Become a Customer Expert through Technology

Become a Customer Expert through Technology

One of the best examples of turning Iron customers into Gold customers involves the battery of strategies used by Amazon.com, the online bookstore. Initially, the company focused on being able to get virtually any book that the customer wanted. Once it established this ability, it recognized that developing profiles of individual customers was a winning strategy. Once a customer had purchased something from Amazon.com, the company started to build its information database about the customers' preferences. Whenever a customer ordered a book, the database produced a list of books from the same author and on similar topics that could expand the purchase. These suggestions were often very welcome to the customer, who might not have been aware of the other books. After multiple purchases, the database was designed to make suggestions as soon as the customer signed on, again increasing purchases. Before long, the company discovered that customers who bought books also bought CDs and movies, and it expanded its product lines to satisfy these other needs of its customers. To top the strategy off, the company asked customers if they wanted to receive information about products that were new and dealt with their interests. Using the customer's e-mail address, Amazon.com thereby created ongoing communication with customers about their personal interests, making it so easy to deal with the company that customers began spending all their book dollars--as well as CD and movie dollars--at Amazon. 

Become a Customer Expert by Leveraging Intermediaries

Caterpillar, the world's largest manufacturer of mining, construction, and agriculture heavy equipment, owes part of its superiority and success to its strong dealer network and product support services offered throughout the world. Knowledge of its local markets and close relationships with customers built up by Caterpillar's dealers are invaluable. "Our dealers tend to be prominent business leaders in their service territories who are deeply involved in community activities and who are committed to living in the area. Their reputations and long-term relationships are important because selling our products is a personal business."(n19) 

Develop Frequency Programs

Most retail firms can benefit from frequency programs that encourage customers to spend more with the company in order to receive special benefits. Convenience-item retailers like VCR rental companies can effectively use frequency programs. Blockbuster, for example, developed a program called Blockbuster Rewards. For a one-time payment of $9.95, a customer is able to get benefits that include: rent five videos, get one free every month; two free video rentals a month just for joining; and one free video rental with each paid movie or game rental every Monday through Wednesday. Notice that it is not the one-time fee that makes the Blockbuster Rewards customer a Gold customer--it is the frequent use of the service. The firm is motivating the use of capacity that it cannot otherwise sell, and encourages customers to turn to Blockbuster for all their video rental needs. Blockbuster did not drop the price on its video rentals, which would lower its profits. In fact, the company increased prices and reduced the number of days a new video could be rented from two to one.