Case study: the transport company that took a wrong turning in relationship marketing
A major international transport operation was facing increasing competition in all its markets. It was a market leader in every respect. It had a strong brand, a good reputation for customer service and charged a premium price. But its profitability was under threat from increasingly price-based competition.
Although it had managed its customers using a customer database for several years -- and had developed a relationship marketing approach -- it had been some time since it seriously evaluated this strategy. It decided to review the strategy.
The first step was to analyse its customer base from a new perspective. It created a data warehouse which pulled together for the first time data on purchases and service use, promotional responses and customer service. Analysis of this data showed the company had taken a wrong turning. There were two main shocks.
First, the average customer remained an intense user for much shorter periods than the company had thought. This meant that the customer base was turning over fast, with just a few customers staying for a long time. The old relationship marketing approach was falling down because it was too slow.
The company took too long to recognise the most valuable customers so they received higher quality and their best treatment just as they were thinking of leaving. At the critical period when new customers were forming their brand preferences they were treated poorly.
Secondly, the company correlated value, promotional response and complaints poorly. There were many low-use customers who often responded to promotions for incentives and complained frequently.
These findings shocked managers, particularly as several new competitors had successfully targeted new customers. This lead the company to redefine its relationship offer to new customers. Using data mining techniques, it developed a profile of future high-value customers. It applied the profile to new customers, enabling it to single them out for improved management earlier in their relationship.
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