Page 92 - DMGT308_CUSTOMER_RELATIONSHIP_MANAGEMENT

Unit 4: Customer Retention, Acquisition and Expectation

Notes
The elements of customer involvement that are illustrated in Figure 4.4, which are the two
arrows symbolize an on-going, iterative development program where development projects
build up the product and service portfolio of a firm. Customer involvement requires making a
decision about the following factors:
1. What type of customers to involve?
2. To what extent they should be involved?

3. How it should be done?
The broken line illustrates the organizational context, in which a firm decides on the strategy of
the development organization.

The motives to involve customers are also important and will determine how customer
involvement is carried out and what results can be achieved. Finally, there might be problems
associated with customer involvement.

4.1.5 Different Types of Customers

A traditional approach of product and service development is to obtain information form
representative customers at the centre of the intended target market. Companies often obtain
information about customer needs only, and assign manufacturers with the task of generating
ideas for solutions leading to new products. Company employees are required to translate
needs into solutions that should fit these needs. Lead users present strong needs that will become
general in a market place months or years in the future. As there are no products or services
available on the market to fulfil their needs, lead users often develop a solution on their own
and can therefore provide design data as well. Consequently, the lead user process takes a
different approach from that of traditional methods, collecting information about both needs
and solutions from the leading edges of the target market and from markets facing similar
problems in a more extreme form. In slow-moving industrial markets, “average users” may
provide satisfactory input to the development process. Four customer characteristics were used
including technical attractiveness, financial attractiveness, closeness and relationship with the
customer, and lead user characteristics. They found that financially attractive customers, lead
users, and close customers have a positive impact on new product success. Technically attractive
customer, on the other hand, had a negative impact on new product success. A possible explanation
is that they have needs that are different from those of the market in general and therefore can
mislead the company.
Some companies choose to primarily work with financially attractive customers, whereas about
30% of the companies do not make any special selection of customers. An overview of the results
from the investigated companies is provided in Figure 4.5. For some companies the strategy is
to work with the customers who are interested in co-operation or to co-operate with the customers
who are available at a specific moment.
When comparing different types of market characteristics, that is B2B or B2C, we found that
companies on the business market are more likely than companies on the consumer market to
use customers with a special expertise (Chi-square = 23.9, p<0.01).

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Caution The organisations should pay attention to the profile of the target market
segment, its changing needs and make efforts for fulfilling the same, and this would yield
better results in customer retention.

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