Business Case Studies, Executive Interviews, Don Peppers and Martha Rogers on CRM

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Executive Interviews: Interview with Don Peppers and Martha Rogers on CRM
January 2008 - By Dr. Nagendra V Chowdary

Don Peppers and Martha Rogers on CRM
Founding Partners
Peppers & Rogers Group.

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  • For a customer, when can variety be helpful and when can it be harmful? Could you provide some real world examples where companies led their customers into overchoice and also examples of companies who understood this problem and created an effective product mix?
    It is a well-known axiom in direct marketing that the surest way to depress response is to offer customers a choice. Asking a customer to choose represents one more hurdle that lies between the customer and the sale. It is important to realize that fundamentally customers do notwant choice; they just want exactly what they want

    Being agile may help manufacturers become more costefficient in introducing more and more variety, but unless agility is directed at mass customizing in response to actual demand, customers will not think you're agile only bursting with options. Complexity and costs on the shop floor will only be replaced by confusion and chagrin on the shopping floor.

  • What is your practical advice to managers to avoid overchoice?
    The mission of a 1to1 marketer is to figure out exactly what individual customers need (often through direct collaboration), and then produce it, generally using design tools that eliminate the problem of too much choice. And they can do this efficiently, at a price customers are willing to pay and at a cost that allows for profitable margins. Mass customization is not being everything to everybody; rather, it is doing only and exactly what each customer wants,when hewants it. Indeed,most 1to1 marketers find that although there may be a significant up front investment in developing the products, processes and technologies required mass customized products can be produced at costs that are very nearly as low asmass-produced costs. And for some products, mass customization actually costs less, particularly when markets become fragmented enough that mass production techniques can no longer effectively predict what customers need.

  • Marketers have lost the forest for the trees, focusing too much on creating products for narrow demographic segments rather than satisfying needs. Customers want to 'hire' a product to do a job or, as legendary Harvard Business School marketing professor Theodore Levitt puts it, "People don't want to buy a quarter inch drill. They want a quarter inch hole!" Does CRM help in identifying and defining the real customer needs?
    One very succinct definition of CRM is "treating different customers differently" which simply means behaving differently towards a customer based on the characteristics of the customer. To be successful at CRM you must know how your customers are different. And customers are different in two fundamental ways they have different values to the firm, and they need different things fromthe firm.At most companies, a great deal of effort and analysis goes into understanding who themost valuable customers are, while considerably less attention is given to understanding how different customers are in their needs. There sult is that a firmwill persist in seeing the problem through its own eyes rather than through the eyes of the customer, focusing on the drill rather than the hole.

    All marketing involves changing the customer's behavior. But with CRM, the firm can take individual initiatives, with respect to one customer at a time, as appropriate to each customer. You cannot change an individual customer's behavior without appealing to somemotivation or need that the customer has. CRM, in effect, forces a firm to try to see its business situation through the eyes of the customer.

  • In multi-sided markets, some customers contribute to a company's bottom line directly while others contribute indirect benefits,which are more difficult to calculate. How to reach out to these indirect customers? How should companies leverage their associations?
    We think all forms of customer contribution need to be tallied and tracked by a marketer, in order to prioritize marketing efforts among different customer groups. In pharma, for example, highly influential physicians will have a disproportionate impact on the success of various drugs and medicines. But in all industries now, with customer reviewsites and online social networking, the opinion of one customer has the possibility of influencing dozens, or perhaps many thousands, of other customers.

    While word-of-mouth marketing seems to be a hot topic these days, we don't think it is easy to do or manage, because of the inherently randomway in which customer networks evolve. Rather, it is best to lay as much groundwork for favorable word-ofmouth as you can by always working to earn the trust of your customers.

  • Companies have more or less ignored 80% of the world's population the global poor. Should the world's poor, who individually have less than $5 a day in disposable income, be a viable market for new goods and services?What are some of the challenges that companies face operating at the base of the pyramid? Certainly, the poor are very different consumers from the more affluent. What kind of business models are needed?
    While we don't deal with this issue specifically in our 1to1model, there is no reason why poorer people would not be just as desirous as those more well-off of strong relationships with vendors they can trust. We think the problem of chronic poverty is not a businessmodel issue, but in almost all cases a governmental and regulatory issue. Themost promising policies for poverty relief are those that deregulate many forms of business activity. Although many rules and laws that restrict free markets are ostensibly designed to protect the poor, the ironic result in many cases is that these regulatory restrictions inhibit business formation and competition, so poverty-stricken people have no way to lift themselves out of their situation.

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