Customer Relationship Management

A business philosophy and set of strategies, programs, and systems that focus on identifying and building loyalty with a retailer’s most valuable customers

Customer Loyalty Committed to purchasing merchandise and services from a retailer Resist efforts of competitors to attract the loyal customer Emotional attachment to retailer

CRM Process Cycle Collecting Customer Data Analyzing Customer Data and Identifying Target Customers Implementing CRM Program Developing CRM Program Learning Action

Collecting Customer Data Types of Information in the Customer Database Approaches for Collecting Information Privacy Concerns

Information in Each Customer Data History of purchases Customer contacts by retailer (touch points) Customer preferences Descriptive information about customer Customer’s responses to promotions

Approaches for Collecting Information Need to connection contacts with a specific customer identifier Ask for identifying information Encourage use of frequent shopper cards Link checking account number and/or third party credit cards to customer

Privacy Concerns Control over Collection Do customers know what information is being collected? Do customers feel they can decide on the amount and type of information collected by retailers? Control over Use Do customers know how the information will be used by the retailer? Will the retailer share the information with third parties?

Concerns When Using Electronic Channels Information collected without the awareness of customers Collecting click stream data using cookies

Fair Information Practices Notice and awareness Comprehensive statement about information storage, manipulation, and dissemination Choice/consent Opt-in and Opt-out options Access/participation Customer able to confirm accuracy Integrity/security Controls for theft and tampering Enforcement/redress Mechanism to insure compliance

Analyzing Customer Data Data Mining – technique used to identify patterns in data. Market Basket Analysis Identifying Market Segments Identifying Best Customers

The Customer Pyramid PlatinumGoldIronLead Most Profitable Customers Least Profitable Customers

RFM Analysis Recency, Frequency and Monetary Analysis RFM Target Strategies Recency FrequencyMonetary (Rs)0-2 m3-4m5-6m>6m 1-2<1000First-time customers Low-value customers 1-2> <3000Early repeat customers Defectors 3-4> <5000High-value customers Core defectors 5-6>5000 >6<10000 >6>10000

Customer Retention Programs Frequent Shopper Programs Special Customer Services Personalization Community

Effective Frequent Shopper Programs Tier Based on Customer Value Offer Choices of Rewards Reward all Transactions Transparent and Simple Issues: Expenses to be justified Impact on loyalty questionable Easily duplicated – difficulty to get competitive advantage

Implementing CRM Programs Need systems and data bases + Close coordination between departments – marketing, MIS, store operations, HR Shift in orientation from: Product Centric to Customer Centric