The document discusses the importance of nurturing customer relationships for business success, highlighting that a company's most valuable asset is its customer base. It outlines strategies to acquire, retain, and grow customer value, emphasizing the shift from a market share approach to a customer share strategy. The text explains that long-term customers become increasingly profitable due to higher purchasing volumes, reduced operating costs, referrals, and premium pricing.

1. The Learning Relationship
If you’re my customer and I get you to talk to me, and I remember what you tell me, then I get
smarter and smarter about you. I know something about you, my competitors don’t know. So I can
do things for you, my competitors cant. Before long, you can get something from me you cant get
anywhere else, for any price. At the very least, you’d have to start all over somewhere else, but
starting over is more costly than staying with me, so as long as you like and trust me to look out
for your best interests.
Customers are every company’s source of revenue
No company will ever realize income from any other entity except customer it has has now and the
customers it will have in the future. Thus in many ways a firm’s most valuable asset is its
customers base, and given over new and unfolding technological capabilities to recognize, measure
and manage relationships with each of those customers individually, a forward-thinking firm must
focus on deliberately preserving and increasing the value of that customer base.
How to increase the value of your customer’s base?
Get – Keep – Grow
Get:
Acquire profitable customers
Keep:
Retain profitable customers
Win Back profitable customers
Eliminate unprofitable customers
Grow:
Upsell additional products in a solution
Cross-Sell other products to customers
Referral and word-of-mouth benefits
Reduce service and operational costs
Customer Strategy is both an operational and analytical process:
Operational CRM focuses on the software installations and the changes in the process affecting
the day-to-day operations of a firm-operations that will produce and deliver different treatments to
different customers.
Analytical CRM focuses on the strategic planning needed to build customer value as well
as the cultural, measurement and organizational changes required to implement that strategy
successful.

2. Recent transition from Market Share Strategy to Customer Share Strategy
Market Share Strategy
Customer Share Strategy
Customer Satisfaction
TRADITIONAL MARKETING
Customers reached
Company sees products and brands as the
source of all company value
Product (or brand) managers sell one product
at a time to as many customers as possible
Differentiate products from competitors. Sell to
customers
Find a constant stream of new customers
Company makes sure each product and likely
each transaction is profitable, even at the cost
of a customer’s confidence.
Uses mass media to build brand and announce
products
Customer Satisfaction
CUSTO
MER
STRATE
GY
Customers reached
Company sees customers as –by definition- the
only source of revenue
Customer managers sell as many products as
possible to one customer at a time
Differentiate customers from each other.
Collaborate with customers
Find a constant stream of new business from
established customers
Company makes sure each customer is
profitable even if that means losing money on
occasional products or transactions
Use interactive communication to determine
individual needs and communicate with each
individual
Why the Customer Share Strategy pays off
A study by Reichheld and Sasser (1990) to profit per customer in service sectors, concludes that a
longer a customer stays with an enterprise, the more profitable she becomes.
Four factors are contributing to this underlying growth:
1) Profit derived from an increased purchases. Customers grow larger over time and need to
purchase in larger quantities.
2) Profit from reduced operating costs. The customer becomes more experienced, they make
fewer demands on the supplier and fewer mistakes in the operational process,
3) Profits from referalls to other customers. Less needs to be spend on advertisements and
promotions due to word-of-mouth recommendations from satisfied customers.
4) Profit from price premium. New customers can benefit from introductory promotional
discounts, while long term customers are more likely to pay premium prices.