Customer Acquisition and Segmentation

All customers are not equal and; therefore, not all of them should be treated equal. Two strong keywords in the discussion of CRM concepts relate to “selectivity” and “partnership.” There exist various customer hierarchies that evaluate the involvement of the customer with the company. Some of these are Prospect-Customer-Client, Supporter-Advocate-Partner or the more simplified Advocate-Buyer-Tryer. The concept of customer as a partner where the customer is willing to give inputs on a product or a service design or product or service delivery is the highest level of hierarchy. Customers behave in four different ways:

1. Apostles: They are loyalist customers who are completely satisfied and keep returning to the company. Their experience so far exceeds their expectations and they share their strong feelings with others.
2. Terrorists/Defectors: Defectors are neutral. Most of them can be converted into highly satisfied customers if a company has strong processes in place to address their needs.
3. Mercenaries: These customers may be completely satisfied but exhibit almost no loyalty and are often expensive to acquire and quick to depart. They chase low prices, buy on impulse, pursue fashion trends or seek change for the sake of change. They can make a company’s life miserable.
4. Hostages: These customers either belong to the companies who operate in a monopolistic environment or they are habituated to a particular brand and demonstrate inertia in brand switching. Often these customers experience the worst a company has to offer and must accept it.

1. Customer Acquisition Management

Customer acquisition management is a term used to describe the methodologies and sys­tems to manage customer prospects and inquiries generated by a variety of marketing tech­niques. It can be considered the connectivity between advertising and customer relationship management. This critical connectivity facilitates the acquisition of targeted customers in the most effective fashion.

Customer acquisition management has many similarities to lead management. A closed loop reporting system is always included in customer acquisition management. Such a reporting system typically allows the organization to quantify the effectiveness of results of various promotional activities. This allows organizations to realise continuous improve­ments in both promotional activities and customer acquisition systems.

Customer acquisition management creates an orderly architecture for managing large volumes of customer inquiries or leads. The architecture must be able to organize numer­ous leads, at various stages of a sales process, across a distributed sales force. In order to understand this process, it is helpful to examine a simplified linear lead flow process such as advertising and CRM, customer inquiry or response, inquiry captured, inquiry filtered, lead graded and prioritized, lead distribution, sales contact, lead nurturing or retention, sales result and analysis of promotions effectiveness.

2. Linking Profitability and Loyalty

Customers can be classified into the following by linking profitability and loyalty:

Butterflies: They are short-term customers having high profit potential. There is a good fit between a customer’s offerings and a customer’s needs.

Strangers: They are short-term customers having lowest profit potential. There is little fit between a company’s offerings and a customer’s needs.

Barnacles: They are long-term customers having low profit potential. There is a limited fit between a company’s offerings and a customer’s needs.

Truefriends: They are long-term customers having highest profit potential. There is a good fit between a customer’s offerings and a customer’s needs.

3. Customer Lifecycle Management

Customer lifecycle management or CLM is the measurement of the CRM programme’s success over time—providing a person with CLM metrics from before and after the CRM implementation. CLM is the measurement of multiple customer-related metrics, which when analysed for a period of time indicates performance of a business. The overall scope of the CLM implementation process encompasses all domains or departments of an organiza­tion, which generally brings all sources of static and dynamic data, marketing processes and value-added services to a unified decision supporting platform through iterative phases of customer acquisition, retention, cross and upselling and lapsed customer win-back.

In customer relationship management, customer lifecycle is a term used to describe the progression of steps a customer goes through when considering, purchasing, using and main­taining loyalty to a product or service. Marketing analysts Jim Sterne and Matt Cutler have developed a matrix that breaks the customer lifecycle into distinct steps—getting a potential customer’s attention, teaching them what you have to offer, turning them into a paying cus­tomer and then keeping them as a loyal customer whose satisfaction with the product or ser­vice urges other customers to join the cycle. The customer lifecycle is often depicted by an ellipse, representing the fact that customer retention truly is a cycle and the goal of effective CRM is to get the customer to move through the cycle again and again.

Some detailed CLM models further breakdown these phases into acquisition, introduction to products, profiling of customers, growth of customer base, cultivation of loyalty among customers and termination of customer relationship. It might be useful to understand that each customer has certain stages in the lifecycle:

Contact phase: The goal of this phase is to gain a new customer. Contact has to be made through marketing, advertising, telemarketing, personal selling, direct mail, promotion and publicity.

Acquisition phase: The goal of this phase is to increase customer retention. Information must be collected about the customer and their purchase condition must be understood. They must be offered post purchase re-assurance and the price-value relationship must be promoted.

Retention phase: The goal of this phase is to create long-term and committed loyal customers. A service philosophy must be developed and responsiveness to customers must be increased.

Loyalty phase: The main objective goal of this phase is to extend customers loyalty. Loyalty, customer lifetime value and average net worth must be defined. The costs associated with loyalty must be analysed.

Source: Poornima M. Charantimath (2017), Total Quality Management, Pearson; 3rd edition.