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RM-4 Customer Relationship Management

Customer relationship management (CRM) focuses on identifying and building loyalty with valuable customers. CRM involves collecting customer data, analyzing purchasing patterns, and developing personalized marketing programs. Effective CRM balances customer benefits and privacy concerns while targeting the most profitable customer segments. Implementing CRM requires coordinating across departments and shifting to a customer-centric approach.

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30 views35 pages

RM-4 Customer Relationship Management

Customer relationship management (CRM) focuses on identifying and building loyalty with valuable customers. CRM involves collecting customer data, analyzing purchasing patterns, and developing personalized marketing programs. Effective CRM balances customer benefits and privacy concerns while targeting the most profitable customer segments. Implementing CRM requires coordinating across departments and shifting to a customer-centric approach.

Uploaded by

Akram Khan
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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RM-4

Customer Relationship Management


Retailing Strategy

Retail Market Strategy

Financial Strategy Site Location

Customer Relationship
Management

Retail Locations Organizational Structure and


HR Management

Information Systems
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.

• What is loyalty? Is it the same thing as liking a


retailer or frequently patronizing a retailer?
Customer Loyalty

• Committed to purchasing merchandise


and services from a retailer
• Resist efforts of competitors to attract the
loyal customer
• Emotional attachment to retailer
– Personal attention
– Memorable positive experiences
– Brand building communications programs
Can Offering Discounts Achieve
Customer Loyalty?

No!
Retail strategies like these can
be copied by competitors

These strategies encourage


customers to be always
looking for the best deal McGraw-Hill Companies, Inc./Gary He, photographer

rather than developing a


relationship with a retailer
CRM Process
Information About Each Customer in the Database

• History of purchases
• Purchase date, price paid, SKUs bought, whether or not
the purchase was stimulated by a promotion
• Customer contacts by retailer (touch points) --visits to
web site, inquires to call center, direct mail sent to
customer
• Customer preferences
• Descriptive information about customer
• Customer’s responses to marketing activities
Approaches for Collecting
Customer Information

• Need to connection contacts with a specific


customer identifier
• Ask for identifying information
– Telephone number, name and address
• 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? Steve Cole/Getty Images

• Will the retailer share the


information with third parties?
Frequent Shopper Cards
Card is often squeezed out of wallet

Customers forget to bring it to the store

Might not even show it if in a hurry

(c) image100/PunchStock
Heighten Concerns When Using
Electronic Channel

Information collected without


the awareness of customers

Collecting click stream data


using cookies
Similar to an invisible person Stockbyte/Punchstock Images

videotaping a customer as they


walk through a store
Customer’s Decision to
Offer Information

Disclosure of Information
Unwanted Sales Contacts
Discounts
Special Treatment
Personal Attention
Balance benefits and risks
Consumer Protection Differences

• United States European Union


• Limited protection in • Information only can only
be collected for specific
specific areas purposes
– Credit reporting • Purpose must be
– Video rentals disclosed to customer
– Banking • Information can only be
used for specific purpose
– Medical records
• Information can not be
exported to countries
with less stringent
regulations
FTC Guideline for 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
J.Crew Security and Privacy Policy
Analyzing Customer Data

Data Mining – technique used


to identify patterns in data.
Market Basket Analysis
Identifying Market Segments
Identifying Best Customers
Ryan McVay/Getty Images
Market Basket Analysis

Data analysis focusing on


the composition of the
customer’s market basket
– what items are bought
during a single shopping
occasion

Uses: Burke/Triolo Productions/Getty Images

-Adjacencies for displaying merchandise


-Joint promotions
Market Basket Analysis Taught Wal-Mart to Change!

Product Placed Near


Bananas cornflakes, produce
Kleenex paper goods, cold medicine
Measuring spoons housewares, Crisco shortening
Flashlights hardware, Halloween
costumes
Little Debbie snack cakes coffee
Bug spray hunting gear
Identifying Best Customers

• Estimating Lifetime Value

• Based on assumptions that the


customer’s future purchase behaviors
will be the same as they have been in
the past

• Classifying Customers by recency,


frequency, and monetary value of
purchases (RFM Analysis) (c) Brand X Pictures/PunchStock
Which Customer Probably Has the
Greatest Lifetime Value

Purchases Over Last 10 Weeks

1 2 3 4 5 6 7 8 9 10
Jack $20 $20 $20 $20 $20 $20 $20 $20 $20 $20
Jill $210 $0 $0 $0 $0 $0 $0 $0 $0 $0
Customer Pyramid

Platinum
Best
Most loyal
Least price sensitive
Customer Pyramid

Gold
Next best
Not as loyal
Customer Pyramid

Iron
Doesn’t deserve
much attention
Customer Pyramid

Lead
Demands attention
May have
negative value
RFM Analysis
RFM Target Strategies
Illustration of RFM Application

• A catalog retailer is deciding which group of customers to


send a catalog.. Based on experience and an RFM
analysis of customer database:
• Average order size for customers in cell - $40
• Contribution margin – 50%
• Response rate – 5%
• Cost of catalog and mailing -$.75

• Will the retailer make a profit mailing to this RFM


segment?
Illustration of RFM Application

• A catalog retailer is deciding which group of customers


to send a catalog.. Based on experience and an RFM
analysis of customer database:
• Average order size for customers in cell - $40
• Contribution margin – 50%
• Response rate – 5%
• Cost of catalog and mailing -$.75

Will the retailer make a profit mailing to this RFM


segment?
$20.00 contribution x .05 response rate - $.75 cost
= $.25 profit per catalog mailed
CRM Programs

Retailing Best Customers

Converting Good
Customers to Best
Customers
Getting Rid of
Unprofitable
Customers
Customer Retention Programs

• Frequent Shopper Programs


• Special Customer Services
• Personalization
1-to1 Retailing
• Community

Royalty-Free/CORBIS
Elements in Effective
Frequent Shopper Programs

• Tier Based on Customer Value


• Offer Choices of Rewards
– Non-monetary incentives
• Reward all Transactions
• Transparent and Simple
Issues with Effective
Frequent Shopper Programs

• Expense
• Difficulty in Making Changes
• Impact on Loyalty Questionable
• Easily Duplicated – Difficult to Gain
Competitive Advantage
– Need to offer “invisible” benefits
Personalization

Hello, Barton Weitz


Dealing with Unprofitable Customers

Offer less approaches


for dealing with these
customers

Charge customers for


extra services
demanded Don Farrall/Getty Images
Implementing CRM Programs

Need systems, databases

Close coordination between departments –


marketing, MIS, store operations, HR

Shift in orientation
Product Centric Customer Centric

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