1. 1 Copyright ©2009 by Cengage Learning Inc. All rights reserved Designed by Eric Brengle B-books, Ltd. CHAPTER 21 Prepared by Amit Shah Frostburg State University Marketing Lamb, Hair, McDaniel 10 Customer Relationship Management (CRM)

2. Copyright ©2009 by Cengage Learning Inc. All rights reserved Customer Relationship Management 2 LO I A company-wide business strategy designed to optimize profitability, revenue, and customer satisfaction by focusing on highly defined and precise customer groups.

3. Copyright ©2009 by Cengage Learning Inc. All rights reserved Customer Relationship Management Cycle 3 LO I 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

4. Copyright ©2009 by Cengage Learning Inc. All rights reserved Identify Customer Relationships 4 LO 2 Customer-Centric The company customizes its product and service offering based on data generated through interactions between the customer and the company.

5. Copyright ©2009 by Cengage Learning Inc. All rights reserved Knowledge Management 5 LO 2 Qualitative facts Customer actions Comments Experiential observations Collected Information Includes:

6. Copyright ©2009 by Cengage Learning Inc. All rights reserved Interactions of the Current Customer Base 6 LO 3 Requested Service Channel Past Relationship Current transaction Customer

7. Copyright ©2009 by Cengage Learning Inc. All rights reserved Interactions of the Current Customer Base 7 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

8. Copyright ©2009 by Cengage Learning Inc. All rights reserved Capture Customer Data 8 LO 4 Store visits Conversations with salespeople Interactions via the Web Traditional phone conversations Wireless communications Online http://www.geico.com

9. Copyright ©2009 by Cengage Learning Inc. All rights reserved Identifying the Best Customers 9 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.

10. Copyright ©2009 by Cengage Learning Inc. All rights reserved Data Analysis 10 LO 6 Predictive modeling Lifetime value analysis Recency-frequency-monetary analysis Customer segmentation

11. Copyright ©2009 by Cengage Learning Inc. All rights reserved Customer Segmentation 11 LO 6 The process of breaking large groups of customers into smaller, more homogeneous groups Generates a “profile” or picture of the customers’ similar demographic, geographic, and psychographic traits Focuses on best customers

12. Copyright ©2009 by Cengage Learning Inc. All rights reserved Recency-Frequency-Monetary Analysis 12 LO 6 1.Identifies customers mostly like to purchase again 2.Identifies and ranks “best customers” 3.Identifies most profitable customers

13. Copyright ©2009 by Cengage Learning Inc. All rights reserved Data Manipulation Techniques 13 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.

14. Copyright ©2009 by Cengage Learning Inc. All rights reserved 14 CRM Marketing Database Applications 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

15. Copyright ©2009 by Cengage Learning Inc. All rights reserved Retaining Loyal Customers 15 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

16. Copyright ©2009 by Cengage Learning Inc. All rights reserved Cross–selling other products and services 16 LO 7 CRM provides opportunities to cross-sell related products Cross-sell to customers with demographic, lifestyle, or behavioral characteristic matches Internet companies use product and customer profiling to reveal cross-selling opportunities

17. Copyright ©2009 by Cengage Learning Inc. All rights reserved Targeted Marketing Communications 17 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

18. Copyright ©2009 by Cengage Learning Inc. All rights reserved Reinforcing Customer Purchase Decisions 18 LO 7 Cognitive dissonance is the feeling consumers experience when they recognize inconsistency between values and opinions and their purchase behavior Thanking customers help cement a long-term, profitable relationship Update customers periodically on the status of their order

19. Copyright ©2009 by Cengage Learning Inc. All rights reserved Increasing Effectiveness of Distribution Channel Marketing 19 LO 7 CRM Databases RFID technology Multichannel Marketing Online http://www.kidsdadsmoms.com

20. Copyright ©2009 by Cengage Learning Inc. All rights reserved Improving Customer Service 20 LO 7 Level of customer service is influential in customer retention Customer retention – the percentage of customers that repeatedly purchase products from a company