Managing Customer Dynamics in the Age of Digital Disruption: Definition and Approach

With the rapid proliferation and advancement of technology, customers adopt technology at a rapid pace. While the digital disruption gives a business an opportunity to stand out, it also is increasing customer negotiation power as well. With the help of apps, social network, mobile, and IoT devices, customers expect more and demand more in terms of features, functionalities, convenience, responsiveness, trust and more. Taking consideration the pace of digital disruption businesses of all types need to understand customer dynamics in order to develop a sustainable approach to serve and manage customers better in the digital age. Companies need to view customers differently and interact with them in 360 degree dimension rather than linear fashion since customers can initiate the change and trend.

Here comes the new way of looking at customer and business relationships as viewed across all points of contact – Customer Dynamics. It has the potential to significantly expand the scope and end-results of traditional Customer-Business relationship through the contribution of additional information only available from analysis of multi-channel customer interactions.

Wikipedia defines customer dynamics as an emerging theory on customer-business relationships that describes the ongoing interchange of information and transactions between customers and organizations. These exchanges occur over a wide range of communication channels, such as phone, email, Web and text, including those outside of organizational control like social media. In a nutshell customer dynamics are changes in customer preferences that occur over time.

Sources of Customer Dynamics

The changes in customer preferences are influenced by multiple forces. While Digital disruption is reinventing consumer expectations, the following factors can be considered as sources of customer dynamics.

Figure 01: Sources of Customer Dynamics | Source: Compiled by Author from Online Sources | Copyright © 2020 – iammoulude.wordpress.com. All right reserved.

Thus, customer dynamics is a fundamental “problem” that all firms must address when developing an effective marketing strategy. Companies need to revive how the growing volume and diversity of interactions impacts the customer-business relationship in the areas of operational efficiency, customer experience, and revenue generation. Businesses can create significant competitive differentiation by understanding the customer’s true intent and meeting that in a way that also supports the business’s intents.

Approaches for Managing Customer Dynamics

The implication of customer dynamics set one of the vital principles of modern day marketing. The principle theory of customer dynamics suggest that all customers change and an effective marketing strategy must manage the dynamics. There are several approach (vary from product to product, industry to industry) can be used to manage the customer dynamics.

Figure 02: Approaches for Managing Customer Dynamics | Source: Compiled by Author from Online Sources | Copyright © 2020 – iammoulude.wordpress.com. All right reserved. 

The all three approaches mentioned above represent individual set of Pros and Cons respectively. Based on the nature of product or industry a specific approach may be in practice with individual merit and credibility.

Figure 03: Pros and Cons of Approaches | Source: Compiled by Author from Online Sources | Copyright © 2020 – iammoulude.wordpress.com. All right reserved.  

Framework for Managing Customer Dynamics

Considering the significant of addressing customer dynamics, a framework can be developed for effective management of customer dynamics. The basic framework illustrated below uses three inputs: CRM, marketing programs, and lost customer data. While after process it produces three outputs: dynamic segmentation and positioning statements and strategies.

Figure 04: Framework for Managing Customer Dynamics | Source: Compiled by Author from Online Sources | Copyright © 2020 – iammoulude.wordpress.com. All right reserved.

The framework suggest that to convert CRM, marketing program, and lost customer input data into dynamic segmentation and AER positioning statements and strategies, managers should follow a series of steps:

• Dynamic segmentation

• Migration Paths and Triggers

• Customer Lifetime Value of Segments and Migrations

• AER positioning statements

• AER strategies

In the digital age, the boundaries between customers and businesses are blurring, and the relationship is mutually beneficial. The understanding and appropriate strategy to address the impact of customer dynamics will help companies to sustain profitability and to take up business to the next level. With evolving technologies, people have shifted how they want to engage with each other and also how they want to receive brand communication. The marketers also need to shift how to reach and retain customer by managing the changes of the customer over time.