Multichannel Customer Strategy PDF

Preview

Summary

Appunti delle lezioni del Prof. Lamberti. Il documento è frutto della mia rielaborazione delle lezioni. E' possibile ci siano degli errori e/o inesattezze. In tal caso, l'utente si assume la responsabilità della consultazione....

Description

MULTICHANNEL CUSTOMER STRATEGY COURSE NOTES Prof. Lamberti Politecnico di Milano A.Y. 2016/2017 Silvana Mastantuoni

Silvana Mastantuoni

INDEX Sommario INDEX .......................................................................................................................................................... 2 1.

INTRODUCING THE GENERAL FRAMEWORK ................................................................................... 3 Evolution in needs and “customer power” ................................................................................................. 3 4 Ms model ............................................................................................................................................... 6 Customer centricity and multichannel brand experiences..........................................................................7

2.

MARKETING CHANNELS: TOOLD AND TRENDS ............................................................................. 10 Internet marketing ................................................................................................................................... 10 The website ......................................................................................................................................... 11 Build website traffic.............................................................................................................................. 11 Direct email marketing ......................................................................................................................... 18 Mobile marketing..................................................................................................................................... 18 The marketing opportunities of mobile ................................................................................................. 20 Mobile marketing management............................................................................................................ 23 Co-creation ............................................................................................................................................. 24 Retailing.................................................................................................................................................. 26 OK Cash and Carry Case study .............................................................................................................. 32 Social Media marketing ........................................................................................................................... 33

3.

INFORMING THE MULTICHANNEL CUSTOMER STRATEGY .......................................................... 37 Marketing research ................................................................................................................................. 37 Big data and marketing ........................................................................................................................... 44 Data mining ......................................................................................................................................... 45 Customer Insight detection...................................................................................................................... 47

4.

DESIGNING AND MANAGING MULTICHANNEL CUSTOMER EXPERIENCE .................................. 50 Customer journey and Personas ............................................................................................................. 50 Advertising .............................................................................................................................................. 52

5.

MEASURING THE PERFORMANCE OF A MULTICHANNEL CUSTOMER STRATEGY ................... 54 Customer relationship management........................................................................................................ 54 Profitability, Customer Lifetime Value, Prospect Lifetime Value and BEAR ......................................... 58 Value analysis Output.......................................................................................................................... 59 Marketing Metrics.................................................................................................................................... 60 Media Planning.................................................................................................................................... 62

Silvana Mastantuoni

Politecnico di Milano

1. INTRODUCING THE GENERAL FRAMEWORK 03/10/2016

Evolution in needs and “customer power” A business model is based on establishing a relationship with customers and gain money from them over time. So, in order to be profitable in the long run, a company must “marry” it customers, must establish a long-term relationship with them. But how can I convince the customer that I am the right person to “marry”? I must be present everywhere and control every touch point and be consistent in all of them. Take for example Trip Advisor: a single negative review can affect the reputation of a whole business. Today, a marketing strategy considers all the possible channels. Moreover, consider that we are going more and more towards digital businesses with no physical assets and services in the place of products. Take for example Uber: they don’t even own a car; they just have read correctly customers’ need. So, when we are talk about “reading customer needs” we are talking about marketing and this means, especially in this moment, defining the company strategy. In order to succeed, a company must be able to: 1. Detect intimate customer need 2. Focus on customer loyalty (customers are becoming more and more demanding, have a lot of freedom of choice) 3. Develop a suited customer experience that is necessarily multichannel- using all the possible “touchpoints”1 Another important topic for marketing is the Accountability, that basically means being able to quantify the cost and the payback of the marketing, asses if the choices that we have made relying on marketing’s assumptions gave a positive result. WHY MULTICHANNEL CUSTOMER STRATEGY? To answer this question let’s imagine to have been the first to ever introduce a t-shirt on the market and that this product had a massive expansion. Very likely, after a certain amount of time, some competitors will enter the market and start to improve the production process, in order to cut the costs down and take the whole market. This could result either in lower prices or in higher margins.

In both cases, if we don’t do anything, we will be kicked out of the market. Now, if we engage a price war, we will find our self with very low profits (ideally, in a perfect competition scenario). Another possibility is to widen the product range. We opt for this decision and make a market research2 on which of the two colours – let’s say, yellow and red- we should produce. Let’s assume that the research shows a fifty-fifty division of the market. What should we do (assuming that there’s no way to produce both the colours)? We can either produce one of the colours, satisfying all the targeted customers (hence willing to pay more) but losing 50% of the market, or produce orange t-shirts, probably getting 100% of the customers, none of them fully satisfied. 1 2

The channels available to get in touch with the customer Simplification of the real heterogeneity of the customer base, through the identification of some representative customers

3

Silvana Mastantuoni The basic idea is to produce an “average product”, that enables us to catch the biggest share of the market. We call it a Marketing centroid. Whenever you segment a market you associate the market with a centroid. But we can reasonably assume that after a certain time, competitors will recognize market’s need for red and yellow t-shirts and start producing them. So what? • Competition leads to segmentation • Segmentation leads to hyper-segmentation, up until we target each single customer or the cost of further segmentation exceeds the benefit. But of course if I don’t segment, I get kicked out of the market. • Meanwhile, basic needs are reasonably satisfied According to Kotler, a NEED is a “ feeling that something is missing (sense of lack, privation) compared with the general satisfaction of the human condition”. Instead, the desire is the objectification of needs and the demand is the actual purchase aimed at satisfying needs. Attali and Guillame defined true and false needs, where true needs were the ones connected with personal surviving and false need all the rest. Keynes redefined the needs in  Absolute: needs experienced regardless of the situation of others.  Relative: needs whose satisfaction takes us beyond our peers, giving us a feeling of superiority over them For Keynes, absolute needs can be satisfied, relative needs can never be fully satisfied. Now the question is: does marketing create needs? Generally speaking,3 the answer is no. We have “embedded” in ourselves every different need and marketing has the aim of making this feeling explicit. If desire comes from a product nobody asked for, it means that companies addressed existing needs for which the supply was still missing. Marketing’s role is to objectify the need, to create desire. Now, one of the best-known study of human needs is Maslow’s hierarchy of needs. It starts from the assumption that needs derive from sense of privation, which motivates human beings to go to higher-order needs once they have satisfied the lower-order ones (omeostasys).

As said before, nowadays basic needs are reasonably satisfied, so we address just the last two parts of the pyramid (e.g. Coca-cola now has the slogan “in search of happiness”), which are also the most difficult to address because the product is now just the part of the value proposition. The change of the markets needs and the hyper-segmentation have led to the so called ‘experiential marketing’. Experiential marketing is a marketing strategy that directly engages consumers and invites and encourages them to participate in the evolution of a brand. Rather than looking at consumers as passive receivers of messages, experiential marketers believe that consumers should be actively involved in the production and co-creation of marketing programs, developing a relationship with the brand. Experiential marketing is the set of activities that we carry on thorugh the different touch points. The offer is made of a tangible product, services, but also an intimate and co-created experience. 3

We are moving in the boundaries of “traditional marketing”, but there are other application fields in marketing (such as subliminal information) which are related to the creation of needs.

Silvana Mastantuoni

Politecnico di Milano

06/10/16 According to the “traditional” approach of microeconomics, the willingness to pay of increases if the quantity of product decreases. The pricing decisions based on this assumption are not really suited, especially in today’s markets, which are characterized by: 1) Servitization: market saturation4 caused a shift of focus from products to related services (e.g. car sharing vs car owning and sharing economy in general). 2) Customization: after the industrial revolution, the leading approach was standardization (remember Ford and the only colour for the T model) but once the basic needs had been satisfied with standard products, many industries started competing on customization. Being customization an expensive practice, companies prefer to customize the experience instead of the product/service, usually through co-creation (“from products to customers and from customers to values”-Kotler). So, there are innovative business models which can better answer to the change in needs of the markets:  LONG TAIL - In the past businesses would apply the Pareto law in order to choose which product to manufacture – i.e. the 20% of the products that represent 80% of the revenues-. Today, sales can be more effectively represented by the so-called “ long tail” (Anderson, 2004): products in low demand or with low sales volume can collectively make up a market share that rivals or exceeds the relatively few current bestsellers (but only if the store or distribution channel is large enough).

Therefore, we can assume that in the past bestseller products were not expression of a clear and sharp choice of the market toward a product/service, but instead were often “second-best” choices driven by the unavailability of the “first-best”. The reason of this evolution from Pareto curve to Long tail curve is that in the past there was the necessity to spread the high fixed costs to produce goods (and services) over a large number of customers, in order to be economically feasible. Nowadays, thanks to the digitalization, the data, the internet connection and so on, the fixed cost are much lower allowing producers to satisfy all the possible needs of the customers. An example of companies that rely on this concept can be Amazon

4 Market saturation is a situation that arises when the volume of a product or service in a marketplace has been maximized in its current state. At the point of saturation, a company can only achieve further growth through new product improvements, by taking existing market share from competitors or through a rise in overall consumer demand.

5

Silvana Mastantuoni









or Apple (with the ITunes Store), which make great part of their revenue on niche products  Best sellers in a product economy may not be so in a service economy. PAY WHAT YOU WANT- a pricing strategy where buyers pay their desired amount for a given commodity, sometimes including zero. In some cases, a minimum (floor) price may be set, and/or a suggested price may be indicated as guidance for the buyer. The buyer can also select an amount higher than the standard price for the commodity. Many common uses of PWYW set the price prior to a purchase, but some defer price-setting until after the experience of consumption (much like tipping). PWYW is a buyer-centred form of participatory pricing, also referred to as co-pricing (as an aspect of the co-creation of value). It can be considered a perfect price discrimination. FEE-IN-FREE-OUT- this business model works by charging the first client a fee for a service, while offering that service free of charge to subsequent clients. The model is appropriate in business environments (for example, digitization services) where there is a one-time cost to develop a product or service but little or no cost involved in its subsequent distribution (e.g. wi-fi) TIERED SERVICE- or premium pricing/versioning - this is a form of price discrimination: by providing a choice between two or more “tiers” of product (e.g. basic, advanced and premium) consumers are asked to reveal their degree of price sensitivity (or willingness to pay). FREEMIUM- Business model that works by offering basic Web services, or a basic downloadable digital product, for free, while charging a premium for advanced or special features (e.g. Spotify).

4 Ms model Data and insights about today’s markets:  Internet is breaking down time and space barriers and is becoming more and more a utility.  We can’t disentangle anymore the “digital world” and the “rest of the world”- digital IS the world-.  Internet penetration is 83% in Europe. Offline people are a niche.  We are increasingly mobile. There are 7,4 Billion of mobile users, more than the half are UNIQUE mobile users (this I because for example in rural and underdeveloped areas, building the infrastructure for internet connection would be unbearable- the mobile connection is a lot easier)  We are increasinglly social (+10% growth of social media users; +17% mobile social media users2015/2016) so that social media has unprecedented reaches (Facebook has 1 billion monthly active users). But changes are deeper, and involve the whole society. We can identify 4 main characteristics of today’s society (4 Ms):  multi-screen: we own and use tv, pc, smartphone, tablet and more. TV is still an important media (in Italy 86% of media users see TV) but its importance is decreasing. It is usually turned on during the meals and after dinner, while PC is with us during the working hours.  multi-channel: Nowadays we are used to switch channels very easily. The relationship with a company but also non-commercial activities are multi-channel. For example, 60% of time spent on social media is through mobile. The number of connected mobile devices is increasing dramatically, while PC have decreased. Also retailing is evolving: stores are no longer just an endpoint for the shopping experience. The “web-rooming” role of internet -i.e. searching online and then buying offline- is decreasing in favour of “show-rooming”. Back in 2007, in Italy 7 out of 35 million shoppers used internet to search for information. Nowadays this doesn’t even make sense. We just discriminate between “infoshoppers” and “e-Shoppers” (heavy) e-commerce users. NB: e-Shoppers can’t be considered as a homogeneous cluster – we can segment them according to the online purchase frequency and on line sharing activity-.  multi-tasking: The digital life has become so pervasive that we usually have smartphones, laptops, tablets, tv, and often are also used together at the same time. Researches show that 16% of primetime audience uses another device during the broadcasting. Marketing campaigns are still payed per impression, which traditionally means opportunities to see. But while I see the TV I use at the same time the smartphone, I would probably lose the advertisement. So, understanding the reach of campaigns is at the core. Silvana Mastantuoni

Politecnico di Milano Mobility: It is worth remembering that in Europe we have reached 130% penetration of mobile, in North America 100% and 151% in Central and Eastern Europe. Considering (Italian) consumers’ behaviour, we can state the following: more and more people are “inverting” the shopping experience (from online considerationpurchase in shop to consideration in shoponline purchase); increasing demand pushes companies to go online; digital touchpoint usage is increasing in P2P process. 

Customer centricity and multichannel brand experiences FROM MARKETING FUNNEL TO CUSTOMER JOURNEY: Marketing has always sought those moments, or touch points, when consumers are open to influence. For years, touch points have been understood through the metaphor of a “funnel”— consumers start with several potential brands in mind (the wide end of the funnel), marketing is then directed at them as they methodically reduce that number and move through the funnel, and at the end they emerge with the one brand they chose to purchase. But today, the funnel concept fails to capture all the touch points and key buying factors resulting from the explosion of product choices and digital channels, coupled with the emergence of an increasingly discerning, well-informed consumer. A more sophisticated approach is required to help marketers navigate this environment, which is less linear and more complicated than the funnel suggests. We call this approach the consumer journey. The customer journey is made of set of touch points that the customer freely chooses and decides how to navigate in them (some of which are online, some offline). The customer simply build its own path, so the company must be on every touch point, with something to say on each one. In the meantime, since the customer is free to touch in unexpected moment, the objective is not only to be present, but to think about a content strategy on these touch points in order to suggest the customer which should be the next proper touch point. In order to find the proper content, I have to know what my customers are interested in when they are on that particular touch point (motivation, feelings,...