Customer relationship management (CMR) Strategic marketing

Customer relationship management What is customer Relation Management (CRM)? A company-wide business strategy designed to optimize profitability revenue customer satisfaction by focusing on highly defined and precise customer groups Concept is to treat customers as individuals rather than part of a group

Customer relationship management strategy The company accomplishes this strategy by Organizing the company around customer segments Establishing and tracking customer interactions with the company Fostering customer satisfying behaviors Example when you login to a website like www.listen.com Rhapsody player targets consumers who stream audio Tracks their musical preferences and usage Uses this information to offer special promotions & make recommendations to you specifically

Customer relationship management CRm v. Mass Marketing Mass marketing means using one approach & hoping it has mass appeal CRM allows you to effectively communicate with the individual customer

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 Customer relationship management seems like a simple customer service management strategy It is a closed-loop system that builds relationships with customers Continuous No predefined starting/ending point

Customer Relationship Management Bridgestone tire uses ondemand 5 Gathers information from P.O.S. Demographic, frequency of purchases, how much they purchase, & how far they drive Gathers information from all types of communication the customer has How often they visit a specific store & purchasing history Captures relative customer data on interactions Last purchase made, does customer redeem coupons, last form of communication between customer Store & integrate customer data Stores customer responses from survey, warranty cards, any customer input source Identify most profitable customers Not all customers are the same. Focus on money makers Leverage information Customer data is sent to all departments of a company. Get all information to right department. Send customers promotions aimed at increasing store visits & sales

Customer relationship management CRM key points Customers take center stage Business must manage the customer relationship across all points of customer contact

Identify customer relationships Companies have a crm system that follows a customer-centric focus or model Customer centric An internal management philosophy similar to the marketing concept Company customizes its product & service offering based on data generated through interactions between the customer and the company All company decisions and actions are a direct result of customer information

Customer relationship management Companies force customers to login to websites so that they can gain access to their information & preferences Take advantage of online opportunities; have to login Learning An informal process of collecting customer data through customer comments and feedback on product or service performance.

Customer relationship management Knowledge management 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 involves Collecting information through: Experimental observations Comments Customer actions Qualitative facts

Customer relationship management Empowerment Delegation of authority to solve customers’ problems quickly—usually by the first person that the customer notifies regarding the problem. Employees don’t have to rely on management to make decisions Trusted to take care of customer without supervision

Customer relationship management interaction the point at which a customer and a company representative exchange information and develop learning relationships Customer defines the terms of the interaction (often by preference) Organization responds with products & services that meet customer needs Any activity or touch point a customer has with a company (directly or indirectly) constitutes an interaction

Customer relationship Management Touch points All possible areas of a business where customers communicate with that business. -- Amazon saves your searches based on login Point of sale interactions Communications between customers and organizations that occur at the point of sale, normally in a store. -- Check out with store credit card

Customer relationship Management Most common ways a company can interact with current customers Web Point of sale Kiosk Delivery, installation Survey Product registration

Customer relationship Management Channel interactions The traditional approach for acquiring customer data The method of data collection (how information is obtained) is most important Can include Store visits Conversations with sales people Interactions via the web Phone conversations Wireless communications

Undercover boss Directv http://www.youtube.com/watch?v=CK3RK2dcPJc How do they (or could they) develop customer retionships? How do they identify customer relationships? Examples of interactions between a company & its customer base Types of information it wants to capture

CRM Part II

Warm up Directv empowers its customer service representatives to offer discounts to long-established customers in order to solve a problem. This is an example of which stage of the customer relationship cycle? Capturing customer data Identification of customer relationship Leveraging the customer information Storing & integrating customer data using information technology

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 Identify customer relationships Understand interactions with customer base Capture customer data based on interactions Store & integrate customer data using information technology Identify best customers Leverage customer information

How do companies store & integrate customer data?

Customer relationship Management Data warehouse A central warehouse of customer data collected by an organization. Essentially it is a large computerized file of all information collected in the previous phase of the CRM process. Takes information from a variety of databases and integrates them so that departments throughout an organization can have access to all pertinent customer data

Customer relationship Management When Building a database you develop a list Response list: customers who have indicated an interest in a product or service Includes their name & addresses Have responded to an offer at some time Compiled list: created by an outside company that has collected data of potential customers Gather information from telephone directories or membership rosters Enhance information with census data & other public record information

Customer relationship Management Goal of a company is to find your best customers 80/20 Rule: 80% of your profits come from 20% of your customers Goal is to identify that 20%. Data mining Identify and profile the best customers Pickup on patterns & characteristics to determine trends Calculate their lifetime value Predict purchasing behavior

forms of analysis can be performed after customer data is captured?

Customer relationship Management Data mining Customer segmentation Break down large groups into smaller homogenous groups Recency-frequency-monetary analysis (rfm) Measures: recently purchased moves, frequency, & amount spent Projects current value of a customer to a company Lifetime value analysis (ltv) Projects future value of a customer to a company Explains how much it costs to acquire customers Level of spending to retain customers Facilitates targeting new customers Predictive modeling Predict when a purchase will take place

How do companies leverage customer information?

Leveraging customer information Leveraging means designing & tailoring marketing strategies to best appeal to identified customers Campaign management Monitoring the success of marketing strategies based on sales, orders, etc.. Develop customized sales for loyal customers Customers that spend more, get more Allows companies to store information about customers & trends

Database Applications CRM Marketing Database Applications Chapter 19 Customer Relationship Management (CRM) 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 Notes: Page 294 lists some common CRM marketing database applications. LO7

Campaign Management LO7 Chapter 19 Customer Relationship Management (CRM) Communicating offerings in a way that enhances customer relationships Developing customized offerings for appropriate segment Pricing these offerings attractively LO7

Retaining Loyal Customers Chapter 19 Customer Relationship Management (CRM) 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 reward loyal customers for making multiple purchases Notes: If a company has identified its best customers, effort should be made to maintain and increase their loyalty. As shown here, customer retention can have a dramatic effect on a company’s profitability, while in turn continue to reward loyal customers. Loyalty programs provide information about customers and trends LO7

Targeted Marketing Communications LO7 Chapter 19 Customer Relationship Management (CRM) 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 Notes: Using transaction and purchase data, customers can be segmented into infrequent, moderate, and heavy users. Communications programs for each segment are designed to encourage customer purchases and loyalty. LO7

Multichannel Marketing Increasing Effectiveness of Distribution Channel Marketing Chapter 19 Customer Relationship Management (CRM) Multichannel Marketing CRM Databases RFID technology Online KidsDadsMoms10 Would you be comfortable building a profile about your child at KidsDadsMoms.com? Why or why not? What are the advantages of giving complete information? Are there any disadvantages? Can you use their highly customized site without building a learning profile for a child? Notes: With CRM databases, manufacturers have a tool to gain insight into the customers who are buying their products. It is also possible to track purchases made online and in brick-and-mortar stores. This concept is called multichannel marketing. Companies are also using RFID technology (radio-frequency-identification technology) to improve distribution. Online http://www.kidsdadsmoms.com LO7

REVIEW LEARNING OUTCOME Chapter 19 Customer Relationship Management (CRM) LO7 REVIEW LEARNING OUTCOME Leveraging Customer Information Marketing 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 CRM Database Applications