Advantage

Focusing on profitable customers helps organizations maintain strong relationships and high service standards. Satisfied customers remain loyal and resist competitors’ offers. This creates a competitive advantage and improves brand reputation in the market.

• Ensure Long-Term Business Sustainability

The ultimate purpose of customer profitability analysis is to ensure sustainable business growth. By concentrating on valuable customers, controlling costs, and improving service, organizations maintain steady revenue and financial stability. Profit-oriented customer management helps businesses survive in competitive markets and achieve long-term success.

Measuring Customer Profitability

Customer profitability measurement refers to the process of determining how much profit a business earns from an individual customer or customer group. It compares the revenue generated by customers with the total cost incurred in serving them. These costs include marketing, order processing, delivery, service support, and complaint handling. The objective is to understand which customers contribute positively to company earnings and which customers create more expense than value.

• Identifying Customer Revenue

The first step in measuring profitability is calculating the revenue generated by each customer. Companies analyze purchase value, purchase frequency, subscription fees, and service usage charges. Customers who purchase regularly and spend more contribute higher revenue. CRM databases and billing records help organizations track all transactions accurately. This step helps firms understand the financial contribution of each customer over a specific period.

• Calculating Customer–Related Costs

After identifying revenue, organizations calculate the costs associated with serving each customer. These costs include marketing expenses, sales visits, delivery charges, customer service operations, product returns, and technical support. Some customers require more attention and therefore create higher service costs. Accurate cost calculation is important because high revenue does not always mean high profit if service expenses are excessive.

• Profitability Analysis Formula

Customer profitability is calculated using a simple formula:

Customer Profitability = Revenue from Customer − Cost of Serving Customer

If revenue is higher than the cost, the customer is profitable. If service cost exceeds revenue, the customer becomes unprofitable. This analysis helps companies categorize customers into profitable, less profitable, and loss-making segments for better decision-making.

• Activity-Based Costing (ABC) Method

Activity-Based Costing is a widely used technique to measure customer profitability. It assigns costs based on activities performed for each customer, such as order handling, complaint resolution, or technical support. Customers who use more company resources are assigned higher costs. ABC provides accurate profitability information and prevents incorrect assumptions about customer value.

• Customer Lifetime Value (CLV) Approach

Customer Lifetime Value estimates the total profit expected from a customer throughout the entire relationship. Instead of focusing on short-term profit, CLV measures long-term contribution. A customer may not be profitable today but may become valuable in the future through repeat purchases and loyalty. CLV therefore helps businesses invest wisely in customer retention.

• Customer Segmentation Based on Profitability

After measurement, companies classify customers into groups such as high-value, medium-value, and low-value customers. High-value customers receive personalized service and loyalty rewards. Medium-value customers are encouraged to increase purchases, while low-value customers are served through automated systems. Segmentation helps businesses focus on profitable relationships and reduce unnecessary expenses.

• Role of CRM Technology

Modern CRM software helps organizations track transactions, service activities, and customer interactions automatically. Data analytics tools process large volumes of data and generate profitability reports. Technology improves accuracy and allows real-time monitoring of customer value. It also helps companies identify trends and take corrective actions quickly.

• Managerial Decisions Based on Profitability

Customer profitability information supports managerial decisions such as pricing strategies, service levels, and marketing investments. Businesses may offer premium services to profitable customers and reduce costly services for low-profit customers. Companies can also design special loyalty programs to retain valuable customers. Thus, profitability measurement guides strategic planning.

Customer Value Modeling

Customer Value Modeling is a CRM technique used to estimate the economic value a customer brings to an organization over a period of time. It evaluates how beneficial it is for a company to acquire, serve, and retain a customer. The model considers purchasing behavior, service usage, and relationship duration. Instead of focusing only on single transactions, it studies the long-term relationship. This helps companies understand which customers are worth investing in and how to manage relationships effectively.

Purpose of Customer Value Modeling

• Identify High-Value Customers

Customer value modeling helps organizations recognize customers who contribute the most to long-term profit. By analyzing purchase frequency, spending patterns, and loyalty, companies can identify high-value customers. These customers are treated as strategic assets and receive personalized service, exclusive offers, and priority support. Identifying valuable customers ensures that the organization protects its most important relationships and strengthens customer satisfaction and retention.

• Improve Resource Allocation

Businesses have limited resources such as time, manpower, and marketing budget. Customer value modeling helps companies allocate these resources wisely. High-value customers receive more attention, better service, and customized communication, while standard procedures are used for low-value customers. This prevents unnecessary expenditure and improves operational efficiency. Proper allocation of resources increases productivity and ensures better use of organizational efforts.

• Enhance Customer Retention Strategies

The model helps companies design effective retention strategies. When businesses know which customers are valuable, they can provide loyalty programs, personalized offers, and after-sales support to maintain relationships. Retaining valuable customers ensures stable revenue and reduces the need for costly acquisition efforts. Thus, customer value modeling strengthens long-term customer relationships.

• Support Marketing Decision Making

Customer value modeling guides marketing planning and promotional activities. Instead of mass marketing, companies can target specific customer segments. Promotional campaigns are directed toward customers who are likely to generate higher returns. This increases the success rate of marketing activities and improves return on investment. Marketing becomes more focused and efficient.

• Increase Customer Lifetime Value

The model encourages businesses to improve the long-term value generated from customers. Companies introduce cross-selling, up-selling, and relationship-building activities to increase repeat purchases. As customers continue to interact with the brand, their lifetime value increases. This leads to higher profitability and stable income for the organization.

• Improve Product and Service Planning

Customer value modeling provides insight into customer preferences and expectations. Companies can design products and services according to the needs of valuable customers. It reduces the risk of product failure and enhances acceptance in the market. Organizations can also discontinue products that do not contribute to profitability.

• Control Service Costs

Some customers require excessive service support, increasing operational cost. Customer value modeling helps businesses identify such cases and adjust service levels accordingly. Companies may introduce self-service options or standardized service processes. Controlling service cost improves profitability without harming customer relationships.

• Strengthen Customer Relationships

By understanding customer importance, companies can maintain better communication and personalized interaction. Regular contact, feedback collection, and customized services build trust and emotional connection. Strong relationships lead to loyalty and long-term association. Customer value modeling therefore improves relationship quality.

• Gain Competitive Advantage

Organizations that understand customer value perform better than competitors. They serve important customers effectively and respond quickly to market changes. Loyal customers resist competitor offers and continue purchasing. This strengthens the company’s market position and brand reputation.

• Ensure Long-Term Business Growth

The ultimate purpose of customer value modeling is sustainable business growth. By focusing on profitable relationships, improving retention, and controlling costs, companies maintain steady revenue. A stable customer base allows businesses to expand confidently and achieve long-term success.

Components of Customer Value

• Functional Value

Functional value refers to the practical usefulness and performance of a product or service. Customers evaluate whether the product solves their problem effectively and performs as expected. Quality, durability, reliability, and efficiency are major elements of functional value. If a product works properly and fulfills its purpose, customers feel satisfied and continue purchasing. Strong functional value builds trust and encourages repeat buying behavior.

• Economic (Price) Value

Economic value relates to the price customers pay in comparison to the benefits received. Customers always compare cost with utility. If they feel that the product offers good benefits at a reasonable price, they perceive high value. Discounts, affordability, and cost savings increase economic value. Businesses must balance price and quality to ensure customers believe they are getting value for money.

• Emotional Value

Emotional value refers to the feelings and psychological satisfaction customers experience while using a product or interacting with a brand. A positive experience such as comfort, happiness, confidence, or pride increases emotional attachment. Brands that create pleasant experiences develop loyal customers. Emotional value often influences purchasing decisions more strongly than price or functional benefits.

• Social Value

Social value arises when a product enhances a customer’s social status or acceptance in society. Some products provide prestige, recognition, or image improvement. Branded clothing, premium gadgets, and luxury items are examples. Customers purchase such products not only for utility but also for social identity. Companies use branding and positioning strategies to strengthen social value.

• Relationship Value

Relationship value is created through long-term interaction between the company and the customer. Friendly communication, personalized service, and after-sales support build trust and commitment. Customers feel comfortable dealing with a familiar company and prefer continuing the relationship. Strong relationship value increases customer loyalty and reduces switching behavior

• Service Value

Service value refers to the support customers receive before, during, and after the purchase. Quick delivery, installation assistance, customer support, and complaint handling increase satisfaction. Efficient service reduces customer effort and enhances convenience. High service value often differentiates a company from competitors and encourages repeat purchases.

• Convenience Value

Convenience value represents the ease with which customers can purchase and use a product or service. Availability, easy payment options, online ordering, and fast delivery improve convenience. Customers prefer companies that save time and effort. Greater convenience leads to higher satisfaction and retention.

• Personalization Value

Personalization value occurs when companies tailor products and communication according to individual customer preferences. Customized offers, recommendations, and personalized messages make customers feel important. CRM technology helps businesses understand individual needs and deliver relevant solutions. Personalization strengthens emotional connection and loyalty.

• Experiential Value

Experiential value is derived from the overall experience customers have with the brand. Store atmosphere, website design, customer interaction, and product usage experience contribute to this value. A pleasant experience creates positive memories and encourages repeat visits. Businesses focus on improving customer experience to increase satisfaction and engagement.

• Trust and Assurance Value

Trust value develops when customers feel secure and confident in the company. Reliable products, honest communication, and consistent service build trust. Warranty policies, return guarantees, and transparent information also contribute to assurance. When customers trust a company, they continue purchasing and recommend it to others.

Personalization Marketing

Personalized marketing, also known as one-to-one marketing or individual marketing, is a marketing strategy by which companies leverage data analysis and digital technology to deliver individualized messages and product offerings to current or prospective customers. Advancements in data collection methods, analytics, digital electronics, and digital economics, have enabled marketers to deploy more effective real-time and prolonged customer experience personalization tactics.

Beginning in the early 1990s, web developers began tracking HTML calls that their websites were receiving from online visitors. In 2012, the Web Analytics Association (WAA) officially changed its name to the Digital Analytics Association (DAA) in order to accommodate new and developing data streams that exist in addition to the web.

Technology

Personalized marketing is dependent on many different types of technology for data collection, data classification, data analysis, data transfer, and data scalability. Technology enables marketing professionals to collect first-party data such as gender, age group, location, and income and connect them with third-party data like click-through rates of online banner ads and social media participation.

Data Management Platforms: A data management platform (DMP) is a centralized computing system for collecting, integrating and managing large sets of structured and unstructured data from disparate sources. Personalized marketing enabled by DMPs, is sold to advertisers with the goal of having consumers receive relevant, timely, engaging, and personalized messaging and advertisements that resonate with their unique needs and wants. Growing number of DMP software options are available including Adobe Systems Audience Manager and Core Audience (Marketing Cloud) to Oracle-acquired BlueKai, Sitecore Experience Platform and X+1

Customer Relationship Management Platforms: Customer relationship management (CRM) is used by companies to manage and analyze customer interactions and data throughout the customer lifecycle to improve business relationships with customers, assist in customer retention and drive sales growth. CRM systems are designed to compile information on customers across different channels (points of contact between the customer and the company) which could include the company’s website, live support, direct mail, marketing materials and social media. CRM systems can also give customer-facing staff detailed information on customers’ personal information, purchase history, buying preferences and concerns. Most popular enterprise CRM applications are Salesforce.com, Microsoft Dynamics CRM, NetSuite, and Oracle Eloqua.

Beacon Technology: Beacon technology works on Bluetooth low energy (BLE) which is used by a low frequency chip that is found in devices like mobile phones. These chips communicate with multiple Beacon devices to form a network and are used by marketers to better personalize the messaging and mobile ads based on the customer’s proximity to their retail outlet.

Strategies

One-to-one marketing refers to marketing strategies applied directly to a specific consumer. Having knowledge of the consumer’s preferences, enables suggesting specific products and promotions to each consumer. One-to-one marketing is based on four main steps in order to fulfill its goals: identify, differentiate, interact, and customize.

• Identify: In this stage, the major concern is to get to know the customers of a company, to collect reliable data about their preferences and how their needs can best be satisfied.
• Differentiate: To distinguish the customers in terms of their lifetime value to the company, to know them by their priorities in terms of their needs, and segment them into more restricted groups.
• Interact: In this phase, one needs to know by which communication channel and by what means, contact with the client is best made. It is necessary to get the customer’s attention by engaging with him/her in ways that are known as being the ones that he/she enjoys the most.
• Customize: One needs to personalize the product or service to the customer individually. The knowledge that a company has about a customer, needs to be put into practice and the information held has to be taken into account in order to be able to give the client exactly what he/she wants.

Costs and Benefits

Personalized marketing is used by businesses to engage in personalized pricing which is a form of price discrimination. Personalized marketing is being adopted in one form or another by many different companies because of the benefits it brings for both the businesses and their customers.

Businesses

Before the Internet, it was difficult for businesses to measure the success of their marketing campaigns. A campaign would be launched, and even if there was a change in revenue, it was nearly impossible to determine what impact the campaign had on the change. Personalized marketing allows businesses to learn more about customers based on demographic, contextual, and behavioral data. This behavioral data, as well as being able to track consumers’ habits, allows firms to better determine what advertising campaigns and marketing efforts are bringing customers in and what demographics they are influencing. This allows firms to drop efforts that are ineffective, as well as put more money into the techniques that are bringing in customers.

Some personalized marketing can also be automated, increasing the efficiency of a business’s marketing strategy. For example, an automated email could be sent to a user shortly after an order is placed, giving suggestions for similar items or accessories that may help the customer better use the product he or she ordered, or a mobile app could send a notification about relevant deals to a customer when he or she is close to a store.

Customers

Consumers face an overwhelming variety and volume of products and services available to purchase. A single retail website can offer thousands of different products, and few have the time or are willing to make the effort to browse through everything retailers have to offer. At the same time, customers expect ease and convenience in their shopping experience. In a recent survey, 74% of consumers said they get frustrated when websites have content, offers, ads, and promotions that have nothing to do with them. Many even expressed that they would leave a site if the marketing on the site was the opposite of their tastes, such as prompts to donate to a political party they dislike, or ads for a dating service when the visitor to the site is married. In addition, the top two reasons customers unsubscribe from marketing emailing lists are 1) they receive too many emails and 2) the content of the emails is not relevant to them.

Personalized marketing helps to bridge the gap between the vastness of what is available and the needs of customers for streamlined shopping experience. By providing a customized experience for customers, frustrations of purchase choices may be avoided. Customers may more quickly find what they are looking for and avoid wasting time scrolling through irrelevant content and products. Consumers have come to expect this sort of user experience that caters to their interests, and companies that have created ultra-customized digital experiences, such as Amazon and Netflix.

Future of Personalized Marketing

Personalized marketing is gaining headway and has become a point of popular interest with the emergence of relevant and supportive technologies like DMP, geotargeting, and various forms of social media. Now, many people believe it is the inevitable baseline for the future of marketing strategy and for future business success in competitive markets.

Adapt to technology: For personalized marketing to work the way advocates say it will, companies are going to have to adapt to relevant technologies. They will have to get in touch with the new and popular forms of social media, data-gathering platforms, and other technologies that not all current employees and businesses may be familiar with or can afford.

Restructuring current business models: Adopting a new marketing system tailored to the most relevant technologies will take time and resources to implement. Organized planning, communication and restructuring within businesses will be required to successfully implement personalized marketing. Some companies will have to accept that their current business and marketing models will change radically, and probably often. They will have to reconsider the ways customer data and information circulate within the company and possibly beyond. Company databases will be flooded with expansive personal information individual’s geographic location, potential buyers’ past purchases, etc., and there may be complications regarding how that information is gathered, circulated internally and externally, and used to increase profits.

Legal liabilities: To address concerns about sensitive information being gathered and utilized without obvious consumer consent, liabilities and legalities have to be set and enforced. Privacy is always an issue, in some countries more than others, so companies have to manage any legal hurdles before personalized marketing can be adopted.

Event-Based Marketing

Event-based marketing has become a hot topic among marketers in recent years. It refers to prospect nurturing, sales and communication activities that change based on the customer or prospect’s situational needs. Rather than approaching your marketing with a “one-size-fits-all” mentality, for instance, you alter your approach based on the customer or prospect, and the impending changes in their businesses.

Defining an “Event”

Some people misunderstand the meaning of event-based marketing, believing it refers to specific dates. The “event,” however, refers to the activity or change in the customer or prospect.  

An event can be any action, activity or change with a customer or prospect that could triggger new buying decisions. Some events are more noticeable, but others are more discreet. Here’s a few trigger events that typically cause significant disruption, thus change within an organization.

• Funding announcements
• Mergers and aquisitions
• Facility expansion, relocation, capital improvements
• Executive leadership changes
• Financial performance
• Hiring Announcements
• Layoffs
• New product or service announcements
• Legal or regulatory issues

Following an event or a new announcement, a salesperson could customize his or her approach based on the impending organizational change. 

If you plan on using event-based marketing, though, you’ll need to take a proactive approach towards these business opportunity leads and  the customers throughout their lifecycle. Without identifying “events,” you won’t be able to customize your approach based on the customer or prospect’s needs.

Benefits of Event-Based Marketing

Why should you use event-based marketing? According to an article published by Eventricity, it’s not uncommon for businesses to achieve 30% or higher customer response rates when using event-based marketing. The website cites a case study involving the National Australia Bank and ABM Amro Antonveneta, which experienced a 34% average customer response rate when using event-based marketing. This is just an average, and your business may experience even higher response rates.

Influential businesses around the globe are aware that technology has reshaped the way we work today. When the digital era first started, the process of adaptation took some time, nonetheless the reward was priceless. These are 5 benefits from technology used in business communications:

1. Increased Communication. Do you remember a time at work when you had to send a handwritten letter to your boss who might have worked in a different located due to either travel meetings or important projects? The average respond time could have been days. Today, technology gives us the opportunity to communicate via email, messages, Skype or FaceTime, within minutes and most importantly, from any part of the world.
2. Improved Level of Security and distribution. “Back in the day” we used to store piles of paperwork in a locked safety cabinet or safe. Today, technology allows businesses to save up to thousands and thousands of sensitive information and files, encrypt such files and store on a single PC, external hard drive or cloud drive. With a proper antivirus like Avira, and security tips to protect your devices from hacking, the appropriate departments have access to these files and can share among one another within seconds while keeping files safe.
3. Visual Quality. Do you remember when you used to write your reports with a typewriter? And you had to do it carefully to keep paper quality? Nowadays, computers have software tools like Word, PowerPoint, and Excel, which can make your reports more visually attractive. As well as correct mistakes as many times as you would like without having to worry about paper issues or constantly restarting.
4. Quick, accessible Information. The Internet is another technology used in business communication. Trips to this virtual library can take place within seconds! Getting the information, you are looking for has never been easier and/or faster. Have you heard of a single company that doesn’t use internet in their daily basis? That’s right, today having Internet access is as important as having a computer, because of the accessible information you can get while using it at work, which can increase knowledge and substance different work reports.
5. Increased Efficiency. Last but absolutely not least, efficiency. Here is a great example of how technology in business communications has increased efficiency: remember how credit cards used to be put under a carbon paper to get physical impression? We know what you’re thinking, it was tedious and it took a while. Today credit cards are swiped through a card reader and the payment is made! Additional ways efficiency has increased are; computers are also a handy tool to process data, and employees are working faster than ever and this is making their workflow smoother.

Technology has altered modern life in many ways, especially in the workplace. The invention of computers, the miniaturization of electronics and the development of wireless communication have all altered the business world. Business communication, in particular, has seen some of the greatest advancements due to technological developments.

• Bring business efficiency

It helps people to be more productive and efficient. Whether you’re using a word processing program that allows you to edit with ease or an electronic bookkeeping system that pulls data at the touch of a keystroke, technology makes life easier. You can schedule sales calls and appointments, track employee time, and perform many tedious tasks that once took hours in only minutes.

• Ensure Computational Accuracy

Modern spreadsheets like Excel, with its computational formulas, ensure accuracy. Accounting programs like QuickBooks allow keeping account inventory accurate and clear. All information related to sales, its management, areas, customer data and pay bills, payroll have become easier with the support of computer and its various functions. The basic understanding of system saves time and cost and compile financial information. With the use of many software programs, data can be stored easily and manage as well.

• Technology helps to be competitive in marketplace

Today, no business can function without technology. Competitors use technology and go ahead in business; therefore, it is essential for a business too to use technology and its more advanced process as compared to its competitors. The use of digital marketing to promote a company and online sales tools to sell across the street and across the globe. Embrace Customer Relationship Management systems that allow a company to track what their customers do and like.

• Be Industry Relevant

Technology opens the other information as well related to business for eg. A healthcare profession with the use of technology can connect its consumers online, understand their health-related problems, get connect with a pool of doctors, and regular information about latest development. It will help them to be industry relevant and acceptable in a market.

• Security

Technology can be used to protect financial data, confidential executive decisions and other proprietary information that leads to competitive advantage. Simply put, technology helps businesses keep their ideas away from their competition. By having a password on computers, a business can ensure that all the important files are protected and saved.

• Efficiency of Operations

Technology also helps a business understand its cash flow needs and preserve precious resources such as time and physical space. Warehouse inventory technologies let business owners understand how best to manage the storage costs of holding a product. With proper technology in place, executives can save time and money by holding meetings over the Internet instead of at corporate headquarters.

• Information Retrieval and Distribution

Information from text to audio, video or images can be easily sent to the public in a vast array of methods. This way relationships are created faster and easier too.