Strategies to Capture Customer Value or Destroy It
In a Relational Marketing approach, the client becomes a reference to develop marketing strategies aimed at capturing its value over time. The company seeks profitability objectives per customer considering the acquisition cost and the relational costs necessary to maintain and enhance it.
In green, we indicate the customer’s purchases of reference to a second company that we call alternative. This company is consolidated as a second option for customer A, especially in the period of greatest potential.
In blueWe indicate the purchases that this customer A makes to the company that we call the principal. It coincides at the beginning and end of the cycle with the potential and follows a parallel path to the client’s potential. This main company is the one that obtains the highest performance of the client. Their efforts are aimed at retaining the client, increasing their share in the client and developing the client’s potential.
We can say that it develops a comprehensive approach to Relational Marketing. Consider a customer A and his life cycle as a user of a certain category of products and services. The attached graphic shows your purchase potential over time, that is to say, the maximum purchase volume of this customer at any time according to their needs and interests and the capacity of the offer available to solve these needs according to the client’s priorities. To point out that needs and priorities to meet these needs belong to the subjectivity and perception of the client, although they can be modulated by the marketing actions of the supplier companies.
In red, the terminator company appears that, although it has a good initial entry, exceeds its eagerness to place products exceeding the potential of the customer. The result is that it loses customer confidence and disappears from the cycle losing the possibility of consolidating its position. It will hardly recover the investment made in that client.
Finally, we draw in yellow the representative trajectory of the companies proves that they appear fleetingly in the life of the client because they have moved some of the marketing mix variables (promotions, product innovation, communication, distribution, price …) and get a response of short-term advantage.
In mature qualified markets, with saturation and standardization of products, intense competition, and stagnant demography, it is useful to visualize the customer cycle and define the strategy to follow based on the ability of the company to become a main supplier or alternative, Only possible ways to achieve sustainable growth of the company.
Obviously all companies practice the test strategy in new customers and markets, but they should do so in a subsidiary way to their main activity: select “good” customers and follow them throughout their life cycle.
We often evaluate the success of our marketing programs in the form of market share. In addition to the figure that expresses that quota, it is interesting to know the mix of quota obtained from related and test clients. In the first case, the quota is stable, in the second volatile. In the first, the productive marketing effort, in the second, expensive. So when we increase our share, we should know from which group of clients we get it to correctly evaluate a marketing strategy.
The terminator companies, in the wake of the CRM, the need to recover Internet investments in the short term and the concern for the quarterly results are making the popular saying come true: bread for today, hunger for tomorrow.
In response to the terminator’s aggression, the customer freezes their purchases and directs their spending towards other more satisfactory activities or products. In extreme illustration: one who keeps his money under a tile after a negative experience with a bank. In addition to losing the customer, the terminator reduces the customer’s purchase potential to the detriment of the remaining suppliers in the sector and the customer itself.
In effect, we can consider the terminator as a true destabilizer of the market. In some sectors, it is difficult to retain customers and gain their trust. It is the result of many years of opportunism by suppliers that have systematically exceeded the limits of sustainable growth. Many times the history of a product/market gives the answer to the reason for its poor development when the product or service itself was technologically viable and a good solution for users.
Paradoxically, this failure is also for the user, who is deprived of a useful and viable solution that he does not accept when he mistrusts the provider based on previous negative experiences.
Sometimes the client, who thinks he has been a loser in the previous transaction, seeks counterparts to level the balance (for example, an additional discount); If the supplier accepts, it enters a spiral of offers and counteroffers that can break the natural tendency of the client to seek suppliers of continuity and trust for opportunistic behavior and in the auction as a method to set prices.