
Marketing: The Changing Nature of Customer Relationships
Saturday, August 20, 2022
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Significant changes are occurring in the ways in which companies are relating to their customers. Yesterday's big companies focused on mass marketing to all customers at arm's length. Today's companies are building a deeper, more direct, and more lasting relationships with more carefully selected customers. Here are some important trends in the way companies and customers are relating to one another.
Relating with more carefully selected customers
Few firms today still practice true mass marketing - selling in a standardized way to any customer who comes along. Today, most marketers realize that they don't want relationships with every customer. Instead, they now are targeting fewer, more profitable customers. Called selective relationship management, many companies now use customer profitability analysis to weed out losing customers and target winning ones for pampering. Once they identify profitable customers, firms can create attractive offers and special handling to capture these customers and earn their loyalty.
But what should the company do with unprofitable customers? If it can't turn them into profitable ones, it may even want to " fire " customers that are too unreasonable or that cost more to serve than they are worth. For example, consumer electronics retailer Best Buy recently rolled out a new " Customer - Centricity " strategy that distinguishes between its best customers ( called angels ) and losa profitable ones ( called demons ). The aim is to embrace the angels while ditching the demons. "
The angels include the 20 percent of Best Buy customers who produce the bulk of Its profits. They snap up high-definition televisions, portable electronics, and newly released DVDs without waiting for markdowns or rebates. In contrast, the demons form an " underground of bargain-hungry shoppers intent on wringing every nickel of savings out of the big retailer. They load up on loss leaders ... then flip the goods at a profit on eBay. They slap down rock-bottom price quotes from Web sites and demand that Best Buy make good on its lowest-price pledge . "
To attract the angels, Best Buy's Customer Centricity stores now stock more merchandise and offer better service to these good customers. For example, the stores set up digital photo centers and a " Geek Squad, " which offers one-on-one in-store or at-home computer assistance for the high-value buy era. Best Buy also set up a Reward Zone loyalty program, in which regular customers can earn points toward discounts on future purchases. To discourage the demons, Best Buy removed them from its marketing lists, reduced the promotions and other sales tactics that tended to attract them, and installed a 15 percent restocking fee.
However, Best Buy didn't stop there. Customer analysis revealed that its best customers fell into five groups: " Barrys, "high-income men: " Jills, " suburban moms; " Buzzes, " male technology enthusiasts; " Rays, " young family men on à budget and small business owners: Each Customer - Centricity store now aligns its product and service mix to reflect the make - up of these customers in its market area. Best Buy then trains store clerks in the art of serving the angels and exorcising the demons.
At stores targeting Barrys, for example, blue-shirted sales clerks steer promising candidates to the store's Magnolia Home Theater Center, a comfy store within a store that mimics " the media rooms popular with home - theater fans. With sales up more than $ 10 billion in just the past three years, the customer-centric strategy. appears to be a winner for Best Buy and its customers. As one store manager puts it, " The biggest thing now is to build better relationships with [our best ] customers. "
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