CRM

CHAPTER 1
1) What is customer value, and why is this term essential for CRM ?

 Customer Value is the perception of what a product or service is worth to a Customer versus the possible
alternatives. Worth means whether the Customer feels she /he or he got benefits and services over what
she/he paid.

 Some reasons which explain why customer value is important:

- Prospective customers are not specifically looking for your product or service. They are in search of
products which fulfills their needs and wants. Determining customers’ needs and wants and getting to
know how to help them in their specific needs is the key.

- Customer value means different things to different people. When selling products, its intrinsic
characteristics do not change from one customer to another. However, the customer value or customer
satisfaction level being offered can be changed from one situation to another. One customer may find
the product to be an immediate solution of a pressing need whereas, others may not. In this aspect,
customer value becomes very important as value can be customized as required wherever a potential fit
exists.

- Understanding customer requirements helps in aligning customer value. Making every customer feel
valued is a very good practice; however, some customers may be more valuable than others. These are
lifelong customers and provide repeat business and high referrals and recommendations as well. The
product that delivers customer value may support major sales for particular market segments which
also allows targeted selling based on integral values.

2) Which technologies influence strategic CRM, on both the consumer, company sides? 

 CRM cannot survive without technology. Technology serves as the partner of CRM in order to cater the
needs of the customers. It makes their relationship meaningful in a way that the company understands
what the customers need. They become aware if the customers are satisfied enough on their products
and services if not, it would be easy for them to look for strategies to make them satisfied.

 Databases serve as the soul of CRM. It would not become functional without the use of technology.
Databases help collect data and make it organized before using it to serve its purpose. It gathers
information from the customers through the use of internet that makes communication faster.

 Online services for the customers. Since there is no impossible when it comes to technology, the
relationship between the company and the customers would become stronger through the use of media
technology such as the social media. Even though they are far from each other, negotiating is not that
hard  to achieve.

 Services are always available. Due to the rise of different gadgets, it is now easy for the customers to
have an access to the companies that will suit their needs. Cellphones and laptops are just few of the
many gadgets that can be used as long as it has an application that the companies are using.

 Low-cost CRM. The evolution of technology makes it for the CRM to cost reasonably. Companies can
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 afford to have this because they would not spend lots of money just to cater the needs of the customers.
As the technology evolves, the CRM will also evolve to adapt the continuous demands of the
customers.

 The rise of technology paved way to the great positive effects in terms of establishing a business. It is
now easy for the companies to make their customers access directly what they offer to them and CRM
is a strategy to keep customers and it can also add appeal to make to increase the number of customers
to make the business survive the competition. The integration of technology in CRM can make it more
effective and function the way it is. CRM works better when the sheer power of technology is fully
integrated.

CHAPTER 2

1) How are CRM activities similar/different from marketing activities? Please discuss

While Marketing is a sales and marketing concept, CRM refers to the tools used to carry out the concept.
Marketing is implemented as a strategy and includes activities such as identifying long-term sales and
retention goals, public relations, marketing and advertising campaigns.

CRM includes the operational tasks that support the marketing strategy. Activities may include
gathering data about the customers, then organizing and analyzing it to create target customer profiles.
CRM data is also effective in finding opportunities to create special offers to reward long-time
customers for their loyalty, further building the relationship.

CRM Marketing

Vision: customer experience Vison: market positioning

Use analytical capabilities Use SWOT analysis

Customer value segment Target market segment

Main objectives: Development, Main goals: Manufacturing,

accuracy, satisfaction, loyalty, maintaining, developing, market
satisfaction of employees share, brand assets

 Based on customer lifecycle  Based on the product life cycle

2) What is the distinction between traditional database marketing and a customer value based
approach toward database marketing?

 Database Marketing

Identify and analyze customer population

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 Group based on similarities

Recommend separate marketing campaigns for different groups

 Applies database marketing techniques at customer level.

 Develops strong company-to-customer relationships.

 Customer Value:

The economic value of the customer relationship to the firm

 Practice of analyzing and utilizing marketing databases and leveraging communication technologies to
determine corporate practices and methods that will maximize the lifetime value of each individual
customer to the firm.

 Adoption of CRM with customer value at its core strategy helps us define CRM from a customer value
perspective.

 Benefits of customer value-based approach in Database Marketing

Decrease in Costs

Maximization in revenues

Improvement in Profits and ROI

Acquisition and Retention of Profitable Customers

Reactivation of Dormant Customers

CHAPTER 3
1) What are the four key components of CRM strategy? Briefly describe each component.
a)Customer Management Orientation
 Defined as the set of organizational values, beliefs, and strategic actions that enable the implementation
of customer management principles
 Characterized by a top management belief and commitment that the customer is at the center of activity
 Recognizes that customers are heterogeneous in needs and value to the firm and reflects a readiness to treat
different customers differently
 Considers the fact that a longer-term view of revenues from customers needs to be taken into
account
b)Integration and Alignment of Organizational Processes
 Comprises organization wide creation and synchronization of processes, systems, and reward systems
enabling implementation of customer management principles
 Strategic CRM works best for organizations that are organized around cross-functional processes rather
than functional silos
c)Firmly incorporates needs of the customer and goals of the firm into product and service delivery
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 Characterized by an understanding that value provided to target customers should be what drives all
processes
 Individual processes work in sync with common goal of attracting and retaining target customers
 Customer management compatible incentives drive employee and organizational goals simultaneously
 Processes are designed in such a manner that they automate a feedback
d)Information Capture and Alignment of Technology
 Comprises all the necessary technology and processes to collect, store, and process relevant and
timely customer information
 Characterized by the capability of leveraging data to actionable information
 Makes customer management processes not only more efficient but also more effective
 Helps to create entirely new processes and channels based on online and mobile applications
 Firms that are able to generate intelligence and act on it will derive competitive advantage
2) What are the key step in implementing CRM?
a)Gain enterprise-wide commitment
 Top-down management commitment
 Bottom-up buy-in from system users
 Dedicated full-time project team
 Budget allocation for the total solution
b)Build a CRM project team
 Obtain active representation from:
- Management - Provide leadership, motivation and supervision
- Information services/ technical personnel - Ensure CRM system compatible with existing software
applications.
- Sales, marketing and services groups - Evaluate usability of CRM system based on effectiveness, efficiency
and satisfaction
- Financial staff - Provide critical analysis for assessment of increased sales productivity, evaluation of
operating costs, estimated cost of system expansion and ROI projections.
- External CRM expert - Provide a valuable source of objective information and feedback
c)Analysis of business requirements
 Gathering information to:
- Identify the services and products that are being supported.
- Map current workflows, interfaces, and inter-dependencies.
- Review existing technologies, features and capabilities
- Discuss the vision for the business and the operational plan
- Define business requirements
- Develop enhanced business workflows and processes
- Identify gaps in technology functionality
- Map functionality to business processes
- Develop a new technology and functionality framework
- Develop a conceptual design and prototype plan
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  Define the CRM Strategy
1. Value Proposition
2. Business case
3. Customer strategy
4. Enterprise transformation plan
5. Other stakeholders
3) What is the value proposition?
 Multi-faceted package of product, service, process, price, communication, and interaction that customers
experience in their relationships with a company
 Areas to be addressed:
- What the customers value – what the company should focus on
- What the company says it offers the customers
- What the company actually offers the customers
CHAPTER 4
1) What factors will you consider when measuring the ROI of CRM investments?
Business Processes
Consulting Services
Information Technology
Vendor Management
2) What are the various components of the CRM architecture from an operational perspective?
Information Delivery/ Online Catalogs
Customer Database
Personalization and Content Management
Sales force Automation
Partner Channel Automation
Customer Services
3) What analysis is involved in assessing the value of a customer?

Customer demographic analysis and customer behavior modeling: able to know who its customer are:
name, gender, age, address, number and so on. How customers have behaved and predict how they will
behave => define customer segments and use them as the basis for making differential decisions in
marketing, sales and customer services.

In conclusion, after establishing the methods and analyze customer demographic in above, it is essential
to focus resources on most valuable customer relationships.

CHAPTER 5
1) How would you calculate the retention rate of your company’s customer base? What
assumptions do you need to make?
Customer retention rate designates the percentage of customers the company has retained over a
given time period. Retention rate is a reverse side of churn rate, which shows the percentage of
customers a company has lost over a specific period. The importance of retention rate as a metric
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 varies depending on the industry, for example for businesses providing services or selling software
goods, customer retention is crucial and it directly affects profitability of the business.
There are several formulas to calculate customer retention rate, one of the most used and easy one is
the following:
Customer Retention Rate = ((EC-NC)/SC)*100, where:
EC - number of customers at the end of a period
NC - number of new customers during that period
SC - number of customers at the start of that period
Let's say you released a mobile game. On September 1st you had 1000 players. You got 500 new
players by September 30, however 200 players stopped playing the game. So, at the end of a period
(in our case one month) you had 1300 playing customers. Let's calculate the retention rate:
((1300-500)/1000)*100=80
So, you manage to retain 80% of your customers.
2) How to calculate the acquisition rate
Acquisition = first purchase or purchasing in the first predefined period
𝐴𝑐𝑞𝑢𝑖𝑠𝑖𝑡𝑖𝑜𝑛 𝑟𝑎𝑡𝑒 = (𝑜𝑓 𝑃𝑟𝑜𝑠𝑝𝑒𝑐𝑡𝑠 𝑎𝑐𝑞𝑢𝑖𝑟𝑒𝑑/o𝑓 𝑃𝑟𝑜𝑠𝑝𝑒𝑐𝑡𝑠 𝑡𝑎𝑟𝑔𝑒𝑡)× 100%
Denotes average probability of acquiring a customer from a population
Always calculated for a group of customers
Typically computed on a campaign-by-campaign basis
Information source
Numerator: From internal records
Denominator: Prospect database and / or market research data
Evaluation
Important metric
Gives a first indication of the success of a marketing campaign
But cannot be considered in isolation
3) How will you calculate the acquisition cost per customer?
Consider a mail – order catalog company, an IT service company, and a retail store. What are
the underlying assumptions in each case? How precise are you calculation?
Measured in monetary terms

Precise values for companies targeting prospects through direct mail

Less precise for broadcasted communication
Information source
Numerator: from internal records
Denominator: from internal records
Evaluation
- Difficult to monitor on a customer by customer basis
For example:
- You work for an IT service company that sells products to customers for $100 each.
- Each product costs you $50, so you add a 100% markup, enabling you to earn a profit of $50 per
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 item.
- In one month, you spend $3,000 to make the campaign on your site, and this effort earns you 300
new paying customers.
- If your total acquisition cost (remember, this is your campaign spend, plus all the other things you
pay for such as warehouse space, website maintenance, etc.) is $5,000, then your true AC would
be $16.66.
- The formula looks like this: ($3,000 + $2,000) / 300 = $16.66
4) How to calculate the Average Inter – Purchase Time?
Average Inter-Purchase Time (AIT) is the average time elapsing between purchases.
𝐴𝐼𝑇 𝑜𝑓 𝑎 𝑐𝑢𝑠𝑡𝑜𝑚𝑒𝑟 =

 Measured in time periods

 Important for industries where customers buy on a frequent basis
 Information source
 Sales records
 Evaluation
 Easy to calculate
 Useful for industries where customers make frequent purchases
 Firm intervention might be warranted anytime customers fall considerably below their AIT
5) What is survival rate
 Measured for cohorts of customers
 Provides a summary measure of how many customers survived from the
 beginning of the formation of a cohort up to any point in time afterwards
 SRt
 (%) = 100 * Rrt * SRt-1
 Where: SR = Survival Rate
 Number of survivors for period 1 = survival rate for period 1 * number of
 customers at the beginning
6) What is the size of wallet
 Size of Wallet ($) of customer i in a category =
 Where:
- i = a particular customer,
- j = firm,
- J = all firms offering products in the considered category,
- Sj = sales value (in category) to customer i by firm j, j = 1,…,J
 Information source
 Primary market research
 Evaluation
 Critical measure for customer-centric organizations based on the assumption that a large wallet
size indicates more revenues and
 profits
 Example
- A consumer spends on average $400 on groceries in different supermarkets per month. Thus
his/her size of wallet is $400
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 7) What is the share of category requirement?

 Where:
- j0 = focal firm or brand,
- i = customer,
- I = all customers buying in focal category,
- J = all firms or brands available in focal category,
- Vij = purchase volume of customer i from firm (or brand) j
 Information source
- Numerator: volumetric sales of the focal firm from internal records
- Denominator: total volumetric purchases of the focal firm’s buyer base – through market and
- distribution panels, or primary market research (surveys) and extrapolated to the entire
- buyer base
- Evaluation
- Accepted measure of customer loyalty for FMCG categories
- SCR controls for the total volume of segments / individuals category requirements
- Does not indicate if a high iSCR customer will generate substantial revenues or profits
 Can only be achieved by knowing the customer’s size of wallet
CHAPTER 6
1) How will you use lift charts to determine future marketing action?
 Lifts charts show how much better the current model performs against the results expected if no
model was used (base model)
 Can be used to track a model’s performance over time, or to compare a model’s
 performance on different samples
 Lift% = (Response rate for each decile) / (Overall response rate) *100
 Cumulative lift% = (Cumulative response rate) / (Overall response rate) *100
 Cumulative response rate = cumulative number of buyers / Number of customers per decile
2) What is the link between customer lifetime value and the profitability of an organization?
 Customer lifetime value (or life-time value (LTV), is the average amount of money your customers
will spend on your business over the entire life of your relationship.
 For instance, if a customer continues to buy products or services from your business for 10 years
and spends $10 per year, his or her customer lifetime value is $100, minus any money you spent to
acquire that customer.
 LTV can be used as an indicator for assessing a customer’s worthiness. It is often used among the
medium to large organizations for predicting future revenues from their customers. LTV can be
widely used in various domains of different natures, purposes and objectives. LTV is the best basis
for making decisions on the market and customer strategy. Through the prediction of the customers‟
profitability, an organization can drive the business decision on how much to invest in a customer
for profits optimization

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 3) What is the Past Customer Value?
Past customer value (PVC) is a metric which assumes the results of past transactions are an indicator
of the customer’s future contributions.

4) What is the basic lifetime value (LTV) mode?

LTV is a measure of a single customer’s worth to the firm
Used for pedagogical and conceptual purposes
Caution:
- If the time unit is different from a yearly basis, the interest rate needs to be adjusted accordingly
Information source
- CM and T from managerial judgment or from actual purchase data.
- The interest rate, a function of a firm’s cost of capital, can be obtained from financial accounting
Evaluation
- Typically based on part customer behavior and may have limited diagnostic value for future
decisionmaking
5) How alculate the Customer Equity?

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 6) How to calculate the Customer Equity Share?
Customer Equity Share (CES):

Where: CEj = customer equity of brand j, j = focal brand, K = all brands a firm offers
CHAPTER 8
1) What are the various ways to categorize databases?
Types of databases
- Categorization based on information in the databases
- Categorization based on the nature of the underlying marketing activities
Categorization
- Based on their main business functions
- Databases managing business operations
- Databases supporting decision-making activities
Alternate categorization:
 Information included in the databases
 Nature of the underlying marketing activities
 Database technology used
2) How are databases classified based on the information they contain? Are these different
classes of databases complement or substitutes?
 Customer Database
Data from active and inactive customers
Information included in customer databases:
- Basic information: name, address, zip code, and telephone number
- Demographic information: age, gender, marital status, education, number of people in household,
income
- Psychographic information: values, activities, interests, preference
- Transaction history: frequency of purchase, amount of spending
- Other relevant information: inquiries and referrals, satisfaction, loyalty
Data from Inactive Customers:
- How long have the customers been inactive?
- How long have they been active?
- What was their purchasing pattern when they were active?
- How much did they spend?
- How were they initially acquired?
- Why are they inactive?
Prospect Database
- Non-customers that have profiles that are similar to the profiles of existing customers
- Segments prospects and positions the company’s differentiated products to the prospects’ specific needs
Cluster Database
- Clusters defined based on geographic reference groups, affinity groups, and lifestyle reference groups
- Depending on the membership of prospective customers to specific clusters, firms can customize their
marketing communications
Enhancement Database
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Used to transfer additional information on customers and prospects
An overlaying process is used that eliminates duplications
Enhancements may include: demographic and psychographic data, transaction history, changes in
address, changes in income levels, privacy status, new product categories bought recently
These are different classes of databases complement or substitutes because:
Alternate categorization:
Information included in the databases
Nature of the underlying marketing activities
Database technology used
3) List some of the key uses of marketing databases. Provide an example for each of those
Categorization Based on The Nature of Underlying Marketing Activities
Passive marketing database
A mailing list that passively stores information about acquired customers (email)
Future marketing efforts target the same customers in the list (Telesales)
Active Marketing Database
Example: Travelers’ case
Retention program- five ‘touches’ – systematic and low-cost interactions
Result – increased retention rate; decreased defection by 5%
CHAPTER 10
1) Explain the difference between behavioral and attitudinal loyalty. Provide an example of
each.
 Behavioral loyalty refers to the observed actions that customer have demonstrated towarrd a
particular product or service. Attitudinal loyalty instead refers to a customer’s perception and
attitudes toward a particular product or service.
 Example: A person who regularly shopped at the same place is behaviorally loyal, while one tells
others how great the product is, or simply feels really positive about the brand he is from. he or she
chose to be loyalty by attitude.
2) What are the key objectives of loyalty program?
Which of these objectives provide the strongest competitive advantages?
 The key objectives of LP:
a) Building true (attitudinal and behavioral) loyalty
b) Efficiency profits
c) Effictiveness profits
d) Value aligment
3) You are a consulant to a credit card organization that wants to establish a loyalty
prpogram . The CEO has just read abotut how most loyalty programs result in money –
losing propositions. How do you alleviate the CEO’s concerns?
 "Because this is a program that consumes time, manpower, money and does not bring immediate
profit. But it takes a certain time to be able to see the effect that the loyalty program brings. If
successfully applied, the loyalty program will help the company increase sales and profits; increase
interaction with users; increase brand awareness; increased NPS; increased RFM; ...It can be seen
that, although it costs a lot for loyalty program, when applying the loyalty program, it will bring a
positive effect and a great revenue for the company. The amount of money the company earns after
applying the program will be much higher than the initial cost if we know how to apply loyalty
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 program appropriately. Therefore, the director should consider and learn in choosing a suitable
program for the company to avoid wasting and increasing profits. "
4) Do companies profit by introducing loyalty program?
Is the success of a company’s loyalty program dependent on its industry category?
Many companies can benefit from implementing loyalty programs. According to Forbes, many
companies make almost 20% of their profits from these programs. The mistake many companies
make is their "put it and forget it" attitude - the attitude of accomplishing anything that you actively
fear and deliberately avoid for these programs without keeping up with your change in the market.
They simply do not realize that a poorly designed and implemented program can actually destroy value
by spending more than the money they create.
Companies need to focus on the majority of the factors to make a successful loyalty program
profitable.
- Focus on what is gained and not just who provides repeat visits.The goal of customer acquisi
- tion, which is really profitable, is not just the number of acquisitions.
- Bringing customers to spending structure, providing more rewards for spending more.
- Smart removal of customers with the lowest profit.
- Get back profitable customers who moved, used past purchase data, etc.
- Increasing the lifetime value of customers (CLV).
- Building genuine customer relationships based on relevance and relevance
- Establish a more fair pricing policy.
- Smart response to competitive challenges.
- Improve product range and stock options.
- Better business and store layout.
- Reduce advertising and promotion expenses.
- Reduce marketing / advertising costs (email is cheaper than print).
- Loyal customers directly affect the company's profits.
- Develop a core offer that cannot be denied.
- Affect the level of customer satisfaction.
- Affect the elasticity of purchasing decisions.
- Assess the impact of the market on customer loyalty.
- Use demographic data to predict loyalty.
- Increase the proportion of wallets.
- Promote the brand to build customer loyalty.
- Becoming a true business see customers as the business center.
- Ensuring the success of a loyalty program.
- Detailed planning and careful implementation.
- Rapid market entry with an alliance program.
- Successful implementation of the CRM system.
- Use gift cards and store loyalty cards.
- Use six P's in loyalty marketing.
- Building a database can really create loyalty.
- Avoid technology issues with a loyalty base.
5) How can you measure loyalty? How does loyalty relate to the profitability of a company?
There are 10 measures of customer loyalty efficiency that will work for all businesses and need to be
carefully monitored to establish a loyalty strategy.
Share wallet:
- Share Wallet measures the percentage of customer spending in the category that you capture.
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- It's a clear measure of great significance - understand it and you'll find it easier to build customers
effectively.
Lifetime value of customers:
- Data problems can make it difficult for some businesses to quantify, but CLV is a key measure of
customer loyalty, particularly when its performance is monitored over time.
- It also shows how much you can afford to invest in customer relationships.
- Sales per customer
- Sales trends per customer can help you understand the value of customer segments and eliminate the
impact of changes in absolute customer numbers.
Active customer volume:
- A seemingly basic but important measure of customer loyalty.
- Knowing the number of active customers (and 'activity' can be defined as trading or interacting with
your content) and how these trends will give you an indication of interaction.
Access frequency:
- Measure how often your customers visit you and you will have an effective measure of customer
loyalty.
- They can also visit your competitors, but the frequency of visits is a powerful measure that will help
you increase customer loyalty.
Recency:
- Spending per customer or access frequency is increasing but if a recent visit - a customer who
recently traded with you - is declining, you could have a serious problem.
Spending per transaction:
- This measure indicates the level of purchase that customers are making in your business.
- Spending per Transaction may vary due to price changes but also as a result of customers beginning
to split purchases, potentially also spending at competitors.
Retention rate:
- Calculated by the number of active customers in the most recent period of activity in the previous
period. Retention rates are one of the best measures of customer loyalty.
Index of participation:
- The measure takes into account the extent to which your customers are actively engaged with you -
factors such as email clicks, offers, offers and referrals can all be important and engagement metrics
are often the sum of fusion of several factors.
Net Promoter Score:
- Network advertising is a management tool that can be used to assess the loyalty of customer
relationships of a company. It serves as an alternative to traditional customer satisfaction research
and is claimed to correlate with revenue growth.
How does loyalty relate to a company's profitability:
- Customer loyalty means a lot to the company and the profitability ratio tends to increase with
customer loyalty. Loyal customers will have lower service costs than new customers because the
transactions have been carried out according to the familiar route and they are also less demanding
at the company, they propose ideas for products. and services for the company, speak well about the
company and its products, pay less attention to brands and ads of competitors and are less sensitive
to prices, buy more when the company introduces new products and improve the current product
quality. Loyalty is considered to be a major contributor to company profits, an increase in loyalty
will help the company grow more sustainably. Therefore, in order to survive, develop long term and
increase profits, it is necessary to have loyal customers.
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 6) Would low - item (coffee, candy, sodas) benefit from loyalty programs?
What kind of incentives might work best?
 With low ticket items such as coffee, candy and soda, these products are often purchased for
consumption meaning they seek or enjoy these products after consuming them and create a good
experience. Having a big reward for low ticket items makes sense simply because the items are on sale
at a low price and it's more likely that consumers don't have to think before buying the product again if
they've sold it before. By introducing a reward card program, in which consumers will have to
purchase six cups of coffee before getting the free Saturday is an example of providing rewards for
repeat purchases and bringing back Value for consumers because cheap items don't seem to be a big
deal. Other reward program structures that provide incentives will be the holding of a contest in which
consumers have 1 in 6 chances to win prizes and the prizes will range from free coffee to a medium.
new traffic.
7) Design a loyalty program for you neighborhood gas station. Describe the incentives.
Determine the cost structure. Set benchmarks and evaluate the profitability of the program
across possible seenarios.
 Petrolimex petrol station
Description of loyalty program: For every VND 30,000 for a gas refill, customers will receive 1 point;
100 points is equivalent to 50,000 VND.
Offer: Loyalty to a gas station will collect enough points to redeem rewards in cash.
Cost: VND 50,000 off when customers earn enough points.
Structure: The structure is built so that it looks appealing to consumers without costing the company /
business. Attract loyal consumers and build a competitive advantage over rivals.
Benchmark: Competitors in Ho Chi Minh City with this gas station: Revotec, Comeco, ...
Assessing profit scenarios: In order to accurately evaluate the effectiveness of the program, it is
necessary to understand the information about the company, the program, the local competitors and the
current financial situation of the industrygas.
CHAPTER 11
1. Explain the three key steps in the management of campaigns.
 Campaign
A series of interconnected promotional efforts designed to achieve precise marketing goals
Composed of one or more promotions, each of which is an initiative or a device designed to attract the
customers’ interest
Aimed at prospects or existing customers
Usually undertaken within a defined timeframe (ex. season)
 Campaign Management Process
A campaign is a series of interconnected promotional efforts designed to achieve precise marketing
goals. Managing a campaign encompasses
planning, developing, executing, and finally analyzing the campaign results. A campaign is composed of
one or more promotions, each of which is an initiative or a device designed to attract the customers’
interest. It can be aimed at prospects or existing customers and usually is undertaken within a defined
timeframe (such as a season, and generally not exceeding a calendar year). Marketers could use the
customer value metric as a means to profitably target campaigns.
As a general rule, a successful campaign management process comprises four connected stages:
a. Planning. Strategic process by which decisions are taken. The purposes and objectives of the campaign
should be defined and rationalized at this stage.

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b. Development. Tactical process that takes care of creating the offer, choosing the support and design,
choosing the media, and selecting the customer names.
c. Execution. Operational process of running the campaign in the media chosen and controlling all related
aspects.
d. Analysis. Evaluation process of the campaign results in light of the original, objectives.
 Campaign Planning and Development
Development at the campaign planning stage, marketers make strategic decisions that help define the
overall objectives of the campaign, the best communication message, and the best target audience.
Once these strategic issues are defined, the development phase starts.
 Campaign Planning and Development – Setting objectives and strategies
Campaigns have a central role in annual marketing plans, so campaign objectives should be in line with
overall marketing and corporate objectives.
Categories:
- Market penetration (increase usage or market share)
- Market extension (find new user groups or enter new segments)
- Product development (new products or services)
- Diversification (find new markets and products, discover new strategies)
Examination of different marketing strategies in place:
- Product strategy
- Pricing strategy
- Distribution strategy
- Promotion strategy
2. Imagine you are the manager of a chain of 25 seafood restaurants in Virginia. The restaurant
has a mainstream positioning. You are planning a campaign to attract new clients and your
available budget is $30.000. Describe how you would go about implementing this campaign.
7 common ways to calculate a Campaign Budget:
Present Budgeting
Budgeting for an Allowable Marketing Cost (AMC)
Budgeting with the Competitive Party Method
Budgeting with the Objective and Task Method
Budgeting with the Percentage of Sales Method
Budgeting with Key Performance Indicators
Budgeting with the Life Time Value (LTV)
Budgeting with the Percentage of Sales Method
Fixed percentage of turnover allocated to marketing communications
Marketing communication expenditure directly linked to sales level
To determine the exact percentage that should be allocated, the company looks at
Competitor allocations and industry averages
To define the turnover, the company can look at historic sales
Budgeting with Key Performance Indicators
Process that allows company to figure out the cost of a special promotion
Often called front-end analysis
spend $ 10,000 on media campaigns like website announcements and inviting speakers
Spend $ 15,000 on promotional vouchers or activities

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spend $ 2,500 on decorating activities
spend $ 2,500 on sweepstakes game activity

3. Explain the ideas around the concept of campaign testing? Do you think that testing in general
will become more important in the future? Why or why not?
Conducting a comparison between different ways of proceeding with a campaign
Test individual campaign elements, other elements remaining constant, and measure the resultant change
in the performance of the campaign
- Testing is based on a basic principle. Take the current set-up of the campaign and use it as the control of
the test. The select the element you want to test and change it. Next, select a sample of your target
customers and run a test with the changed element. Comparing the performance results of the test
version with the control will illustrate the impact of this variable on the over-all campaign objectives.
Performance Measures Tested to Predict Campaign Results
Response to the campaign, in percentage
The number of responses obtained divided by the total number of customers selected will give the
response rate, in percentage
Response rate serves as an indicator of the success that the particular campaign being tested can achieve
Campaign profitability
Performance results allows an estimate for the revenues of the real campaign
Total campaign costs (expenses of preparing the campaign, testing costs plus cost of running the
campaign) deducted from the revenues, gives a prediction for the profitability of the campaign. I think
that testing in general will become more important in the future because it will
Optimizing a particular campaign driving the testing rather than having a successful marketing program
=> Maximize the performance of the campaign.
The population is growing and the interests of each group of people are different. Testing will help
optimize costs to similar low cost and fast in providing results. Increase the probability of success in
different groups of people.
4. Give examples for the key performance indicators for the evaluation of a campaign success.
The company is launching a campaign to promote a product to new customers. The campaign customer
objective is to acquire 1000 customers. The company can afford 30$ per customer (AMC = 30$) and
the gross margin per sale will be 50$. The campaign budget for this program is 30.000$ (30 x1000).
For testing, the firm decided to spend promotion emails to 3000 and a mailing to 3000 prospects.
Telephone calls will be made to 500 prospects from a rental list.
After the test campaign, there is a remaining budget 19,200 of the original 30,000$. This will be used
to send emails to the remaining 57,000 email addresses not used or active the campaign. Total cost for
email campaign will be 17,000$ which leaves 2,100$ for the best ROI.

5. Explain the advantages and disadvantages of the various campaign budget setting methods.
 Seven common methods to calculate a budget and present their main advantages and disadvantages:
Most companies determine a given year’s marketing expenditure on the basis of what they spent the year
before, by applying a ratio that adjusts media cost inflation, projected sales increase or decrease,
market conditions, and so on.
Advantages: The campaign budget won’t be drastically cut over the years, so it will follow a more or
less steady expenditure flow.
Disadvantages: Working with a preset budget that doesn’t take into account last year’s sales is the least
effective way of calculating a budget. Companies treat marketing as an expenditure instead of as an
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 investment to boost future sales. As a consequence, working with this kind of budget planning may be
hazardous for the firm, rendering its business less competitive and slower to change.
1.Budgeting for an allowable marketing cost
Budgeting for an allowable marketing cost (AMC) consists of determining the amount that can be spent
on campaign marketing activities, while preserving the required profit margin. Each potential
expenditure is given priority according to its forecast for return on investment, and each investment is
given equal consideration. Its objective is to achieve the optimum revenue per customer and maximize
sale profits. The AMC is obtained by subtracting the costs (cost of goods + distribution costs) and the
required profit margin from the total sales value.
Advantages: When using the AMC there is no preset limit to the campaign budget unless a cash-flow
constraint is imposed. By using this method, the company controls costs.
Disadvantages: Many activities are hard to accurately forecast, and some activities may not pay back in
a given year. These intricacies lead to a degree of conservatism that inhibits the aggressive pursuit of
an AMC marketing policy.
2. Budgeting with the competitive parity method
Competitive parity tries to equate budget allocation with those of competitors. Organizations in
competitive environments may opt for this budget technique.
Advantages: In this method, emphasis is on competitor intelligence. By checking out what the
competition is doing, the company is adapting itself to the market conditions.
Disadvantages: It is difficult to be precise as to who your competitors are. It is also difficult to estimate
the relative size of competitors, because a company’s nearest competitor may be significantly bigger or
smaller than your company. Next, marketing communication strategies are certainly different for
market leaders and for market followers and budgeting based on parity may thus not be very wise. This
method cannot satisfactorily take into account sudden changes in the competitive activity or objectives.
It does not take into account the company’s own objectives.
3. Budgeting with the objective and task method
This method focuses on, first, determining the marketing objectives, and then deciding on the marketing
communication tasks needed to achieve those objectives. By calculating the costs of these tasks, a
budget can be set.
Advantages: This method focuses on marketing objectives. The resources are expended according to the
objectives.
Disadvantages: Implementing this method is a difficult task because it is not always easy to define the
objectives and to quantify their implementation costs. This method also makes an important
presumption: It assumes that the relationship between objectives and tasks is well known and
understood.
4. Budgeting with the Percentage of Sales Method
A fixed percentage of turnover is allocated to marketing communications. The marketing
communication expenditure is directly linked to sales level. In order to determine the exact percentage
to be allocated, the company looks at competitor allocations and industry averages. To define the
turnover, the company can look at historic sales.
Advantages: This method incorporates a series of alternatives, and it allocates costs to the objectives.
Disadvantages: It may be difficult to determine the percentage of sales that must be allocated.
Competitors may have a small advertising budget and concentrate their budgets on the sales force, and
this would be a deceiving benchmark.
5. Budgeting with Key Performance Indicators
Determining the campaign budget via some key performance indicators is a process that allows the
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 company to figure out, in a quick way, how much it can afford to spend on a special promotion.
Sometimes this analysis is called front-end analysis. This analysis is done with simple performance
measures such as the cost per sale, the
conversion rate, the cost per inquiry, the marketing cost ratio, or the return on investment.
E-mail presents itself as an effective way to engage customers in a dialogue. As a flexible and
consumer-preferred communication vehicle, e-mail has applications across acquisition, retention, and
customer service. Messages can be tailored to each customer based on her/his stage of the buying
process. E-mail also allows customers to opt-in with their own preferences.
6. Budgeting with the Lifetime Value Method
Budgeting in the most effective and efficient way would imply reducing expenditures to a unit cost basis
in order to focus on the value of individual customers and on the different values per customer. Given
the data recorded in the CRM database, the company may predict ongoing customer value rather than
only the individual sales revenue. Knowing the lifetime value of each customer will allow the company
to compare returns on alternative marketing expenditures and to compare return on expenditure from
obtaining business from existing customers or from new ones. This gives the opportunity to efficiently
allocate the budget using the most profitable strategies.
Advantages: Using the CRM database information allows the company to predict, in a more accurate
way, the cost of the campaign. At the same time, it efficiently allocates resources between strategies
because it allows a comparison between the returns of alternative marketing campaigns.
Disadvantages: It is very difficult to keep track of customer values because most companies lack
transactional data from customers. Forecasting the customer LTV as a budgeting measure is still in its
infancy. Also, if the company doesn’t keep track of the performance results of past campaigns, it won’t
be able to compare these results with similar campaigns and learn from past errors. Sometimes the
strategy that produces the highest ROI does not provide the fastest return and therefore, it can be
replaced by faster strategies with lower ROI.
CHAPTER 12
1) Discuss, with regard to a firm’s CRM strategy, whether the proliferation of direct channels is
just a current trend or if online channels will someday replace traditional channels completely.
 The presence of the internet, and especially of new electronic channels in business and daily life has had
a tremendous impact on firm’s channels options. Whether through a web-site, a mobile device or
sophisticated voice response systems, consumers take advantage of this great variety to seek
information and transact directly with the firm. Computers, travels, books, music, the list of products
that customers are familiar with and even prefer to purchase electronically is getting longer. Firms thus
have direct access to end customers and also can reorganize, in every interaction, whether the customer
has bought from them before. When the interaction occurs through technology enabled channel, the
firm can record and store all relevant information about this customer, without having to negotiate
with, provide incentives, to or train a third party channel member, such a retailer.
 The implementation of direct online channels, such as a manufacturer’s website, has become quite
common. These channels offer low cost alternative and can achieve great coverage which makes them
a key route to value chain efficiencies. Customers have adopted online channels nearly universally, due
to their continuous availability and convenience, so they have become great resources of precise
customer information for firms.

2) Obi, a German DIY supplier, initially sold through franchise stores, but it just opened an
online shop in November 2010. The implementation of this additional channel resulted in an
unhealthy conflict between Obi and its franchisees, leading to a battle in court. The focal issue
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 was the cannibalization by the website of sales in the franchise stores, especially due to the low
prices charged online. Discuss Obi’s multichannel design and management. What went wrong?
(Chọn 1 trong 3)
i. Obi’s multi channel design consisted of end users being able to purchase at a physical store (the
franchise), as well as online. His intention was to pursue different strategies to achieve a higher market
coverage, however, he ended up creating intrabrand competition from offering lower prices online.
This therefore put pressure on product prices in the franchise, possibly leading to a lower profit margin
overall.
In a multichannel environment, it can be challenging for firms to achieve customer loyalty as the
possibility of comparing prices across all retailers decreases the customer’s search costs, but increases
competition and price wars. In this case there was no management and was a lack in the integration of
function across all channels, which could have lead to enhanced loyalty. Instead of offering all
products at a low price, the online channel also should have provided certain packages of services that
would attract different types of customers instead of making existing customers more valuable to the
firm. Therefore every channel should have its own strategy but work together.
ii. The conflict that has developed controversy over the franchises and the Obi German supplier is the fact
of a multi-channel design consisting of direct channel via an online shop, and traditional brick and
mortar stores providing a physical location- an indirect channel. When a low-cost alternative is put in
place in a supply chain and gouges franchise stores it can result in loss of sales, and loss of customers
coming into the store. With that being said, customers could also go into the store, check the price, and
then go compare it with the online price and make a purchase via the website which creates price
competition and similar along the lines of predatory pricing which could drive the franchise stores out
business or out of the market.
iii. The cause of conflict with Obi franchisees is the direct loss in sales caused by this low cost platform.
But there is a bigger issue in management to focus on. Much of this conflict could have been avoided if
development of the platform involved franchisee input. By simply implementing a platform, hoping it
wouldn’t raise conflict was the wrong way for management to go. In order for all channels to be
successful integration has to be unanimous. This would involve a possibility of in store pick-up and a
means for stores to receive a percentage of sales. Cannibalization of brick and mortars is inevitable
when prices are cheaper elsewhere. The consumer may use them to physically to look at the product
but they will likely pursue purchase online. Multichannel strategy should create value for a company as
a whole. Thus implementation should include all areas of the companies in order to define a strong
strategy for every level.
3) Manufacturers such as Henkel or Procter & Gamble are very detached from end customers.
Given the increasing power of retailers, how might they reestablish closer contact with these
ultimate customers?

Manufacturers such as Henkel or Procter & Gambel establish closer contact with their customers by
aligning the goals and interests of the company with all channel members. The focus of customer
relationship management in an indirect channel structure is typically on building a good working
relationship with the channel member and providing incentives for building strong relationships with
end customers. These large companies usually have power over their indirect channels and could
ensure the channels conformed to their customer relationship agenda. However, the increase of private-
label products has lead to a decrease in P&G’s ability to control CRM activities.

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