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10/24/2012                                                                                                                ...
10/24/2012                         The Customer Pyramid                                                                   ...
10/24/2012Without any prior warning,Peapod eliminates the less-profitable option to pick-upgroceries at the store in Brend...
10/24/2012                                                                                                                ...
10/24/2012    Everything is great … until Peapod does                                                       Robert’s Busin...
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Tendensdagen 2012 Susan Fournier


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Tendensdagen 2012 Susan Fournier

  1. 1. 10/24/2012 Brands Matter Getting Inside the “R” in Percent preferring brand in Blind versus Named Test for Household Product : Customer Relationship Management Named Blind Brand K 37% Professor Susan Fournier 49% Tendency Day Brand L 63% 51% Stockholm, Sweden October 25, 2012 Source: “What is a brand?,” The King Papers, Stephen King, JWT, London 1998 The Economics of Brand Brand Finance Value of $1,000 invested Brand equity shifts the demand curve Strong Portfolio of strong Brands brand companies Price p Total Demand for product when branded Market produced a monthly return 0.57% above $4,525 the market average $3,195 and at significantly Demand for product when unbranded s lower risk (beta = 0.85) SOURCE: Thomas Madden, Frank Fehle, and Susan Fournier (2006), “Brands Matter: An Empirical Investigation of the Creation of Shareholder Value through Brands,” Journal of the Quantity (share) Academy of Marketing Science, 34(2), 224-235Source: “Combining economic and image analysis for breakthrough brand management,” Eric L. Almquist, Ian H. Turvill, and Kenneth J. Roberts, The Journal of Brand Management, March 1998 The Economics of Relationships The Science of Relationships Customer Value Maximized CLV Curve CLVi = lifetime value of customer i xi,m,l = number of contacts to CMi,y = predicted contribution margin customer i in channel from customer i in purchase m in year l occasion y, measured in dollars frequencyi = predicted purchase Traditional CLV Curve r = discount rate for money frequency for customer i ci,m,l = unit marketing cost for n = number of years to forecast Time customer i in channel m in year l Ti = predicted number of purchases by customer i in planning period Acquisition Retention Attrition Source: Rajkumar Venkatesan and V. Kumar, “A Customer Lifetime Value Framework for Customer Selection and Resource Allocation Strategy,” Journal of Marketing, Volume 68, October 2004, pages 108. 1
  2. 2. 10/24/2012 The Customer Pyramid Mistake #1: Leaving the people out of the relationship Most Profitable Customers Platinum You cant’ know the relationship Gold if you don’t know the people Iron and the role the brand plays in their lives Least Lead Profitable CustomersSource: Valerie A. Zeithaml, Roland T. Rust, and Katherine N. Lemon, “The Customer Pyramid: Creating and Serving ProfitableCustomers,” California Management Review, Volume 43, Number 4, Summer 2001, page 125. Relationship Management in the Information Technology (IT) Era Context Shapes the Relationship Information: the disintegration and reduction of the complex into small, manageable bites Meaning: the assembly of bites into larger, more complex wholes. The large sense made out of many small units.  Information and meaning work at cross purposes  In the search for meaning, context is everything  In the search for information, context is noise Without context you can’t understand the individual, and a relationship cannot be started or maintained Meet Brenda: A Gold Peapod Online Grocery Customer Understand Brenda Care for others that need it Most Care about others Profitable Take Responsibility Customers Make Sacrifices GOLD LEVEL CUSTOMER: Life Do the Right Thing Average Purchase $124.03 Themes 11.2 day interpurchase cycle Mid-life Mom 9.7 day cycle past 2 months Identity Projects Working professional Gold Deep, broad basket and Tasks College Student Consolidated loyalty No complaints Few customer service calls Balance competing roles Advocacy selling Address family problems ……Uses “pick-up” option Daily Concerns “Keep things moving on the homefront” Least “Get things done” Profitable Customers 2
  3. 3. 10/24/2012Without any prior warning,Peapod eliminates the less-profitable option to pick-upgroceries at the store in Brenda’s We are not relating with “consumers.”area. Brenda learns this at 2a.m. We are relating with people. “I was desperate, like a drowning woman. I called customer service. They People aren’t here to have brand just said matter-of-factly, relationships. “yes, I see that location They are here to live their lives. change.” Were they serious? Were they listening? Did they Optimized systems put brand understand what I was relationships in perspective as saying? Didn’t they see facilitators not ends in themselves. what this meant?” Mistake #2: Treating all relationships the same Marriage re·la·tion·ship [ri-ley-shuhn-ship] A socially-supported contract to stay together despite circumstances, foreseen Noun and unforeseen 1. one of several forms of association characterizing the interdependency Core Dimensions between people or things Commitment Loyalty and fidelity Love and passion Brand Friendship Relationship Space Voluntary interdependence between parties Marriage on-the-rocks Love-hate relationship intended to facilitate socio-emotional goals Villain / Stalker/ Marriage Victim Prey Dealer/Addict Abusive marriage partners Enemy Master/Slave Guru/disciple Close siblings Core Dimensions Annoying Secret affair Teacher/student acquaintance Ex-friends Caregiver/Patient Old friends Best friends Intimacy (and vulnerability) Star-Groupie Colleagues Buddy Former friend Fling Reciprocity Complete strangers Teammates One-night-stand Next-door neighbors Casual acquaintance Fleeting acquaintance Online friend Source: GfK/Fournier collaborative research project on brand relationship metaphors 3
  4. 4. 10/24/2012 Brands A B C D E Brand Relationship Profiles Strangers 2% 4% 3% 6% 14% Fleeting acquaintance 15% 21% 17% 20% 18% Close Admired Partner Love-Hate Relationship (28%) One night stand 14% 17% 16% 18% 17% Stalker Dealer Buddies 25% 26% 20% 19% 13% Deceiver Divorced Couple Marriage PartnerAnnoying Acquaintance Enemy Life-long best friend 32% 23% 26% 22% 22% Close Sibling Soured/Break-Up(20%) Guru Soured friendship 5% 5% 10% 8% 6% Secret Affair Teacher Best Friend Ex-friend Old Friend Annoying enemy 7% 4% 9% 8% 12% Exciting Former Friend Teammate Flings(12%) Colleague 41% Star Fling 24% Complete Stranger Next-door Neighbor Old-Time Friendship Brand relationship insights 17% 15% 15% (10%) One-night Stand 14% C: Solid base of friends, but many are negative and soured Fleeting Acquaintance Stranger (21%) Casual Acquaintance Online Friend D: Superficial bonds; Fewer “close” relationships E: Polarizing brand: more strangers, many enemies, fewer buddies Mistake #3: Failing to Play by the Rules Every brand has a portfolio of relationships Different ways of relating require different ways of managing Optimized relationship management systems acknowledge diversity in relationship types Relationship Contracts Back to Brenda: Basic Exchange Brenda T3: Friendship Template Guiding norm Provide good service at a fair price Guiding norm Always be there for each other Basic Exchange Key operative Meet expectations Key operative Make each other happy Friendship relationship Get the job done relationship Open, honest, two-way communication rules Be reliable, dependable rules Don’t betray the friendship I am not supposed to have to think about this Relationship purpose Assistance, emotional support, Intimacy Relationship purpose Relief from hassles, solve problems Brand personality Friendly, nice, caring, responsive Brand personality Warm, subservient Perceived Easy-going, helpful Perceived Respectful Customer Role Customer Role Paying customer 4
  5. 5. 10/24/2012 Everything is great … until Peapod does Robert’s Business Partner what no good friend would ever do Template PeapodPeapod eliminates the pick-up Guiding norm We will work together to achieve our violates friendshipoption common goal rules Business Partner Key operative Calculate rewards over longer-term relationship Take the other’s perspective What it meant to Brenda: rules Provide help, feedback Brenda’s “Where are they now? I felt betrayed.” response Relationship purpose Provide resources at good value “Turns out they did not know me at all.” Brand personality Formal/impersonal, competent “Couldnt they tell me that because of this and that, we feel we cant Perceived Advisor, instrumentally do this anymore? We should have talked.” Customer Role important to brand Termination “No, I can’t forgive them. They should have known better.” Unfortunately, Peapod does not Peapod signals a pure exchange reciprocate Robert’s signals Peapod’s “They sent a questionnaire to all who use them and it “I made recommendations, figuring that if it was my wasnt some of the questions that I would have actions expected - it seemed to me more leaning toward if we business I’d be interested. I basically got no response, Silence signal gave you little stamps, would you come in?” so I didn’t know if they were sort of saying, ‘we don’t care, don’t bother me’ or what” exchange “They sent me a coupon for the troubles instead of finding out and fixing what was wrong.”No effort to “I looked all over Peapod, and there was no sign of “(You mentioned you had given them recommendations; resolve eggnog (…) They didn’t make any effort to see why Robert’s which of those changes would be the most important?) long-term don’t we have it; what’s wrong with our system. That template Actually, at this point, I’m not sure what they even were” issues does not seem to be taking place.” shifts to a “It’s just not giving me as much as I’d like to get out of pure it.” exchange “So fine I’ll take an order every two or three weeks and“You like to think of yourself as offering valuable advice, get my fresh stuff locally now.” and reality is you’re just one of thousands of people telling them how to run it” 27 Relationship Mis-Management “Relationship Marketing is powerful in theory, but Wrong signals troubled in practice Lost signals because marketers do not fundamentally understand Conflicting signals what relationships with Every actions affects customers are all about or the relationship how they are built and maintained.” You have to know the operative rules 5