CUSTOMER RELATIONSHIP MANAGEMENT

CONCEPTS AND TECHNOLOGIES

Chapter 3
Managing the customer life-cycle:
customer acquisition
Three stages of the customer life cycle

 Customer acquisition
 Customer retention
 Customer development
Key customer acquisition questions

 Which prospects (potential new customers) will be

targeted?
 How will these prospects be approached?
 What offer will be made?
Two types of new customer

 New-to-category customers
● are customers who have either identified a new need or
have found a new category of solution for an existing need.
 New-to-company
● are customers are won from competitors.
Portfolio purchasing

 Customers buy on a portfolio basis when they buy

from a choice set of several more or less equivalent
alternatives.
 A customer who has not bought from one of the
portfolio suppliers for a matter of months or even
years, may still regard the unchosen supplier as part
of the portfolio.
Strategic switching

 Strategic switching occurs when customers who shift

their allegiances from one supplier to another in
pursuit of a better deal.
 Banks know that their promotional pricing stimulates
hot money.
Hofmeyr’s conversion model

 Hofmeyr’s basic premise is that customers who are

not committed are more likely to be available to
switch to another provider.
 Commitment is a function of satisfaction with the
brand or offer, the attractiveness of alternatives, and
involvement in the brand or offer.
Profiling committed and uncommitted customers

 Committed customers  Uncommitted customers

• Entrenched customers • Shallow customers have a
are unlikely to switch in lower commitment than
the foreseeable future average, and some of
• Average customers are them are already
unlikely to change in the considering alternatives
short term but may • Convertible customers are
switch in the medium most likely to defect
term
Four questions to assess commitment

 How happy are you with <whatever it is>?

 Is this relationship something that you care about?
 Is there any other <whatever it is> that appeals to
you?
 If so, how different is the one <whatever> from the
other?
Profiling non-customers

 Open non-customers
● Available non-customers prefer the alternative to their
current offer though they have not yet switched, and are
ready to switch.
● Ambivalent non-customers are as attracted to the alternative
as they are to their current brand
 Unavailable non-customers
● Weakly unavailable non-customers prefer their current
brands
● Strongly unavailable non-customers have a strong
preference for their current brands
Sources of B2B prospects

 Personal referrals form satisfied customers

 Online sources
● Search engines
● Company websites
● Portals
● Social media
 Networking
 Promotional activities
● Attendee and delegate lists from exhibitions, seminars, workshops,
tradeshows, conferences, events
● Advertising response enquiries
● Publicity
● Email campaigning
 Lists and directories
 Canvassing
 Telemarketing
The CEOExpress portal

Figure 3.1
Engaging content on social media

 Blogs
 White papers
 Videos
 Presentations
 Podcasts
 Reports
 Case studies
 Testimonials
 Competitions and games
 Tools
 Surveys
Networking definition

 Networking is the process of establishing and

maintaining business-related personal relationships
Promotional activities that build B2B leads

 Exhibitions
 Seminars
 Workshops
 Trade shows
 Conferences
 Advertising
 Publicity
 Email campaigning
Publicity definition

 Publicity is the generation of free editorial content

relevant to a company’s interests
Sources of B2C prospects

 advertising
 sales promotion
 buzz or word-of-mouth
 social media
 merchandising
Advertising definition

 Advertising is the creation and delivery of messages

to targeted audiences through the purchase of time
or space in media owned by others.
Cognitive and affective advertising objectives

 Cognitive advertising  Affective advertising

objectives include: raising objectives include
awareness, developing developing a liking for the
understanding, and product, and generating
generating knowledge. preference
New customers generally
need to be made aware of
the product and to
understand what benefits
it can deliver
Advertising questions for customer acquisition

 Which messages will generate most new customers?

 Which media are most cost-effective at customer
acquisition?
Cut-through

 An advertisement must stand out from the background

clutter and claim the audience’s attention. Advertisers
call this ‘cut-through’.
 Standing out is a matter both of message creativity and
execution, and media selection.
 What stands out?
● black and white ads in colour magazines
● image-based ads in text-dominated media
● loud ads in quiet media
● ads that leave you wondering ‘what was that all about?’
● ads that challenge your comprehension and emotions.
Execution styles

 Slice-of-life
● product being used in a recognisable context
 Aspirational
● associates the product with a desirable outcome or life-style
 Testimonial
● the product is endorsed by an opinion-influencer
 Comparative
● the ad compares one or more alternatives with the
advertised product
Pre-testing ads

 Recall. How much of the ad can the sample recall?

 Comprehension. Does the sample understand the
ad.?
 Credibility. Is the message believable?
 Feelings evoked. How does the sample feel about the
ad?
 Intention-to-buy. How likely is it that the sample will
buy?
Reach and frequency definitions

 Reach is the total number of a targeted audience that

is exposed at least once to a particular ad or
campaign

 Frequency is the average number of times that a

targeted audience member is exposed to an ad or
campaign
Media efficiency statistics

 Response rates provide a first-level indicator of ad

effectiveness.
● Examples include the number of coupons clipped and
returned, or calls requesting information (RFI) made to a
contact centre.
 Conversion rates offer a second-level indicator of ad
effectiveness.
● Examples include sales made as a percentage of coupons
returned, or proposals submitted as a percentage of RFIs.
Sales promotion definition

 Sales promotion is any behaviour-triggering

temporary incentive aimed at prospects, customers,
channel partners or salespeople
Types of consumer sales promotion

 Sampling
 Free trials
 Discounts
 Coupons
 Rebates or cash-back
 Bonus packs
 Banded packs
 Free premiums
 Cross promotions
 Lotteries
 Competitions
Buzz or word-of-mouth definition

 Word-of-mouth is interpersonal communication about

a product or organization in which the receiver
assumes the communicator to independent of
commercial influence.
Merchandising definition

 Merchandising is any behaviour-triggering stimulus or

pattern of stimuli, other than personal selling, that
takes place at retail or other points-of-sale
Social media

 Social media are internet-based applications that

allow the creation and exchange of user-generated
content.
 Examples: Facebook, Twitter, flickr, YouTube and
Tumblr.
 Strategies: create a page or channel; advertise in
social media; promote buzz by revenue leaders;
coopt key infuencers.
innocent drinks
Samsung merchandising

Figure 3.3
Other tools for customer acquisition

 Referrals
 Events
 Shows
 Publicity
 Telemarketing or cold canvassing
 SMS campaigning
 Email campaigning
 Product placement and integration
 Pitching
Referral schemes

 Customer Referral Schemes (CRS) are also known as

Member-Get-Member (MGM) and Recommend-A- Friend
(RAF) schemes.
 These work by inviting existing customers to recommend
a friend and rewarding the recommender with a gift.
 Need to choose the right customer and the right time to
invite a referral.
 Schemes are more effective when targeted at a relevant
section of the customer base, e.g. customers who are
satisfied or customers who have just experienced
excellent service.
KPI’s for customer acquisition programs

 How many customers are acquired?

 What is the cost per acquired customer
 What is the value of the acquired customer?
Making the right offer

 Some industries are consistent in their use of entry-

level products for customer acquisition.
● Insurance companies use automobile insurance to acquire
new customers.
● Banks use relatively high interest rates on deposit account,
or relatively low charges on credit cards.
● Supermarkets price high demand, frequently purchased
items such as bread as loss leaders in order to build store
traffic.
Operational CRM tools that help customer acquisition

 lead management
● The lead management process includes a number of sub-processes,
including lead generation, lead qualification, lead allocation and lead
tracking
 campaign management
● Campaign managers design, execute and measure marketing
campaigns with the support of CRM technologies. Sometimes these
are multi-media campaigns across direct mail, email, fax, outbound
telephony, and SMS platforms
 event-based marketing
● EBM provides companies with opportunities to approach prospects
at times which have a higher probability of leading to a sale, e.g.
important life-stage events
CRM analytics supports customer acquisition

 Operational CRM tools have to be supported by

sound analytics to ensure that the right offer is made
to the right prospect through the right channel at the
right time.
 It is often possible to query current customer-related
databases for clues to guide customer acquisition.