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Digital Marketing (D0Q05A) – Bart Larivière Theoretical Session 2: Back to the Future with some Basics

Moving from Traditional to Digital Explain and provide examples of your own with respect to Kotler’s quote: “Digital marketing and traditional marketing are meant to coexist in Marketing 4.0” ● Understand the shifting roles of traditional and digital marketing in building customer engagement and advocacy. ○ online AND offline ○ Informed AND distracted ○ Positive AND negative brand advocates

● Explain paradoxes that relate to “this time is different + this time it is not different”

CRM: Customer Lifecycle & Customer Journeys

Provide examples of CRM goals -

Building relationships is key

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maintain customer relationships (create value)

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Defend profitable relationships ⇒ choose which customers to focus on

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Reduce unprofitable relationships

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Deliver valuable customer interactions

Being able to plot, explain, and provide examples of the lifecycle phases The lifecycle stage consist a three general stages: 1) Acquisition stage: attracting new customers ⇒ focus on the first purchases 2) Growth/retention stage: keep your customers within the firm ⇒ focus on repeated purchases, referral behavior, customer feedback 3) Attrition/Win-back stage: try to win back lost customers ⇒ customer feedback, customer disengagement, win-back purchase

Explain the link between customer journeys within lifecycles The different stages within lifecycles (acquisition, retention and attrition) are linked with the customer journeys through their touchpoint. These customer journeys themselves also consist of three stages: 1. Pre-Purchase: starting with Need Recognition, Search & Consideration and finally Evaluation of the alternatives 2. Purchase: with Choice, Ordering and Payment 3. Post-Purchase: with Usage and Post-Usage which is often skipped

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The ultimate goal of marketing is of course to combine these two elements to “optimize the customer-firm relationship across the customer lifecycle and the various journeys & touchpoints that make it up to enhance customer value” by the use of asking the right questions: ● Lifecycle strategies: “how should we divide the resources among acquisition and retention efforts?” ● Journey/touchpoint strategies: “How should a specific touchpoint be designed?”

CRM: Customer Lifecycle & Customer Journeys: Acquisition Provide examples of why acquisition is important; thereby also taking the digital age we are living in into consideration ● a company without customers is not a real company ● companies lose customers and need to acquire new customer assets ● when firms focus more on a high-quality acquisition stage, there is a higher chance of customers staying at your firm. (cf. Selective acquisition)

Know the difference between all-inclusive versus selective acquisition, and apply it to specific situations where you need to reflect upon which strategy is preferred ● All-inclusive acquisition: focusing on “everyone we can get” which is an example of choosing quantity above quality ● Selective acquisition: focusing on “only the best”

Where to find leads: being able to give advice with respect to where to find leads for specific contexts and situations; being able to give examples of your own

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● Through existing customers ● Through list-brokers & targeting companies ● Through targeted online advertising & SEO-optimization

Acquisition strategies: being able to give advice with respect to acquisition strategies for specific contexts and situations; being able to give examples of your own ● Expanding into new product categories: e.g. McDonalds breakfast ● Increase market investment: e.g. ad-campaigns, trial campaigns ● Increase effectiveness of acquisition program: e.g. customer profiling ● Offer discounts and incentives: low prices to convince them and then increase the prices once they are convinced ● Set-up referral programs & influencer campaigns: e.g. via social media ● Content creation: Not only trying to sell but also providing relevant and useful content, also called inbound marketing

Metrics for acquisition: being able to give advice with respect to acquisition metrics for specific contexts and situations; being able to give examples of your own ● Response rate: e.g. opening e-mails ● Conversion rate: e.g. actually buying something ● Cost of Acquisition: what is the cost of acquiring people? important part which is too often forgotten! Technology is good but can sometimes be really expensive ● Rate of Acquisition: How much time needed before actually buying? ● Customer Lifetime Value: about the three stages in life cycle

CRM: Customer Lifecycle & Customer Journeys: Growth/Retention Provide examples of why growth and retention are important; thereby also taking the digital age we are living in into consideration Having loyal customers is important because we have to keep hold of our customers. The acquisition takes too much time and is really hard to optimize which is why it is important to have a good retention stage.

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Retention strategies: being able to give advice with respect to retention strategies for specific contexts and situations; being able to give examples of your own -

Development of tailor-made products and services: personalization

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Delivering superior service quality

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Lock-in strategy: loyalty programs like membership cards

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Product or service expansions: f.e. Net-a-sporter

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Cross-selling: “you can also buy this”

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Up-selling: “you can upgrade to this”

Metrics for retention: being able to give advice with respect to retention metrics for specific contexts and situations; being able to give examples of your own ● RFM: Recency-Frequency-Monetary ○ Recency: how long ago since they bought something? ○ Frequency: how frequently do they visit your site? ○ Monetary value: for how much money? ● Relationship length: For how many years has he been a customer? ● Share of wallet: if 100 euros spent, how much went to us? ● CLV

Explain the purpose of loyalty programs, and its objectives More and more companies are investing in loyalty programs because in the digital world you have a lot of opportunities to build programs. The goals of these loyalty programs are: ● Increasing Share of Wallet ● Lower price sensitiveness ● Access information about the customers ● Provide greater ability to target specific customer segments

Discussing the concept of Polygamous Loyalty vs True Loyalty ● True Loyalty: feel strongly connected to your company because you meet relevant needs which causes them to virtually exclude the competition from their consideration set. ● Polygamous Loyalty: being loyal to multiple brands/org (you can like Colruyt but still

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go to the Delhaize)

Loyalty consists out of two parts; ● Behavioral loyalty: customers really buys products ○ Recency-Frequency-Monetary ○ Share of Wallet ● Attitudinal loyalty: customers who want to be a part of your brand/concept ○ commitment ○ feelings/relationship

Loyalty has been discussed in a framework called the Portfolio Management -

Butterflies: behave well and buy a lot but not mindfully loyal

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True Friends: Feel connected, behave loyal and act loya

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Strangers: Not connected, not loyal, not buying

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Barnacles: feel loyal, but aren’t buying e.g. BMW because too expensive

CRM: Customer Lifecycle & Customer Journeys: Attrition/Win-back Provide examples of why attrition and win-back are important; thereby also taking the digital age we are living in into consideration Although it is important to have good attrition and in-back, sometimes it isn’t bad to let customers go.

Knowing different types of churn, being able to advice which churn metric to focus on in a

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specific setting and context Customer Churn is an ongoing process of customers who stop their relationship with the company for some kind of reason. -

Voluntary: dissatisfied, bad experience, …

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Involuntary: death, moving, growing up, …

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Contractual: analyst knows whether the customer is gone or not

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Non-contractual: analyst has to assume that the customer is gone

Sometimes when a customer doesn’t buy a certain product for a long time, it doesn’t necessarily mean that he left the customer base ⇒  link with RFM

Metrics for attrition: being able to give advice with respect to attrition metrics for specific contexts and situations; being able to give examples of your own more clear in slides (examples) ● Churn rate (contractual) ○ full churn ■ break the contract and don’t renew the contract ■ active at t0 1000 vs active at t1 950 ⇒ churn rate 50/1000=5% ○ partial churn ■ break part of the contract and don’t renew part of the contract ■ e.g financial institution ● t0 customer has 5 products vs t1 customer has 3 products ⇒ loss of 2 products ● Churn rate (non-contractual) ○ full churn ■ set rules, often RFM based ■

○ partial churn ■ set rules, often RFM based ■

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Being able to explain what win-back is, critical reflection whether it is good or bad in specific situations; provide examples Win-back is re-acquiring the customer. Why should we do this? ● Lost customers have already demonstrated a need in your product/service ● They know who you are, they are familiar with your products ● You know how to approach them and what they are interested in Who should(n’t) we focus on? -

Best prospects = customer who referred others and were satisfied but somehow don’t buy anymore

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Middle prospects = customer who left because of price

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Worst prospects = customer who left because of poor service or because of price and bad service

Being able to explain what divestment is, critical reflection whether it is good or bad in specific situations; provide examples Divestment is getting rid of customers, but why would we do this? ● Simply not profitable anymore ● Too demanding : employees lose time due to dealing with high-demand customers ● Changes in capacities to serve ● Shifts in business strategy: f.e. growing too fast and going online only f.e. IBM got rid of their customers because they didn’t sell computers anymore

How can we divest? -

Giving incentives: f.e. customize it in a way that you neglect a certain customer segment.

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Cutting-off service: simply stop giving service to certain customers

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Introducing price premiums: “if you want my service, then you’ll have to pay me a lot of money

Are there any dangers? ● You give away your customers to competitors ● Impact on employees: they get de-motivated because you get rid of certain type of

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customers ● Ethical & legal obligations (you can’t exclude everybody) ● Waterfall risk: f.e. by excluding young drivers because they are too reckless you risk losing the parents as well

Being able to explain and apply the stages of the divestment continuum

● Reassess the relationship: understand why the customer is being considered for divestment ● educate the customers: share the company perspective ● renegotiate the value proposition: Renegotiate the value proposition to achieve mutual benefits for the company and customer ● Migrate the customers: Move the customer to a new provider (partner or competitor), channel, or form of payment ● Terminate the relationship: Discontinue the relationship with the customer

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