4. Business process changes Not long ago, companies with efficient facilities and greater resources were able to satisfy customer needs with standardized products, reaping advantages through productivity gains and lower costs. Mass marketing and mass production were successful as long as customers were satisfied with standardized products. As more firms entered the market, mass marketing techniques, where the goal was to sell what manufacturing produced, started to
lose effectiveness. Target marketing, or segmentation, shifted a company’s focus to adjusting products and marketing efforts to fit customer requirements. Changing customer needs and preferences require firms to define smaller and
smaller segments. It has become well known that retaining customers is more profitable than building new relationships. Consequently, relationship marketing was developed on the basis that customers vary in their needs, preferences,
buying behavior, and price sensitivity. Therefore, by understanding customer drivers and customer profitability, companies can better tailor their offerings to maximize the overall value of their customer portfolio. In his seminal study, Reichheld (1996a, b) has documented that a 5 percent increase in customer retention resulted in an increase in average customer lifetime value of between 35 percent and 95 percent, leading to significant improvements in company profitability.
Customer relationship marketing techniques focus on single customers and require the firm to be organized around the customer, rather than the product. Customer-centric organizations seamlessly integrate marketing and other business processes to serve customers and respond to market pressures. Firms
4. Business process changes Not long ago, companies with efficient facilities and greater resources were able to satisfy customer needs with standardized products, reaping advantages through productivity gains and lower costs. Mass marketing and mass production were successful as long as customers were satisfied with standardized products. As more firms entered the market, mass marketing techniques, where the goal was to sell what manufacturing produced, started to
lose effectiveness. Target marketing, or segmentation, shifted a company’s focus to adjusting products and marketing efforts to fit customer requirements. Changing customer needs and preferences require firms to define smaller and
smaller segments. It has become well known that retaining customers is more profitable than building new relationships. Consequently, relationship marketing was developed on the basis that customers vary in their needs, preferences,
buying behavior, and price sensitivity. Therefore, by understanding customer drivers and customer profitability, companies can better tailor their offerings to maximize the overall value of their customer portfolio. In his seminal study, Reichheld (1996a, b) has documented that a 5 percent increase in customer retention resulted in an increase in average customer lifetime value of between 35 percent and 95 percent, leading to significant improvements in company profitability.
Customer relationship marketing techniques focus on single customers and require the firm to be organized around the customer, rather than the product. Customer-centric organizations seamlessly integrate marketing and other business processes to serve customers and respond to market pressures. Firms
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