Branding Customers

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Branding Customers Marketing in the Information
Age
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What is an Internet Company? He who manages
Information in a Network! 1) Supply Chain
Manager Walmart 2) A dot.com Revolutionary AOL
3) Networked Organizations Dell 4) Trading
Hub Freemarkets 5) Demand Chain
Manager Hilton??
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Goliath vs. David
Compaq and IBM
Dell in 1990
Detroit
AutoTrader
Loblaws and Dominion
GroceryGateway/Wow Box
Drugstore.com
CVS
Recorded Music Industry
Kazaa, XoloX, WinXM
ING
CitiGroup
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As Dot.coms go down the drain who is still doing
(quite) ok? IT Vendors Cisco, Oracle, Ariba,
Intel, CommerceOne, Siebel They are enabling a
transformation in marketing management...
From Managing Markets
To managing market segments
To managing customers
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Think RFID Technology?
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Before Demand Chain Integration, we branded
Products
Identity
Branded Product
Customer
Differentiation
Reputation
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Now we brand customers...
Identity
Branded Product
Customer
Differentiation
Reputation
Success is measured in growth in customer equity
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Now we brand customers...
Identity
Branded Product
Customer
Differentiation
Reputation
IT lets firms recognize the customer as an
individual with a history and a future, and be
treated as such.
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Now we brand customers...
Identity
Branded Product
Customer
Differentiation
Reputation
IT lets marketer manage customers for profit,
balancing each customers value against cost to
serve!
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A typical Customer Map
Xxx xx xxxx xx xx xxx xxx xxxx xxxx xxx
xxxx xxxx xxx x x xxxxxx xxx x
x x x x x x xx x xxxx xxxx
x x x x x x x xxxx xx xx
xxxx xxxx xx xx xxx
High
Value
Low
Low
High
Cost-to-serve
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Goal Manage customer relations toward the
diagonal
Xxx xx xxxx xx xx xxx xxx xxxx xxxx xxx
xxxx xxxx xxx x x xxxxxx xxx x
x x x x x x xx x xxxx xxxx
x x x x x x x xxxx xx xx
xxxx xxxx xx xx xxx
High
Value
Low
Low
High
Cost-to-serve
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Demand Chain Management Service delivery system
driven by the customers assessed value
Xxx xx xxxx xx xx xxx xxx xxxx xxxx xxx
xxxx xxxx xxx x x xxxxxx xxx x
x x x x x x xx x xxxx xxxx
x x x x x x x xxxx xx xx
xxxx xxxx xx xx xxx
High
Value
Low
Low
High
Cost-to-serve
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Hilton Facts 68 break-even occupancy Margins
after break-even 80 Life is lived on Knifes
edge How many transactions a year?
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Revenue
13 million nights 6 million guests
Business Travelers
B2C
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13 million nights 7 million guests
B2B 33
Conferences
13 million nights 7 million guests
B2B 33
Resorts
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Revenue
13 million nights 6 million guests
Business Travelers
B2C
33
13 million nights 7 million guests
B2B 33
Conferences
13 million nights 7 million guests
B2B 33
Resorts
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Contribution
Guests
20
104,000 top-tier
2
20
5
324,000 mid-tier
20
16
990,000 lowest tier
Business Travelers 13 Million Nights 6 Million
Guests
20
12
710,000 airline clubs
65
20
3,900,000 not members
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We could depict the story this way
Top-tier members account for 20 of all
discretionary revenues, and 100 of profits
Break-even
Members
Non-member business guests
Resorts
Conferences
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But of course this is depiction is pretty
arbitrary...
All guest revenues contribute to
profitability. Indeed frequent guests may
contribute less per night than infrequent guests
if their patronage is bought with low
prices. So whats attractive about frequent
guests?
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Frequent guest programs economize on customer
acquisition costs. Frequent guest programs
economize on customer retention cost.
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We could depict the story this way
Top-tier members account for 20 of all
discretionary revenues, and more than 100 of
profits
Break-even
Members
Non-member business guests
Cost of retaining this business is essentially
zero
Resorts
Conferences
Hilton spends 500 million each year to acquire
this business
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Result
Loyalty programs are not to be viewed as a cost
of doing business. They are tools to brand
customers. They are the entry price for managing
markets at the customer level - they let Hilton
run the business in the best interest of the
best customers.
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Identity Recognition Status and Reputation
Fungible
Relationship-Specific
Trading Stamps
Quantity Discounts
Anonymous
Buyer is...
Money back
Privileges
Identified
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ERP 1990-1995 -SAP -Peoplesoft -Oracle
Customers
Suppliers
Enterprise
Supply Chain Management 1995-00 -Ariba -CommerceO
ne -I2
Customer Relationship Marketing from 2000
on -Siebel -BroadVision -Pivotal -Epiphany
Databases 1980s -Oracle -IBM -Microsoft
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Demand Chain Management
Customers
Suppliers
Enterprise
Supply Chain Management
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Q. 1 Who gets to be the demand chain manager in
your industry?
Ans. Whoever has the strongest customer brand.
Q. 2 So how do you get to have a strong customer
brand?
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Steps to a Strong Customer Brand
Identify each customer upon acquisition
Give preferred Customers more of what they value
Rank each by gross margin or lifetime value
Ask, learn and remember key customer
characteristics and preferences
Value
Cost-to-serve
For low margin customers, reduce cost-to-serve
Identify
Differentiate
Interact
Customize
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Conclusions
The future of marketing lies in mastering
Interactivity. Interactivity demands identity.
Consumers get identity through the initiatives of
producers. Which initiatives? Brand the customer
and manage one customer at a time. The humble
frequent flyer program may be the prototype of
marketing generally. Just as powerful 20th
century producers controlled product brands, so
powerful 21st century producers will control
consumer brands.