1. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 1 MKTG Designed by Amy McGuire, B-books, Ltd. Prepared by Deborah Baker, Texas Christian University Lamb, Hair, McDaniel 2007-2008 Customer Relationship Management (CRM) 19 CHAPTER

2. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 2 LO 1 Customer Relationship Management A company-wide business strategy designed to optimize profitability, revenue, and customer satisfaction by focusing on highly defined and precise customer groups. Customer Relationship Management

3. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 3 LO 1 Customer Relationship Management Strategy Link all processes of the company from its customers through its suppliers Link all processes of the company from its customers through its suppliers Foster customer-satisfying behaviors Encourage and track customer interaction with the company Organize the company around customer segments Online http://www.crmdownload.com

4. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 4 LO 1 Customer Relationship Management Cycle Identify customer relationships Store and integrate customer data using IT Capture customer data based on interactions Identify best customers Understand interactions with current customer base Leverage customer information

5. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 5 LO 1 Implementing a CRM System Key Points: 1.Customers take center stage 2.Business must manage the customer relationship across all points of customer contact

6. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 6 REVIEW LEARNING OUTCOME LO 1 Customer Relationship Management

7. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 7 Identify Customer Relationships LO 2 The company customizes its product and service offering based on data generated through interactions between the customer and the company. Customer-Centric

8. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 8 Identify Customer Relationships LO 2 An informal process of collecting customer data through customer comments and feedback on product or service performance. Learning

9. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 9 Identify Customer Relationships LO 2 The process by which learned information from customers is centralized and shared in order to enhance the relationship between customers and the organization. Knowledge Management

10. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 10 Knowledge Management LO 2 Qualitative facts Customer actions Comments Experiential observations Collected Information Includes:

11. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 11 Empowerment LO 2 Delegation of authority to solve customers’ problems quickly— usually by the first person that the customer notifies regarding the problem. Empowerment

12. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 12 REVIEW LEARNING OUTCOME LO 2 Identifying Customer Relationships

13. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 13 Interactions of the Current Customer Base LO 3 Requested Service Channel Past Relationship Current Transaction Customer

14. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 14 Interactions of the Current Customer Base LO 3 Touch Points All possible areas of a business where customers communicate with that business. Point-of-Sale Interactions Point-of-Sale Interactions Communications between customers and organizations that occur at the point of sale, normally in a store. Online http://www.bestbuy.com

15. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 15 REVIEW LEARNING OUTCOME LO 3 Interactions with Current Customer Base Web Point of Sale Kiosk Delivery, Installation Survey Product Registration Customer

16. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 16 LO 4 Capture Customer Data Store visits Conversations with salespeople Interactions via the Web Traditional phone conversations Wireless communications Online http://www.geico.com

17. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 17 REVIEW LEARNING OUTCOME LO 4 Capturing Customer Data

18. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 18 REVIEW LEARNING OUTCOME LO 5 Store and Integrate Customer Data Database Compiled list Response list Data Warehouse :::::::::::::::::::::::::::::::::::::::::: \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\ /////////////////////////////////////////////////////////// ~~~~~~~~~~~~~~~~~~~~~~~~~~

19. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 19 Identifying the Best Customers LO 6 Data Mining Data Mining A data analysis procedure that identifies significant patterns of variables and characteristics that pertain to particular customers or customer groups.

20. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 20 Data Mining LO 6  Identify and profile the best customers  Calculate their lifetime value  Predict purchasing behavior

21. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 21 Data Analysis LO 6 Predictive modeling Lifetime value analysis Recency-frequency-monetary analysis Customer segmentation

22. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 22 Recency-Frequency-Monetary Analysis LO 6 1.Identifies customers most likely to purchase again 2.Identifies and ranks “best customers” 3.Identifies most profitable customers

23. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 23 Biz Flix LO 6 Casino

24. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 24 Data Manipulation Techniques LO 6 Lifetime Value Analysis Predictive Modeling A data manipulation technique that projects the future value of the customer over a period of years. A data manipulation technique in which marketers try to determine what the odds are that some other occurrence will take place in the future.

25. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 25 REVIEW LEARNING OUTCOME LO 6 Identify the Best Customers

26. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 26 CRM Marketing Database Applications LO 7 Campaign management Retain loyal customers Cross-selling other products and services Designing targeted marketing communications Reinforcing customer purchase decisions Inducing product trial by new customers Increasing effectiveness of distribution channel marketing Improving customer service

27. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 27 Campaign Management LO 7 Campaign Management Developing product or service offerings customized for the appropriate customer segment and then pricing and communicating these offerings for the purpose of enhancing customer relationships.

28. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 28 Campaign Management LO 7 Communicating offerings in a way that enhances customer relationships Developing customized offerings for appropriate segment Pricing these offerings attractively

29. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 29 Retaining Loyal Customers LO 7 Loyalty programs reward loyal customers for making multiple purchases Retaining an additional 5 percent of customers increases profits by as much as 25 percent Improving customer retention by 2 percent can decrease costs by as much as 10 percent Loyalty programs provide information about customers and trends Loyalty programs provide information about customers and trends

30. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 30 Targeted Marketing Communications LO 7 Infrequent Users Moderate Users Heavy Users Offer direct incentives, such as a price discount Offer more reinforcement of past purchase decisions Design around loyalty and reinforcement of purchase

31. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 31 Increasing Effectiveness of Distribution Channel Marketing LO 7 Multichannel Marketing CRM Databases RFID technology Online http://www.kidsdadsmoms.com

32. Chapter 19Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 32 REVIEW LEARNING OUTCOME LO 7 Leveraging Customer Information  Campaign management  Retaining loyal customers  Cross-selling other products  Designing targeted marketing communications  Reinforcing purchase decisions  Inducing product trial by new customers  Increasing effectiveness of distribution channel marketing  Improving customer service Marketing Information CRM Database Applications