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They adjust marketing investment levels as customer relationships move through their
dynamic life cycles.
They organize processes and structures around acquisition, retention, and add-on selling to
maximize the profitability of each over the customer life cycle.
1.2.1.5 Increasing Returns and Customer Capitalism
Traditional capitalism encourages managers to focus on short-term rewards that eventually lead
to diminishing returns. In contrast, customer capitalism focuses on becoming the customer's pre-
ferred choice to ensure an enduring and compounding competitive advantage and sustainable
growth, eventually leading to increasing returns, that is, positive, disproportionate gains over
time. With customer capitalism, customers lock on to a corporation, and such customers become
the most effective barrier to competitive entry. However, this lock in is very different from the
product lock in envisaged in the traditional offering-based mass marketing approach. The latter is
primarily based more on the product architectures and standards that once established give the
customer little or no option and give the corporation quasi-monopolistic powers for as long as that
particular technology wave lasts.
Increasing returns are the consequence of a combination of network effects (see note
“Metcalfe's Law and Network Effects”) and minimal marginal costs. This situation typically
occurs when enterprises have very large start-up costs but very low marginal costs; this effect
becomes pronounced with incidence of network effects. Network effects is manifested as a
change in the benefit, or surplus, which a customer derives from goods when the number of
other customers using similar kind of goods changes. The classic example of this case is the
use of fax machines, whose value rises rapidly dependent on the number of other people using
similar machines.
Please note that while the positive loops of increasing returns reinforce successes, in
reverse, they will also aggravate losses. If an enterprise falters in delivering value to its
customers, the value gap will get amplified rapidly to pull the enterprise down a
descending spiral of ever-decreasing customer values and number of customers.
1.2.1.6 Leveraging the Customer Capital
Each piece of information in the enterprise, including that residing in the company's information
systems, has a value. This value is primarily associated with manner in which this piece of informa-
tion is utilized by the enterprise for remaining competitive, providing good customer service and
optimizing e-business operations. If SAP CRM is not to be used as a past-facing system merely for
recording and reporting purposes but more as a future-facing handler of strategic information and
relationships, implementation of all the basic components corresponding to the businesses of the
enterprise is essential. As recommended in the last chapter, the organization should consider a big
bang implementation of SAP CRM, wherein all the base components of SAP CRM (relevant to
the enterprise's area of business) are implemented and put in production together. By implement-
ing only certain components of the system, the company cannot hope to reap more significant
 
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