Customer service and customer relationship management (CRM) are an integral part of brand-building. In fact, tying CRM to branding initiatives will help your branding activities be more focused, says author and professor Dr V Kumar.

“Many companies spread their (branding) efforts over too many customers. As a result, the customers they want to keep are dissatisfied and they are wasting money on indifferent customers,” said Kumar at the Managing Customers for Profit workshop organised by the Institute for Customer Relationship Management (ICRM) in late July in Kuala Lumpur.

The author of the recently published book Managing Customers For Profit is currently a  Richard & Susan Lenny distinguished chair professor in marketing and executive director for the Centre for Excellence in Brand and Customer Management at the Georgia State University in the US.

This may be particularly true for car manufacturers where customer satisfaction plays an integral part in the brand’s value to customers. The JD Power Asia Pacific 2009 Malaysia Sales Satisfaction Index (SSI) Study, released on Sept 8, reported that Malaysian national brands (Perodua, Proton, Naza and Inokom) have improved by an average of six points from 2008 while non-national brands have dropped an average of seven points. National brands, said the study, improved most in the delivery timing factor and in sales initiation and the delivery process. The survey ranked Perodua at No 8 with 780 points and Proton at No 9 with 771 points.

Now in its seventh year, the study measures new-vehicle owner satisfaction with the sales and delivery experience and seven key factors that contribute to overall satisfaction. The study was based on the responses of over 2,400 new-vehicle owners who bought their vehicles between September 2008 and April 2009. The survey was conducted between March and June 2009.

Another thing marketers must realise is that brand-building activities must be targeted at customers that are profitable for the company. “You can wind up spending more on a customer than the customer spends on you,” says Kumar

To help determine customers who are worth the effort, Kumar proposes a metric he calls “customer lifetime value” or CLV. A forward-looking measurement of the potential profit a customer may bring, CLV is strongly linked to another metric, customer brand value (CBV) which evaluates the degree of value a customer places on a brand, he noted.

To maximise customer value, companies must understand how CLV and CBV are linked. Customers can be segmented into four categories:
1.     True loyalists — customers who have high CLV and CBV;
2.     Acquaintances —  customers who have high CLV but low CBV;
3.     Poor patrons — customers who have high CBV but low CLV; and
4.     Strangers — customers who have low CLV and CBV.

“The idea is to maintain True loyalists and migrate Acquaintances and Poor patrons to become True loyalists,” says Kumar, adding that customers who are Strangers may cost too much to win over.

He says Hyundai is a story of using brand-investment to increase CLV. Between 2000 and 2005, the Korean company was the fastest growing carmaker in the US. However, between 2005 and 2007, Hyundai’s sales growth flattened. A study by Hyundai found that customers were more willing to buy the Veracruz SUV without the Hyundai logo than with the logo. The company promptly renewed advertising initiatives to the tune of US$400 million (RM1.4 billion) and succeeded in raising its brand profile.

“Branding matters,” says Kumar. If most of your customers think highly of your brand but won’t spend on you, you are either marketing to the wrong segment, or need to adjust your marketing proposition, he adds.

Finally, Strangers should be phased out as they are non-profitable customers who are doing nothing for your brand.

“The boardroom dilemma of choosing to invest in brand-building or customer relationship management is therefore not a simple ‘yes’ or ‘no’,” says Kumar. “Brand-building and customer relationship management must work in tandem.”




This article first appeared in The Edge Financial Daily on Sept 17, 2009.