Customer Asset Management at Dhl in Asia

Introduction

DHL, a division of a German logistics company, is the world's largest logistics provider, offering international courier, parcel, and express mail services. Operating globally, especially in sea and air mail, DHL segments its customers into distinct groups. Based on diverse customer needs, customers are categorized as strategic customers, long-term relationship customers, and direct customers. A strategic customer is one with substantial logistics needs and complex supply chain requirements. Typically, the strategic customer group comprises the top 200-250 customers worldwide. Long-term relationship customers regularly and frequently use DHL's services, with simpler logistics needs compared to strategic customers. In contrast, direct customers lack loyalty to DHL, indicating they might switch to another company at any time. DHL consistently strives to provide the best technology and service to strategic customers to foster strong cooperative relationships. However, the primary focus for DHL is on long-term relationship customers to maximize profits, while also working to convert direct customers into loyal ones.

Challenges in Customer Segmentation

To effectively manage such a diverse customer base, DHL implemented a sophisticated customer segmentation and loyalty management system. This system aims to assess customer profitability, reduce customer churn, and increase DHL's share of shipments. DHL further refined their customer segmentation by categorizing customers into six segments: lost, decreased performer, maintained, increased performer, new, and regained. Data collection presents a significant challenge. Collected data is reported to sales, marketing, customer service departments, and senior management. If there is any increase or decrease in percentages, DHL can take corrective action.

The increased demand for small-sized frequent shipments by consumers poses one of the biggest challenges for logistics express delivery companies. Successfully delivering shipments to consumers distributed across vast geographical areas requires redesigning the existing distribution network, including terminals, hubs, and the network paths connecting them. DHL needs to establish mega-scale hubs to process a high volume of shipment flows. Cost efficiency and a high level of service in the distribution system are crucial for DHL to remain competitive in the business.

Challenges in Launching a Loyalty Program

Launching a successful loyalty program comes with numerous challenges. Once a well-designed loyalty program is successfully launched in the market, it can increase customer loyalty and satisfaction, decrease customer churn rate, strengthen brand equity, and contribute to both up-sell and cross-sell targets, among other advantages. The challenges predominantly arise from the operational perspective post-launch. It is prudent to consider and predict operational challenges and devise the right business strategy and plan to mitigate operational challenges and risks before launching the program in the market.

• Operation Management: Managing day-to-day operations, handling customer queries, issues, and complaints, and establishing a robust customer service function is a key challenge for successful operation management.
• Meeting Loyalty Metrics: Meeting loyalty metrics is a significant challenge, given that most loyalty programs are not very profitable in their early years. Managing and optimizing to increase profitability, delivering a unique customer experience, and reducing customer churn rate will always remain key challenges.
• Enhancing Competition: Increasing the program's attractiveness in the market, acquiring new customers, and even competitors’ customers will be a marketing challenge, especially if competitors have developed their loyalty programs in the market.
• Increasing Customer Experience: Delivering a unique customer experience for different segments based on customer behavior insights, point collection, reward redemption, etc., and designing personalized reward patterns for different segments will be a key challenge for a large client with a vast customer base.
• Developing IT and Technical Infrastructure: Implementing the right technical loyalty scheme, CRM, billing system, etc., is crucial for successful operation and in advanced phases of the program where the focus will be on delivering a unique customer experience for different segments.
• Fraud Management: Frauds can occur, especially in a company with a large customer base. Thus, having a robust fraud management system to predict frauds and take corrective actions will save costs and resources while protecting the brand in the market.
• Launching New Rewards and Promotions: Introducing new rewards, promotions, and marketing campaigns, along with offering personalized offers for different segments, will be a key challenge not only to enhance market competition but also to increase customer satisfaction and deliver a unique customer experience.
• Responding to Market Trends: Adapting to changes when competitors have developed their loyalty programs or created better services for their loyalty programs, or when there are changes in customer behavior or new industry trends impacting the current program in the market.
• Selection of Right Strategic Partners: Building strategic partnerships with other brands in different industries offers numerous benefits for customers and contributes to a more advanced program in the market.
• Increasing Customer Engagement and Communication: A successful loyalty program will engage with different segments and plan for better communication strategies to motivate and drive customer behavior, leading to improved customer loyalty. Engaging with various segments based on new customer engagement and communication is crucial.

Conclusion

After analyzing all the challenges, several key challenges in implementing segmentation in DHL’s customer database can be identified:

1. How to balance resources according to different types of clients?
2. How to adjust strategies to fit different cultures?
3. How to optimize segmentation and profit?
4. How to define and differentiate clients?

Addressing these challenges requires strategic planning and effective execution, ensuring that DHL remains a leader in the logistics industry by catering to diverse customer needs efficiently.

References

American Psychological Association. (2020). Publication Manual of the American Psychological Association (7th ed.). American Psychological Association.

Modern Language Association. (2016). MLA Handbook (8th ed.). The Modern Language Association of America.