Slides for Session 1, ADVANCE Tourism Customer Management Module, March/April 2012

1. Developing Leader for Change &
Innovation in Tourism
28th June 2010

2. Core Module
Customer Management
Session 1
Dr Jim Hamill
www.energise2-0.com
jim.hamill@energise2-0.com
www.twitter.com/drjimhamill

3. About the Module
 Detailed overview of the ‘key success factors’ in effective
customer management for building sustained customer
and competitive advantage
 Including the revolutionary impact of Web 2.0/Social
Media
 Key premise of the class
Power Shift
.

4. About the Module
 The growing empowerment of customers, declining
customer loyalty and the social media revolution have
forced many tourism and hospitality organisations to re-
evaluate their approach to managing customer
relationships
 Defined as ‘the integration of strategy, people,
processes, systems, technology, organisation and
culture to identify, acquire, retain and grow quality
customers‘

5. About the Module
 The ultimate objective of an effective customer
management strategy is to build a quality customer base
– i.e. a strong base of high value, high growth potential customers
providing Malta tourism businesses with a solid foundation for
sustained growth in visitor numbers and spend.
 Synthesis of leading-edge thinking in this area, but also
a very practical course using tools and techniques from
our `Customer Advantage Toolkit’ (CAT) for effective CM
strategy development and implementation

6. Learning Outcomes: Understanding/Knowledge
 Understand the environmental factors contributing to the
growing empowerment of customers in world tourism,
including Web 2.0/Social Media
 The importance of adopting innovative `customer led'
strategies for building sustained competitive and customer
advantage
 Understand what effective Customer Management (CM) is
and what it is not
 The business benefits associated with effective CM

7.  Key issues in the planning and management of effective
CM strategies
 The critical importance of `Knowing Your Customers'
 The role and importance of effective `Customer Touch
Point Strategies'
 Integration of people, processes, systems and
technology
 The CM impact of Web 2.0 and Social Media

8. Learning Outcomes: Subject Specific Skills
 Evaluate the CM practices of your own organisation
benchmarked against accepted `best practice'
 Develop effective `customer led' strategies for
competitive and customer advantage
 Develop and implement effective `customer touch point
strategies' for your own organisation
 Develop and implement a `Quality Customer Growth
Programme'

9.  Project manage CM initiatives
 Monitor and evaluate CM performance within your own
organisation
 Propose effective Web 2.0 and Social Media responses
for building customer relationships

10. Learning Outcomes: Personal Abilities
 Develop the personal abilities and customer empathy
necessary for building strong ‘1-to-1’ customer
relationships and loyalty

11. Module Content
 This Module covers the key strategic, management,
technology and organisational challenges facing Malta
tourism and hospitality organisations when developing
and implementing effective Customer Management
strategies for building sustained customer and
competitive advantage

12. Module Content
Session 1
 The Customer Imperative
 Building Quality Customer Growth Programmes
 Customer Experience Management
 Know Your Customers: Customer Information Systems
Session 2
 Customer Management and Web 2.0/Social Media
Online Support Material and Discussion
Knowledge Crowdsourcing
Readings, References, CAT

13. Questions and Comments
Don’t bother asking because I don’t really care
if you have any questions, what your opinion
is or what you think. If you ask a question I
will ignore you

14. If you haven’t walked out by now, think about the following:
• How many organisations adopt that attitude towards
customer interaction?
• How many of you have had a poor customer
experience? What impact did it have on you? What
caused the poor customer experience? Bad people or
bad systems?

16. The Video
http://www.advance-
tourism.eu/group/customermanagement/forum/topics/im-outta-
here

17. Topic 1
Effective Customer
Management: An Overview
The Customer Imperative

18. ‘The first challenge of the twenty-first century is to
master the changes that come with customers
being in control. Companies that manage this
transition effectively will thrive; those that don’t
will fail………Customer differentiation is the key
to success in the twenty-first century’
(Nykamp, 2001)

19. Customer is King
• A combination of market, customer, economic and
technology barriers have shifted the balance of power
from suppliers to customers
 Market drivers
 Customer drivers
 Economic drivers
 Technology drivers
Power Shift

20. C u s to m e r L e d
D r iv e r s C u s to m e r
D o m in a n c e
M ark et
C u s to m e r
E c o n o m ic
T e c h n o lo g y
S tra te g y C u sto m e r 'M in d s e t'
I n n o v a tio n D iffe r e n tia tio n C hange
C u s to m e r
A d v a n ta g e -
B u s in e s s B e n e fits

21. The Changing Business Environment
• Global Market Turbulence and Uncertainty
• Customer Discernment and Empowerment
• Global Competition
• Shortening Product and Technology Life Cycles
• Product Convergence and Oversupply
• Declining Effectiveness of Traditional Approaches to Sales
and Marketing
• The 80/20 Rule
• Impact of New Technology

22. The Life Time Value of a
‘Quality’ Customer Relationship

24. Customer Management Defined
‘The integration of strategy, people, processes,
systems, technology, organisation and culture to
identify, acquire, retain and grow quality customers‘
The success of your organisation depends on:
 The quality of your customer base
 The strength of the relationship you have with them
 Your ability to leverage that relationship (up and cross
sell)

25. The Ten Key Principles of Effective CM
• A New Approach
• Being Customer Led
• Know Your Customers
• Integration and Co-ordination
• New Performance Metrics and `Win-Win‘
• Organisation and Culture
• `Mission Critical'
• A Key Business Driver
• Effective Planning
• Customer Advantage

26. Summary
 Companies are not in business to beat the competition
 They exist to deliver exception levels of customer
service, at a profit
 The majority of customers will give you only one or two
chances before bad service forces them to defect to a
competitor

27. Business Benefits of ‘Being
Customer Led’

28. Business Benefits
• Concentration of your sales/marketing/relationship efforts on
`quality' customers – your MVCs and MGCs
• Building learning relationships with them allowing you to
better service their emerging needs and wants through highly
customised and personalised products and services.
• Maximising customer retention and loyalty
• Maximising customer ‘Up’ and ‘Cross’ selling opportunities
• Maximising customer profitability and lifetime value

29. • Acquiring new `quality' customers more easily because you
have got it right for existing customers
• Improved value delivery to existing high value customers
• Cost savings and improved marketing/sales efficiency through
targeting limited resources on `quality' customers (actual and
potential)
• Building sustained customer and competitive advantage
through customer differentiation
• Erection of loyalty barriers preventing your competitors from
stealing your `best' customers

30. Four main areas:
• Marketing Efficiency - through concentrating on `quality'
customers
• Marketing Effectiveness - through more highly targeted
sales campaigns
• Higher Profits - lower costs of customer acquisition and
service; lifetime value of `quality' customer relationships
• Building Long Term Customer Advantage - which can be
achieved through intimate customer knowledge and the
customisation/ personalisation of products, services, sales
and marketing to meet the unique `needs and wants' of
individual customers on a `1-to-1' basis

31. Topic 2
Quality Customer
Growth Programme

32. • The ultimate objective of CRM is to achieve sustained
growth and profitability through building a loyal base of
high value, high growth potential customers
• It is the quality of a company's customer base, the
strength of the relationship it has with them, and it's
ability to leverage `Most Valuable' and `Most Growable'
customers that provides the foundation for achieving
sustained profitable sales growth

33.  It is critical, therefore, that a company's sales, marketing
and relationship building efforts are targeted at `quality'
customers and sales prospects
 This requires a systematic, professional approach to
identifying and acquiring the right type of customer,
managing and growing the relationship with them

34. Quality Customer Growth Programme
• A sales, marketing and relationship management
support programme to help companies Identify, Acquire,
Retain and Grow Quality Customers
• Will ensure that ......

35.  Growth is built on a foundation of rock (i.e. high value, high
growth customers) rather than sand (low value, unprofitable
customers)
 The right sales prospects are being targeted and that
relationships are being built with the right type of customer
 Sales, marketing and relationship building efforts are
customised for different customer segments based on their
strategic value to the company i.e. high resource, high
commitment sales and marketing strategies for high value,
high growth potential customers; low resource, low
commitment strategies for low value, low growth potential
customers etc.

36. • This will improve the effectiveness (ROI) and efficiency
(costs) of sales, marketing and relationship building
efforts
• QCGP is a very flexible tool. It can be used to evaluate
the quality of a company's existing customer base; sales
prospects; target markets and sectors

37. Key learning/skills outcomes:
• Assess the strength of your existing customer base. Does it
provide your company with a solid foundation for achieving
sustained and profitable sales growth?
• Decide whether your company's sales and marketing efforts
are targeted at the right prospects, markets and sectors
• Understand the importance of and the business benefits to be
derived from customising your sales, marketing and
relationship building efforts depending on the strategic value
of different customers to your organisation
• Evaluate your existing sales, marketing and relationship
strategy against `best practice' as recommended in QCGP
• Implement a Quality Customer Growth Programme for your
own organisation

38. The Customer
Value Matrix

39. • A strategic framework for positioning different
customers, sales prospects, markets and sectors
according to their relative importance to the company.
• Two main criteria:
– `Customer Attractiveness' - the current and future value
of a particular customer (sales prospect, market or sector)
taking into account sales value, customer acquisition and
service costs, short and long term customer profitability
etc.
– `Probability of Success' - the likelihood that the company
can win, retain and grow that customer's business

40. High High Value, High High Value, High
Growth, Low Growth, High
Probability of Probability of
Customer Success Success
Attractiveness
Medium
Low Value, Low Low Value, Low
Low Growth, Low Growth, High
Probability of Probability of
Success Success
Low Medium High
Probability of Success

41. Customer Attractiveness
• Current Sales Potential
• Future Sales Potential
• Profit Potential
• Profit Timescale
• Customer Image and Reputation
• Nature of Customer's Business/Customer Base
• Business Attitudes
• Financial Strength
• Speed and Terms of Payment
• Risks

42. Probability of Success
• Current Relationship
• Age of Relationship
• Share of Customer's Purchases
• Relative Share with Respect to the Largest Competitor
• Share Trend
• Product/Service Competitiveness (USP)
• Price Competitiveness
• Customer Service
• Customer Understanding
• Industry Experience

43. Strategic Implications

44. • The final step in building a QCGP is to develop and
implement sales, marketing and relationship strategies
appropriate for different customers (sales prospects, markets
and sectors) depending on their respective position on the
CVM
• Strategy development and implementation should take place
at two main levels:
– The overall generic strategy to be followed for each
customer cluster
– Specific sales, marketing and relationship actions to be
implemented

45. Generic Strategy:
• Build Strategic Relationships
• Target for Development
• Build Brand Awareness
• Defend Against the Competition
• Selectively Develop
• Defend Minimally
• Retain Minimally
• Service Minimally
• Withdraw

46. Quality Customer Growth Programme
High
Build Brand Target for Build Strategic
Awareness Development Relationship
Customer
Attractiveness
Defend Selectively Develop Defend Against the
Minimally Competition
Medium
Low Withdraw? Service Retain
Minimally Minimally
Low Medium High
Probability of Success

47. A ‘snapshot’ for
some segments........

48. 1. High Attractiveness/ High Probability of Success (HAHPS)
• Customers in this group represent your `Most Valuable
Customers' i.e. high value, high growth potential customers
with a high probability of success. Your overall strategy for
this group should be `Strategic Relationship Building' or
`Achieve Preferred Supplier Status'. This will require high
involvement, high commitment approaches to sales,
marketing and relationship management. Your overall priority
should be to retain and grow this customer to become a
strategic partner

49. 2. High Attractiveness/ Medium Probability of Success
(HAMPS)
• This group has the potential for becoming a `Most Valuable'
customer. However, while providing very attractive sales prospects,
you only have a medium likelihood of success. This may be
because you do not currently have a strong relationship with the
prospective customer or there is a strong incumbent competitor.
Your overall strategy for this group should be to `Target for
Development'. The specific goal to be achieved is to exploit the
potential of this client for becoming a `Most Valuable' customer.
Your priority should be to enhance the relationship you have with
them thereby improving your future `Probability of Success'.
Sufficient resources need to be made available to achieve this, but
not at the expense of your `Most Valuable' customers. Resources
should be re-allocated away from Low Attractive/Low Probability of
Success Customers.

50. 3. High Attractiveness/ Low Probability (HALPS)
• This group has the potential for becoming a `Most Valuable'
customer for your company. However, your current `Probability of
Success' is low so it is going to take time and good relationship
building to change this. Therefore, your overall strategy for this
group should be to `Build Brand Awareness' i.e. raising the profile of
your company in the minds of this group. A direct selling approach is
unlikely to work for this type of customer and should be avoided.
You do not have sufficient brand awareness or differentiation. Your
priority should be to ensure that the client becomes more aware of
your company, your products and services and what you have to
offer that is different and better than your competitors. Sufficient
resources need to be made available to achieve this, but not at the
expense of your `Most Valuable' customers.

51. 7. Low Attractiveness/ High Probability (LAHPS)
• You have a very good relationship with this customer group,
but future sales prospects are low. Your overall strategy
should be to `Retain Minimally'. While it may be pleasing that
you are in a strong competitive position with this type of
customer (i.e. high `Probability of Success'), this may be
because you are over-servicing their needs. This is a low
value customer group with limited future sales prospects. You
need to be careful about falling into a `comfort zone mentality'.
You need to ensure that you are not over-servicing low value
customers at the expense of high value ones. You may need
to re-allocate resources away from this group to defend or
improve your competitive position with more attractive
customers.

52. Customer Experience
Management

53. CEM: What Is It?
• A new ‘buzz word’ coined by management consultants and
CRM software suppliers to scare us into parting with more of
our hard earned cash?
• Or the ‘holy grail’ of building strong ‘1-to-1’ relationships,
especially with high value, high growth potential customers?

54. • The key propositions of CEM can be summarised as
follows:
– The real source of customer loyalty, retention and growth
is the quality of the experience that each customers has in
dealing with your organisation
– Every time a customer interacts with your organisation,
they experience what it is like to deal with your people,
systems, organisation and culture
– Customer experiences during these interactions,
especially at key ‘Moments of Truth’ (MOT), can have a
major impact on future behaviour. Positive experiences will
help to build customer loyalty. Negative experiences lead
to customer defection

55. – Customer experiences occur across multiple ‘touch
points’ and at different stages of the customer life
cycle
– As companies cannot avoid providing experiences at
each ‘touch point’, it is critical that these are
proactively managed in ways that impact positively on
future customer behaviour. Achieving consistency and
quality across all ‘touch points’ is critical

56. – Based on the above, CEM can be defined as the
proactive management of the critical interactions that
take place between an organisation and its customers
in ways that deliver exceptional value to the customer
and to the business. Managing positive customer
experiences will generate loyalty, retention and
growth. Negative experiences will lead to customer
defection
– CEM, therefore, should be an integral part of an
organisation’s overall approach to customer and
brand management

57. • In terms of bottom line business benefits,
effective CEM can deliver short, medium and
longer term customer advantage – immediate
improvements in customer satisfaction and
retention, sustained customer loyalty and
competitive differentiation

58. ‘Know Your Customers’
The Critical Importance of a Good
Customer Information System

59. • A key pillar of CRM success
• You cannot build a relationship with someone you don't
understand!!!!!
• The more that a company can learn and understand
about the specific `needs and wants' of individual
customers and customer groups, the more it can deliver
highly personalised and customised products, services,
sales and marketing messages thereby increasing
customer loyalty and long-term customer advantage

60. • The foundation for effective customer learning and
understanding is a good Customer Information System
(CIS)
• `Analytical CRM‘ - The main focus is the use of
information to improve customer knowledge and
understanding and thereby, the quality of customer
contacts
• `Analytical CRM' may be defined as the:
"collection, storage, evaluation and analysis of customer
information to produce `actionable customer insights'
which improve the efficiency and effectiveness of
customer contacts"

61. • A Customer Information System should produce `actionable
customer insight'. Customer data must be turned into `Insight
and Action‘
• The four main steps involved are……..
• Gather Customer Data
• Derive Customer Insight from that Data
• Suggest Proactive Actions e.g. develop customised marketing
collateral based on customer need
• Evaluate Response

63. Key Questions to Address
 Do we need a Customer Information System?
 Why do we need one?
 What are the business benefits?
 What activities will be supported by the CIS/CDB?
 What information do we need out of the database?
 Who needs this information and why?
 What information do we need to gather and why?
 Where and how will we get this information?
 Who will be responsible for data collection, storage, analysis etc?
 How well are we currently doing in this area?
 What `gap' exists between the current and ideal scenarios?
 How can we best close this `gap'?
 What actions do we need to take?
 What obstacles do we need to overcome?

64. So how good are we at Customer
Management?

65. ‘Most managers and companies have heard the wakeup
call, and they believe that customer centricity is the key
to success in the future. The hard part now is becoming
fluent in alternative thinking, strategies, and tactics –
breaking away from the responses and policies that our
parents and grandparents taught us for the past 100
years’
(Newell, 2000)

68. RUCL
‘Are You Customer Led?’

69.  Initial benchmark evaluation of your approach to
customer strategy and customer management
 Resulting ‘Gap Analysis’ provides a strong
foundation for future strategy development
 Give yourself a score out of 10 for each area in terms
of how well you are currently doing
 Be honest!!!!!!!

70. The Ten Criteria
 Vision/Mission
 Customer Knowledge and Understanding
 Strategy
 The Customer Experience
 People
 Processes and Systems
 e-Business
 Organisation and Culture
 Performance Evaluation
 Planning

71.  Effective customer management is critical to
achieving sustained growth and profitability
 But most companies do not have a clear
customer management vision or strategy

72. Some Concluding Comments…..

73.  Effective customer management is critical to achieving
sustained growth and profitability. But most companies
do not have a clear customer management vision or
strategy
 Evidence that
 Companies are destroying value with poor CRM systems
 Customer satisfaction index is at best static
 Rising customer expectations
 A good CRM system is critical.......but wider than this

74. ‘the integration of strategy, people,
processes, systems, technology,
organisation and culture to identify,
acquire, retain and grow quality
customers‘

75. ‘The true business of every company
is to make and keep customers’
(Drucker, 1954)

76. ‘The true business of every company
is to make and keep ‘quality’ customers’
(Hamill, 2010)

77. And just when we think we are ‘getting there’,
along comes the Web 2.0/Social Media revolution
Customer to Customer conversations are
increasingly taking place in ‘Cloud’ –
especially in tourism

79. Session 2 covers the impact of Web
2.0/Social Media on World Tourism and
how you should respond