MAY 9, 2003
Customer Management Strategy in Business
This note is written for students, executives and educators that are interested in customer management in business markets. It is based on my field investigations across a variety of hightech and traditional hard-hat industries and provides a roadmap for the formulation and implementation of effective customer management strategies in business markets.1 Individual customers are at the heart of any business enterprise yet most firms continue to formulate and implement strategies at market and segment levels. At market level they ask, “what business are we in?”, then implement at segment level marketing strategies that emphasize choice of segments and take a holistic approach to managing different elements of the marketing effort for each segment served. Management of individual opportunities, if even considered relevant, tends to be exclusive to select, large customers using national or key account programs, and is typically left to the sales function.
That vendors have traditionally managed a few of their large and important customers on an individual basis reflects restrictions imposed by market and industry structures and limitations with respect to access to customer information and interactive technologies. A number of trends, however, are forcing firms to shift their focus and change their approach. Customer consolidation, market globalization, and rapid commoditization cycles are pushing vendors to adopt more sophisticated approaches to serving their large customers. Realizing that the reactive, short-term, customer management initiatives of the past will leave them both vulnerable to exploitation by these large customers and exposed to competitive threats, more and more firms are looking to develop proactive, long-term enterprise-level customer management systems. Vendors are also expanding the scope of their customer management systems to include mid-sized customers that they suspect might be the profit bulge in their customer bases. In most markets these customers are as sophisticated as, share similar needs, and lacking the power to squeeze vendor margins are not as price sensitive as larger customers. Finally, recent advances in information and interactive technologies have dramatically reduced the costs of collecting and analyzing information about, and subsequently interacting with individual small customers. Collectively, these changes are driving firms to move beyond the rhetoric of “being customer focused” and actually manage individually a majority of their large, medium, and small customers.
As shown in Figure 1 below, there are four interconnected steps that firms need to undertake to design and implement effective customer management strategies in business markets.
1 Exhibit 1 lists my cases and research papers that inform the frameworks, tools, and findings reported in this note.
________________________________________________________________________________________________________________ Professor Das Narayandas prepared this note.
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Customer Management Strategy in Business Markets
Figure 1: Customer Management Strategy in Business Markets
C u s to m e r M a n a g e m e n t S tra te g y in B u s in e s s M a rk e ts
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