Course Title Instructor

Managing Customer Relationships: A Strategic Framework Chapter 6 Differentiating Customers by Their Needs

Managing Customer Relationships: A Strategic Framework, Second Edition Don Peppers and Martha Rogers

Chapter 6 Preview
Review IDIC Framework: Differentiate
Definitions Differentiating Customers by Needs Understanding Needs and Behaviors Categorizing Customers by Needs Characteristics of Customer Needs Community Knowledge Using Needs Differentiation to Build Customer

Value
Managing Customer Relationships: A Strategic Framework, Second Edition Don Peppers and Martha Rogers

Review: IDIC Framework

Identify
customers as unique addressable individuals

Differentiate
by value, behavior and needs

Interact
more cost efficiently and effectively

Customize
some aspect of the companys behavior, offerings, or communications

Analysis
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Action
3

Definitions
Needs: The why behind the behavior what a

customer wants or prefers from an enterprise Customer: End user, retailer, etc. Product benefits: Advantage from the use of the product but not equivalent to customer needs Product attributes: Physical features of the product

Managing Customer Relationships: A Strategic Framework, Second Edition Don Peppers and Martha Rogers

Differentiating Customers by Needs

Customers may find different uses for the same

product:
Legos used in make-believe role Legos used as step-by-step building project Legos used to create a childs own configuration

(not on the box)

Defining customer needs, rather than product

benefits or attributes, allows company to develop and offer other products that also meet this need

Managing Customer Relationships: A Strategic Framework, Second Edition Don Peppers and Martha Rogers

Understanding Needs and Behaviors

Needs are the why; behaviors are the what Three different types of customer profiles: 1. Demographic (static) 2. Behavior-based (dynamic; the what) 3. Need-based (dynamic; the why) Needs drive behaviors; behaviors drive value

Managing Customer Relationships: A Strategic Framework, Second Edition Don Peppers and Martha Rogers

Categorizing Customers by Needs

Customer needs are unique, but too costly to create

a need profile unique to every customer To take action, customers need to be grouped, ideally according to need:
Market segment: customers with a similar attribute

(women over age 45 with household incomes over $50,000) Customer portfolio: customers with similar needs (women who value friendships and like to entertain)

Characteristics of Customer Needs

Situational Dynamic Different intensities Often correlate with customer value Most fundamental are psychological Some shared, some unique No single best way to differentiate by needs
Whatever way most effectively changes customer

behavior to increase value for company

Even in B2B, customers are still individuals
Not just a homogeneous company, but purchasing

agents, end users, etc., with specific needs)

Managing Customer Relationships: A Strategic Framework, Second Edition Don Peppers and Martha Rogers

Community Knowledge
Community knowledge is the accumulation of

information about the preferences of a community of customers, allowing an enterprise to anticipate what a customer will need. Fueled by collaborative filtering software, a matching engine that can serve up products and services based on what other customers with similar preferences have preferred Most beneficial for companies that have:
Routine, cost-effective, interactive communications

with customers Managing Customer Relationships: A Strategic Framework, Second Edition Customers highly differentiated by needs
Don Peppers and Martha Rogers

Using Needs Differentiation to Build Customer Value

Accumulate information about customer needs in

the context of a Learning Relationship Share this information, within the bounds of privacy protection, with everyone at the enterprise who will interact with the customer Use this information to treat different customers differently

Managing Customer Relationships: A Strategic Framework, Second Edition Don Peppers and Martha Rogers