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Assignment 3
3. Identify and discuss what Strategic Customer Management
is and why it is important to companies in contemporary
markets.
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IB3A50
0633631
IB3A50 Marketing Management 0633631
Introduction:
In the current era, the sales environment is facing radical change. The market is
becoming overly saturated with alternative products and services resulting in severe
competition within the market place, whilst demand is being hit by the economic crisis. With
markets facing global economic recession there is even more pressure on companies to
perform better than their competitors in order to survive and secure their market position. The
constant rise in customer demand for added value, results in the role and operation of the
traditional sales approach to be inadequate for the development of companies (Nigel Piercy &
Nikala Lane 2004). A much more drastic and revolutionary approach needs to be adopted.
Where there is a transformation from the traditional sales approach to a strategic customer
management focused approach (Nigel F Piercy & Nikala Lane 2003).
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Customer demand, as previously mentioned, is centred on the idea of added value. The
question that arises is what the customer’s perception of ‘value’ is. In the case of customer
demand being transactional, the most important aspect of the managing sales operation is
efficient and effective order-taking. However as the task of purchasing becomes increasingly
complicated, customers demand for greater interaction when they buy and consider more
alternatives. Then the “order-making role becomes more important, and this provides an
enhanced role for the sales person”. (Nigel Piercy & Nikala Lane 2004) The continuous
evolution of customer demand for exclusive and superior relationships with the supplier,
results in the need for strategic management of the relationship with the customer. In order
for suppliers to attain long lasting relationships with their customers they must have an in
depth understanding of the customer’s business, to deliver a seamless service to customers,
catering to their needs. In the case of a supplier-customer relationship it is not just a routine
transaction involving a product or service, but it is the setting up of a value chain. Whereby
the supplier provides the technical support and any required training, comes up with solutions
to logistic and maintenance issues, resulting in a smooth product or service delivery. In this
case customer’s perceived value exceeds the cost of the service. Since they avoid the cost of
switching suppliers. This allows for the customer to maintain global consistency.
“Relationship marketing can be beneficial in the case of customers with long time horizons, as the
switching costs are quite high.” (Kotler, 2005).
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Figure 1.3 helps illustrate the feasibility of relationship marketing. In the top left hand
corner lie sleeping giants. These customers are very profitable and are relatively not
demanding. In this case a relationship is feasible, whereby the customer is met by field
account executives, which have a strong knowledge base on the customer requirements, or in
the case of retailers, the end customer requirements. Then the customer is handled by intrinsic
sales representatives within the supplier for support services and repurchases. The power
traders at the top right are high maintenance with good profits, but result in being as
profitable as pets, due to their high demand for buyer-seller relationships whereby the
supplier must provide a value chain. A value chain “breaks a company up into nine activities,
of which five are primary activities; inbound logistics, operations, outbound logistics,
marketing and sales, services, and four support activities; firm infrastructure, human resource
management, technology department and procurement,”(Kotler, 2005) in order to result in a
seam less delivery of products or services meeting customer requirements.
Pets are customers with transactional demands which may prefer the ease and
swiftness of the internet, or other direct sales channels. Finally delinquents are those
customers, with high demand and are not very profitable. The way in which they would be
handled is via shifting them to easier products to use. (Kotler 2005)
Customer Relationship:
“The goal of relationship marketing is to deliver long term value to customers and the
measure of success is long term customer satisfaction. It involves building relationships at many
levels, economic, social, technical, and legal- resulting in high customer loyalty” (Kotler, 2005).
This is the fore front of a company’s marketing strategy, determining who their
customers are. The problem faced with customer relationship management is that when
companies have difficulty in determining whether the customer, in question, is right for their
marketing strategy. This results in a tendency to being taken in by ‘relationship rhetoric’,
whereby the buyer and seller are in a relationship in which the supplier is unable to satisfy the
customer’s requirements properly, or has to exhaust an excessive amount of resources to do
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so. The way for companies or businesses to avoid such a disaster is by steering clear of
building a strategy that relies on beliefs and trusts that do not exist. (Nigel F. Piercy, 2009)
Through CRM companies such as MVC the music store are able to know what they
have, brought in and sold so as to target specific customers on promotions as they know that
they exist and how many there are, so via news were able to attract customers who like
country music over their promotions during the Nashville country music festival. And Ping
the golf equipment manufacturer have customer specific data on products sold and brought in
or manufactured in their data-warehouse with specific details such as grip size and assembly
instructions, so all a customer has to do is call in and give then their serial number and ping
will ship the exact club to them within 2 days, when otherwise this process would take a few
weeks. (Kotler 2005)
In the current era, the customer demand newer and greater value. Companies have
realised the need to meet customers’ value led demands, and have started to evolve new
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forms for re-structuring the front-end of the company. An example of this evolutional re-
structuring of the front –end is the introduction of customer business development structures.
Where by the focus is on the opportunities presented by major customers and suppliers.
“Proctor & Gamble transformed itself from a slow moving inward-looking bureaucracy of the
1990s into a nimble, innovative and aggressive competitor beating the rest. Part of that
transformation has been the creation of the customer business development (CBD)
organizations at the front of the business. The CBD team work collaboratively with experts
from finance, management systems, and customer service and brand management to develop
and implement business strategies that deliver sustainable competitive advantage for P&G
brands.” (N. F. Piercy & N. Lane 2009)
Due to the evolution of the sales force roles, companies now focus on strategic
customer management. A structure as proposed by Nigel F. Piercy and Nikala Lane suggests
that the imperatives for the transition. This is illustrated in figure 1.4.
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to customers. The larger the company the worse this phenomenon gets. The imperatives for
the sales transformation process are all interconnected and are vital in succeeding to achieve
the goal of strategic customer management. (N. Piercy & N. Lane, 2004) Figure 1.5
illustrates the integration of various departments in order to add value to their customers.
Conclusion:
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customer base still seems to be value driven, but not as much as pre recession periods.
Companies in the market today need to transform their traditional sales techniques into a
strategic customer management approach. The key is for companies to understand their
strategy and who they are targeting, integrate all departments, and have in depth knowledge
of their customer requirements. With pulling in resources from CRM, KAM and HRM,
companies can keep adapting their strategic customer management techniques for ever
innovation. For companies in the markets of today I think that strategic customer
management is imperative. It allows for a greater understanding of the customer’s
requirements and so forth adding value.
Bibliography:
• Cravens D. W. and Piercy N. F. (2006) Strategic Marketing, 8th edn, (New York: McGraw-
Hill/Irwin)
• Olsen, Eric M., Cravens, David W. And Slater, Stanley F. (2001), “Competitiveness
and Sales Management: A marriage of Strategies,” Business Horizons, March/April,
25-30
• Kotler, P, Armstrong, G, Wong, V, Saunders, J. 2005. Principles of Marketing. 5th european
ed.
• Piercy, N.F. (2009) Market-Led Strategic Change: A Guide To Transforming the Process of
Going to Market, 4th edn (Oxford: Butterworth-Heinemann)
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• Piercy, N.F. and N. Lane (2004), Strategic Customer Management: Designing a Profitable
Future for Your Sales Organization', European Management Journal, 22 (6), 659 - 668.
• Piercy, N. F and N. Lane (2006), 'The Underlying Vulnerabilities in Key Account
Management Strategies', European Management Journal, 24 (2/3), 151 - 162.
• Piercy, N.F and N. Lane (2006), 'Ethical and Moral Dilemmas Associated with Strategic
Relationships Between Business-to-Business Buyers and Sellers', Journal of Business Ethics.
72 (1), 87 - 102.
• Piercy, N.F and Lane, N. (2003) ‘Transformation of the Salesforce: Imperatives for
Intelligence, Interface and Integration’, Journal of Marketing Management, 19 (5/6), 563 –
582.
• Royal, Weld (1999), “Death of Salesman”, wwwindustryweek.com, may 17 pp.59-60.
• Stefan Wengler *, Michael Ehret, Samy Saab (2006) Implementation of Key Account
Management: Who, why, and how?An exploratory study on the current implementation of
Key Account Management programs, Industrial Marketing Management 35 (2006) 103 – 112
• Stephens, H (2003) CEO, The H.R Challey Group, Presentation at the American
Marketing Association, Summers Educators’ Conference, Chicago
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