8.5 Challenges in Implementing the CLV Management Framework

We have looked at the development and implementation process of the CLV management framework at two firms, in two business settings, B2B and B2C. However, when it comes to practical aspects of the implementation, project managers have to face many other challenges. Most importantly, more challenges will be faced by the management of the focal firm in implementing the recommended strategic implications. In this last section of the chapter, we will address those challenges and suggest viable approaches that firms can apply to overcome such issues.

8.5.1 Challenges in Data Collection and Internal Collaboration

As technology advances, firms have access to a much wider variety of customer-level data necessary for CLV computing. Some of such key information includes demographics, firmographic data, purchase value, products purchased on each occasion, the number, time, and types of marketing contacts, prospects, and competitors' customers. However, not all firms have access to all of the information they need, especially information regarding prospects and competitors' customers. In the meantime, given the complexity of business settings nowadays, many firms find it challenging to identify the right informational needs, to collect the huge amount of data, and to utilize these data. Sometimes, in order to get the right information, managers will need to resort to collaborative efforts from multiple departments. Failure to properly address these issues might lead to unreliable result findings or delays in implementation, which are costly to the firm.

To overcome these challenges, before starting to collect information, firms should be clear in terms of their informational needs. Firms should also be resourceful in making use of the available secondary information sources and data vendors. Making use of customer data intermediaries (CDIs) – firms specializing in collecting customer behavioral and demographic data – is also a viable option. A more long-term approach would be to invest in an effective data management system internally. To effectively coordinate collaborations across the firm, management must ensure that the CRM initiatives are well communicated to the relevant parties. Any delays or discrepancies should be promptly communicated so that timely rectification can be made.

8.5.2 Challenges in Implementing the Customer-Centric Approach

The findings in both case studies suggest several valuable implications for maximizing the firms' profitability. In implementing those recommendations, the management of each firm have to make certain systematic changes. The most critical change would be to shift the firm's approach from product-centric to customer-centric [9].

Traditionally, firms focus on the product-centric approach. That is, selling products to whoever is willing to buy them. However, given the increasing competition among firms, customers who are supposedly satisfied have many reasons to defect and move on. The key for firms to maximize their profitability is to maximize their individual customers' profitability, which can only be done by focusing on the customers' needs. This requires firms to shift their focus from the product level to the customer level. Several firms such as Wells Fargo, Apple, and so on, have moved away from a product-centric to a customer-centric approach. This fundamental shift requires important changes in the operations element and changes to the workforce. Table 8.12 highlights the fundamental differences between the product-centric and customer-centric approaches.

Table 8.12 Differences between the product-centric approach and the customer-centric approach.

To ensure a customer-centric approach to CRM initiatives, changes pertaining to two crucial areas of the organization will have to be addressed: operational elements and workforce elements [10].

8.5.2.1 Changes to Operational Elements

To effectively implement the customer-centric approach, firms have to focus on interaction orientation [11]. When a firm adopts interaction orientation, its marketing activities are conducted with the customers. Each customer is viewed both as a source of business and as a potential business resource to the firm. The strategic importance of customer-to-customer linkages is recognized and included in the customer empowerment component. Examples of such incorporation of customer empowerment in firms' marketing activities are as follows:

• Making decisions on a per customer point of view.
• Providing rapid responses to customer needs, creating a rich customer experience.
• Allowing customers to exchange information and reviews about product and experiences with other customers.
• Encouraging customers to connect with the firm and design the nature of transactions.

With regard to internal operations, firms are required to realign their structures to successfully adopt the customer-centric approach. The management of these firms need to revisit their business dimension and shift all their performance criteria from product based to customer based. Following the changes in structures, and internal performance metrics, firms should tailor the offerings that focus on the customers, rather than on the products. Product positioning should highlight the benefits in terms of meeting individual customer needs, rather than simply good product features. Specifically, firms should implement the following changes:

• Customer segment centers, customer relationship managers, and customer segment sales teams will replace product profit centers, product managers, and product sales teams.
• Performance metrics should be customer share-of-wallet, customer satisfaction, CLV, and customer equity, instead of profitability per product, market share per product, or number of new products.
• Firms should ask ‘How many products can we sell to this customer?’, rather than ‘How many customers can we sell this product to?'’

8.5.2.2 Changes to Workforce Elements

The workforce of a firm is the most valuable asset, as the success of any CLV implementation depends on how well it is executed by the staff of the firm. The last step in ensuring the implementation process can be effectively conducted is to make key changes to workforce elements.

First of all, top management must support the integration of all corporate functions to focus on customer value. The management should understand the importance of the fundamental changes to the customer-centric approach, and make sure it is communicated to the staff. Finally, the management have to ensure employees' interest in participating and supporting the change by communicating the initiative's effectiveness and potential benefits. Prioritization of customer needs should be made and any barriers should be removed timely through constant monitoring and evaluation efforts.