CRM: Managing Strategic Drivers around Customer Relationships

The ultimate emerging driver in the CRM space is internet technologies. The internet is shrinking the distance between companies and customers. It has made possible high impact applications such as big data that enable companies to track customer information and know their customers by slicing and dicing huge quantities of data in ways that allow them to make decisions like never before.

The biggest change is that previously companies looked at customers in the aggregate. They looked at market segments and decided, based on a number of factors, which segment or segments they would go after. The problem with this approach has always been that myriad variables characterize customers and one size fits all works less and less. A proliferation of choices changes the nature of competition.

Let’s go back and think for a moment about the Model-T Ford. The breakthrough was that mass production made the automobile affordable. However, the choices were limited. The mantra was that “you can have it in any color, as long as it’s black.”

At that time, the big breakthrough was in affordability. Since then, mass production has evolved to enable a large number of colors and many other features to provide choice, albeit still within the range of affordability.

Indeed, providing more choices has also enabled producers to stratify the market in terms of price, enabling companies to charge more for certain features because customers for those features are willing to pay more for them. This is why you so often see offers for similar products at Silver, Gold and Platinum levels.

The driving factor is that you can segment markets nearly infinitely. Based on the 80:20 rule, or Pareto principle, 20 percent of the customers will buy 80 percent of the product. In addition, 20 percent of the customers will be willing to pay a premium price for some additional features.

The ultimate could be that companies could build a custom product for each customer, at a mass produced cost and charge each customer a price that exactly reflects that supply and demand for specific features. However, is that really the ultimate? How can companies offer increasingly wider ranges of options to customers and increasingly lower costs?

CRM: Managing Strategic Drivers around Customer Relationships

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