1. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1 Lamb, Hair, McDaniel CHAPTER 21 Customer Relationship Management (CRM) 2011-2012 © ISTOCKPHOTO.COM/YUNUS ARAKON

2. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 2 Define customer relationship management What Is Customer Relationship Management? LO 1

3. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 3 LO 1 What Is 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 (CRM) is…

4. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 4 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 LO 1 Allows companies to tightly focus in on their target markets

5. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 5 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 LO 1 Exhibit 21.1 A Simple Flow Model of the Customer Relationship Management System

6. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 6 Implementing a CRM System Key Points: 1.Customers take center stage 2.Business must manage the customer relationship across all points of customer contact LO 1

7. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 7 Explain how to identify customer relationships with the organization Identify Customer Relationships LO 2

8. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 8 Identify Customer Relationships LO 2 a philosophy under which the company customizes its product and service offering based on data generated through interactions between the customer and the company. Customer-centric is…

9. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 9 Identify Customer Relationships LO 2 an informal process of collecting customer data through customer comments and feedback on product or service performance. Learning is…

10. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 10 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 is…

11. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 11 Knowledge Management Qualitative facts Customer actions Comments Experiential observations Collected Information Includes: LO 2

12. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 12 Empowerment LO 2 delegation of authority to solve customers’ problems quickly—usually by the first person the customer notifies regarding the problem. Empowerment is…

13. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 13 Successful CRM LO 2 Interaction Occurs when a customer and a company representative exchange information and develop learning relationships The success of CRM can be directly measured by the effectiveness of the interaction between the customer and the organization.

14. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 14 Understand interactions with the current customer base Understand Interactions of the Current Customer Base LO 3

15. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 15 LO 3 Exhibit 21.2 Customer-Centric Approach for Managing Customer Interactions © Image Source/Jupiterimages

16. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 16 Interactions of the Current Customer Base LO 3 Touch Points All possible areas of a business where the 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

17. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 17 Outline the process of capturing customer data Capture Customer Data LO 4

18. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 18 Capture Customer Data Store visits Conversations with salespeople Interactions via the Web Traditional phone conversations Wireless communications LO 4 The traditional approach for acquiring data from customers is through channel interactions.

19. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 19 Capture Customer Data LO 4  In a CRM system, channel interactions are viewed as prime information sources based on the channel selected.  Interactions between the company and the customer facilitate collection of large amounts of data, captured across several touch points.

20. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 20 Describe the use of technology to store and integrate customer data Store and Integrate Customer Data LO 5

21. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 21 Only useful if consistent and accurate. –Use information technology to capture, store, and integrate important information (data warehousing) Useful information: –Customer vital stats –Purchasing habits –Transaction methods –Product usage Access vast amounts of information required to make decisions LO 5 Customer Data

22. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 22 Store and Integrate Customer Data Database Compiled list Response list Data Warehouse :::::::::::::::::::::::::::::::::::::::::: \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\ /////////////////////////////////////////////////////////// ~~~~~~~~~~~~~~~~~~~~~~~~~~ LO 5

23. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 23 Describe how to identify the best customers Identify the Best Customers LO 6

24. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 24 Identifying the Best Customers Data Mining: A data analysis approach that identifies patterns of characteristics that relate to particular customers or customer groups. LO 6

25. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 25 Data Mining  Identify and profile the best customers  Calculate their lifetime value  Predict purchasing behavior LO 6

26. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 26 Data Analysis Predictive modeling Lifetime value analysis Recency-frequency-monetary analysis Customer segmentation LO 6

27. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 27 Customer Segmentation Customer Segmentation: Customer Segmentation: The process of breaking large groups of customers into smaller, more homogeneous groups. LO 6

28. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 28 1.Identifies customers most likely to purchase again 2.Identifies and ranks “best customers” 3.Identifies most profitable customers LO 6 Recency-Frequency- Monetary Analysis

29. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 29 Lifetime Value Analysis and Predictive Modeling 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.

30. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 30 Explain the process of leveraging customer information throughout the organization Leverage Customer Information LO 7

31. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 31 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 LO 7 Exhibit 21.3 Common CRM Marketing Database Applications

32. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 32 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. Campaign Management is…

33. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 33 Campaign Management Communicating offerings in a way that enhances customer relationships Developing customized offerings for appropriate segment Pricing these offerings attractively LO 7

34. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 34 Retaining Loyal Customers Loyalty programs reward loyal customers for making multiple purchases Retaining an additional 5 percent of customers can increase 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 LO 7

35. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 35 Match product profiles and consumer profiles to cross-sell products matching customer characteristics Use product and customer profiling online to reveal cross-selling opportunities while customers surf company Web sites Cross-Selling Other Products and Services LO 7

36. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 36 Designing Targeted Marketing Communications 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 LO 7

37. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 37 Reinforcing Customer Purchase Decisions Thanking customers for purchases and telling them they’re important Updating customers periodically on order status Offer customer service opportunities with postsale e-mails LO 7

38. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 38 Inducing Product Trial Use of marketing database to identify new customers –Best customer profile can be used to profile potential customers Overlay demographic and behavioral data on existing customer data LO 7

39. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 39 Increasing Effectiveness of Distribution Channel Marketing Use Web sites to keep in touch with customers and gain information about them Use multichannel marketing to monitor purchases of customer shopping both in- store and online Use RFID technology to improve distribution LO 7

40. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 40 Improving Customer Service Examples of Web site tools used to get customers to return include –customer wish lists –recommendations based on purchase and search behavior –one click purchasing and shipment tracking LO 7

41. Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 41 Privacy Concerns and CRM If customers fell their privacy is being violated, then the relationship can become a liability. Privacy policies for companies in the U.S. are largely voluntary, but may vary outside the U.S. LO 7