A couple of years ago I had first experienced a leading hotel’s clubroom and had asked for papaya for breakfast. I think I stayed for two nights in that hotel and both the days I did follow my regular pattern of papaya to start breakfast. A couple of months later I had checked into the same chain but in another city. And when I visited the club lounge for breakfast – lo and behold – they were asking me if I would like to be served with papaya first. Indeed I was amazed and, yes, delighted. The hotel chain earned my life-long loyalty, and as I am doing now, narrated the story many times over.
Can you classify this story as one of the three popular marketing strategies? Is the hotel chain practicing customer satisfaction management (CSM), customer relationship management (CRM) or mass customization – or all of the above? More interestingly, why do you need to classify this action, as long as the hotel manages to earn customer loyalty? While the classification might be less important, understanding the key commonalities and differences among the three marketing strategies still is extremely important. Such an understanding will help other enterprises select a research programme that best meets their needs.
The basic idea behind a CSM programme is to identify key performance areas where the average customer's expectations must be met or exceeded. In some CSM programmes, there has been a shift toward dividing the marketplace into smaller, more homogeneous segments of customers and identifying the improvement initiatives that can satisfy these customers. However, in such segment-level analysis too, individual customer identity is less important and the customer is now seen as an average customer of the segment to which he belongs.
Similar to CSM programmes, the objective of CRM programmes also is to earn customer goodwill by matching or exceeding customer requirements. However, two key differences exist between CSM and CRM strategies: First, unlike CSM, the focus of CRM programmes is on individual customers of the firm. Second, while CSM programmes often measure customer perceptions and behaviour at a single point in time, CRM programmes measure customer perceptions and behaviour at multiple points in time.
If leadership believes that individual customer level information is important, then the availability of such data is certainly a good start. Such data is increasingly easy to organise, with cloud CRM packages becoming more widely available in the market. However, such data should be treated as the means, and not the end, for building meaningful customer relationships. What is needed also is the analysis that can convert such data into useful information.
For example, data on a particular customer’s past 12 transactions will be of limited use unless analysis can reveal some distinctive or common patterns across these transactions. An example is a program that can identify the most frequent types of interactions that the customer has with you. Also, combining information on what the customer does with what she thinks of her interactions with the firm – can provide valuable information. Results of such an analysis provide management with useful information on ways to please the customer on her next service encounter. For customers in general, such benefits might be as simple as providing economic recognition (such as frequent flier benefits), or social recognition (such as addressing a customer by name the next time he walks in), or adapting a part of the process or system to meet individual customer requirements (think of my experience with papaya for breakfast).
Finally, like CRM, the objective of mass customisation also is to meet the heterogeneous requirements of individual customers. However, while CRM focuses on acquiring knowledge about and developing an understanding of individual customers, mass customisation generally focuses on the operational strategies that can allow the enterprise to meet individual customer needs and preferences in an efficient manner. The "mass" before customisation provides an ROI perspective to meeting individual customer needs; mass customisation focuses on the costs related to providing customised offerings.
That is, the process overall encourages the enterprise to work toward creating adaptable and flexible processes and systems that can eventually provide customised offerings at the cost to the firm of mass-produced goods. Customising the offering for individual customers can be a prohibitively expensive strategy to follow, and thus a monitor on the cost side of the equation certainly helps. Individual customization is ok at high cost for luxury products or services such as customized tours, yachts, cars or aircrafts.
Discerning SME owners can use their understanding of these three options to select a marketing strategy that best caters to their objective. But while the name attached to the strategy is not important, key commonalities and differences across such strategies should not be ignored. Such consideration would help in the selection and design of a marketing programme that measures customer affinity for the supplier firm, which in turn works to the firm's advantage.