The evolution of Relationship Management concept
Almost two and half decades back, the focus of marketing practices started to shift from product to customer centricity. It was considering the existing customers as the center of business. There was sea-change in the mind set of marketers who were product focused. Traditional marketers segmentized markets to create, monitor and strengthen the product position. Product portfolio tools, such as BCG matrix, GE 9 Cell matrix directed companies like a compass, through maximizing profit and attaining long term goals. Firms having obsessed with effective resource allocation led to a strategic fit. They also have ensured balance of revenue generation and enticing investments. Each product investment was considered on its own merits through connecting investment decisions to shareholder Value. Firms were free to pick the market of homogeneous customer segment on the basis of market and financial attractiveness.
Advocates of Relationship Marketing challenge the customer and economic logic behind portfolio management and construed that :
- Customer profitability is as important as product/market profitability
- Customer value is created by catering customers-effectively as an individual
Let us consider the example of LENOVO. It recently underwent a colossal cultural shift designed to transmute their firm from one focused on ‘product first’ to one focused on the ‘consumer first’.
David Roman, the CMO of LENOVO was interviewed by Senior Contributor of Forbes Dr.Kimberly Whitler. Following are David Roman’s four prominent insights on LENOVO customer-focused strategies:
1.Massive change in entire PC market through redefining LENOVO value model
Originally, we created the bulk of our PCs for customers in defense, banking, and large institutions. In the past many years, we’ve moved to selling computers to consumers and individual end users. With this shift, we’ve re-evaluated and redefined our value model. This shift also has forced us to better understand individual end-user needs : We’ve found these consumers are looking for a complete solution for which they are willing to pay a premium.
2.Offering consumers a different, simple, efficient and easier value proposition
When you sell to institutions, the purchasers focus on a price/feature equation because of the number of computers they’re buying. However, consumers are seeking a different value proposition: They want a product that makes their life simpler, more efficient, and easier. Consumers today have a proliferation of devices (TV, computer, tablet, watch, glass, and even a computer in your car), and one of their biggest challenges involves figuring out how to keep all their different devices connected and integrated to move data between devices.
3.The elements impacted the shift through supply chain and product innovation
While we’ve grown our business to nearly $50B, we realized our competency was centered on supply chain and product innovation. We’re fast, effective, and efficient; however, we decided to spend more time on building the brand. Building the brand makes us more competitive as a company, able to earn a premium from the consumer by establishing ourselves as a premium value in the minds of consumers.
4. The unprecedented internet-based Role of technology at LENOVO
In addition to our shifting customer base, the second element impacting our business model involves technology itself – the Internet. The Internet gives companies the ability to engage one-on-one with consumers – an impossible opportunity a decade ago. While we have a CEO council, and we meet with them to get feedback. We couldn’t meet in person with individual consumers. Leveraging the Internet, we are building a community of users who want to engage with us. We regularly communicate with these consumers to help make us decisions that create more value. For example, our fans online influenced our new logo design and ensured we produced the right assets.
Reicheld examined and stated that customer loyalty and retention are better than by market share, unit cost and scale. He avered that customer which are extremely loyal become more profitable over time because:
- Customer acquisition costs spread over a larger turn over;
- Customer spending tends to accelerate over time;
- Operating costs fall as Customers know the firm’s products, services and policies better;
- Satisfied Customer make referral;
- Intimate Customers are less price sensitive, allowing the firms maintain if not improve its margin (Reicheld, 1996)
In most of the industries a minority of customers generate majority of profits (Hallberg 1995). So not only does customers’ profitability boost with passing time, but some customers are proved potentially far more lucrative than others. Peper and Rogers popularized & disseminated the expression ‘one to one’. Also companies must differentiate customers and not just products. This attracting and retaining customer will have astonishing impact on the business.
Apart from the commercial logic of becoming customer-centric, their extensive and deeper needs can be addressed. Customer’s motivational and behavioral aspect traced and probed in more effective way whilst standing apart and extending its own offer. Over time, this positive cycle of learning and doing, it is hinged with loyalty attributes and captures more of economic value in its value chain. The most intricate and profound problems must be tackled through customization. The better effectiveness must be translated towards solution oriented than result/efficiency oriented.
Source: Google Images
The impact of information technology:
The RM theory has ethical and pragmatic connotation which ensures that the better expedited implementation cycle to manage large no of individual customers through information technology. The technology is proved to be an invisible hand through CRM:
- Providing greater individual customer insight;
- Allowing firms with effective connect to individual requirement;
- Map business processes as the individual customers wants at core.
The customer data stored is becoming much cheaper than before which is useful for better customer service. Data is analyzed to understand customer preferences much better. Integrated virtual offices are being formed to access the data and information of customers to serve them better. The individual need is catered uniquely and the customer objectives are achieved with efficient IT tools. The overall study about customer preferences and their psychology of purchase need to be studied by customer-facing staff.
In past, thrust was upon mass production and marketing which had devised structures, business systems, cultures, frameworks, methodologies. Still configuration of product and services with customer focus was lacking. Conversely latest tools in planning, software systems, logistics and supply chain decisions & processes led to personalized cost effective goods and services across the huge customer base. The ‘mass customization’ is ensured through it. But costing and obscurity were part of prime domain of huge conglomerates. But it is being replaced with acceleration- with low cost version produced -by many owned SMEs instead of developing their single big business. The cost of product should be ‘variable’ instead of the ‘fixed’ cost.
Microsoft’s had made a great technological impacts that have changed the world.
Four decades ago, Microsoft Founders Bill Gates and Paul Allen set the ambitious goal of putting a PC on every desk and in every home. Forty years later that goal has been largely realized. Over a billion PCs are now in use in businesses and homes around the world.
Jason L Ward is a columnist at Windows Central two main goals stand out as primary objectives for Microsoft:
1.A desire for profitability,
2. The goal to have an impact on the world.
Microsoft proactively made user-friendly tools
With user-friendly tools like Windows, Office and MS Paint, Microsoft was successful with making computing, something that was remote and foreign to most people, a personal and easy experience. Consumers and businesses also benefited from the fact that Microsoft’s platform became the dev box and target of a massive community of developers who ultimately supplied Windows with 16 million programs.
Microsoft redefined the relationships between businesses and consumers
OEMs, platform providers, developers, businesses and consumers that are the foundations of the present age of personal computing. Microsoft mainstreamed personal computing to the extent that PCs are now available in a range of forms and price points. PCs and Windows have become the fundamental tools that have helped authors write best sellers, artists create masterpieces, musicians craft music, social service and volunteer organizations monitor resources, manufacturers optimize production, bank’s power of ATMs and much more.
Integrating resources of varied soft- tools has changed the way our world operates
Their integration in almost every part of our lives. Though the PC market declined after the smartphone’s advent, the existence of these “modern mobile PCs”, is a testimony of Microsoft’s impact on the world and personal computing. Especially since Microsoft’s $150 million contribution to Apple in 1997 saved the Cupertino company, enabling it to exist long enough to introduce the world-changing iPhone in 2007.
Value Chains are integrated. These solutions integrate firms with their companies who choose and provide value with a greater talent towards end customers. The customers are provided efficient service through the company’s logistical competence. Information-rich value chains are sensitive hub of catering individual service to customer changes, furnish the needed customer informatics on the progress of individual orders, total demand and forward demand. This gives an idea to production people about the probable requirement of finished goods to be produced as per the pre-decided time horizon. Thus the customer can be catered in best possible manner through highly impactful technology.
PC: Google Images
©2019, Dr.Amit Medhekar. All rights reserved.
