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Question 1: What are the main challenges in implementing this segmentation in DHL’s customer database?
DHL is providing international courier, parcel, and express mail services. It is a division of a German Logistics Company. It is the world’s largest logistics company that is operating around the world particularly in sea and air mail. DHL segments its customer into different groups. According to different customer needs, customers are segmented as strategic customer, long-term relationship customer and direct customer. Strategic customer is someone who has large amounts of logistics needs and also complex supply chain requires. Generally strategic customer group is made up of top 200-250 customers in the world. Long-term relationship customers are using the services of DHL regularly and frequently. Their logistics needs are simpler than strategic customer. In terms of direct customer, they are not loyal to DHL that means that they can choose another company if they like anytime. DHL always try to provide best technology and service to strategic customer to build strong cooperation relationship with them. Though, the main job for DHL is to focus on long-term relationship customer, in order to achieve profit maximization and DHL can also do something for direct customer to make them into loyal customer.
To be able to effectively manage such a diverse customer base, DHL implemented a sophisticated customer segmentation cum loyalty management system. The focus of this system is to assess the profitability from its customers, reduce customer churn, and increase DHL’s share of shipments. DHL further categorized their customer segmentation on the basis of loyalty management system. They classified into six segments of the previous three segments. The segments are: lost, decreased performer, maintained, increased performer, new and regained.
Data collection is a difficult part. Collected data are reported to sales, marketing, customer service department and the senior management. If there is any increased and decreased percentage, the DHL can take corrective action. Increased demand of small-sized frequent shipments incurred by the
consumers have become one of the biggest challenges for logistics express delivery companies. A successful delivery of shipments to consumers distributed across large geographical areas will require re-designing of the existing distribution network including terminals, hubs, and the network paths that connect them. DHL need to establish a mega-scale hubs to process a high volume of shipment flows. Cost efficiency and a high level of service in the distribution system is crucial for DHL to remain competitive in the business.
There are many challenges to launch a successful loyalty program. If a good Loyalty Program once launched successfully in the market, it can contribute to increase customer loyalty and satisfaction, decrease customer churn rate, strengthen brand equity, contribute to both up-sells and cross-sells targets and more advantages. The challenges are mostly from the operational perspective after launching the program in the market. It is wise to consider and predict operational challenges and think about right business strategy and plan to decrease operational challenges and risks before launching the program in the market.
• Operation Management: Day-to-day operational management and handling customer queries, issues and complaints plus establishing a good customer service function is a key challenge for successful operation management.
• Meeting Loyalty Metrics: Loyalty Metrics is a key challenge considering the fact that most Loyalty Programs are not very profitable in first years of operation. Managing and optimizing to increase profitability, delivering a unique customer experience and reducing customer churn rate will always remain key challenges.
• Enhancing Competition: Enhancing competition and increasing attractiveness of the program in the market and acquiring new customers and even competitors’ customers will be a marketing challenge especially if competitors have developed their Loyalty Program in the market.
• Increasing Customer Experience: A unique customer experience for different segments based on customer behavior insight and analysis on usage, point collection, reward redemption, etc and designing personalized reward patterns for different segments will be a key challenge for a large client with a huge customer base.
• Developing IT and Technical Infrastructure: The right Technical Loyalty Scheme, CRM, Billing System etc is important 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 happen especially for a company with a huge customer base and as a result, having a good Fraud Management System giving the option to predict frauds and taking corrective actions will both save costs and resources plus protecting the brand in the market.
• Launching New Rewards and Promotions: Launching New Rewards, Promotions and Marketing Campaigns plus giving new personalized offers for different segments will not only be a key challenge to enhance competition in the market though to increase customer satisfaction and delivering a unique customer experience as well.
• Responding to Market Trends: When the competitors have developed their Loyalty Program in the market or created a better service for their own Loyalty Program or when there are some new changes in customer behavior or maybe some new industry trends that might impact the current program in the market.
• Selection of right Strategic Partners: Building more strategic partnerships with other brands in different industries although brings many benefits for customers and contributes to a more advanced program in the market.
• Increasing Customer Engagement and Communication: A good Loyalty Program will always engage with different segments and plan for better communication strategies to motivate and drive customer behavior leading to better customer loyalty. It is important to engage with different segments based on new Customer Engagement and Communication.
After analyzing all the challenges, we can identify some challenges for implementing the segmentation in DHL’s customer database. The main challenges in implementing the segmentation in DHL’s customer database are:
1. How to balance resources according to different types of clients?
2. How to adjust strategies in order to fit in different cultures?
3. How to optimize the segmentation and profit?
4. How to definite and differentiate clients?
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