21
Customer Relationship
Management (CRM)
Professor Close
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1
Learning Outcomes
LO 1 Define customer relationship management
LO 2 Explain how to identify customer relationships
with the organization
LO 3 Understand interactions with the current customer
base
LO 4 Outline the process of capturing customer data
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 2
Learning Outcomes
LO 5 Describe the use of technology to store and integrate
customer data
LO 6 Describe how to identify the best customers
LO 7 Explain the process of leveraging customer information
throughout the organization
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 3
What Is Customer
Relationship Management?
Define customer
relationship
management
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 4
What Is Customer
Relationship Management?
Customer Relationship
Management (CRM) is…
a company-wide business strategy
designed to optimize profitability,
revenue, and customer satisfaction by
focusing on highly defined and precise
customer groups.
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 5
Customer Relationship
Management Strategy
Organize
Organizethe
thecompany
companyaround
aroundcustomer
customersegments
segments
Encourage
Encourageand
andtrack
trackcustomer
customerinteraction
interactionwith
withthe
thecompany
company
Foster
Fostercustomer-satisfying
customer-satisfyingbehaviors
behaviors
Link
Linkall
allprocesses
processesof ofthe
thecompany
companyfrom
fromits
itscustomers
customers
through
throughits
itssuppliers
suppliers
Allows
Allowscompanies
companiesto
totightly
tightlyfocus
focusin
inon
ontheir
theirtarget
targetmarkets
markets
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 6
Exhibit 21.1
A Simple Flow Model of the Customer
Relationship Management System
Identify customer relationships
Leverage customer Understand interactions
information with current customer base
Capture customer data
Identify best customers
based on interactions
Store and integrate
customer data using IT
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 7
Implementing a CRM System
Key Points:
1. Customers take center stage
2. Business must manage the customer
relationship across all points of
customer contact
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Identify Customer Relationships
Explain how to
identify customer
relationships with
the organization
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 9
Identify Customer
Relationships
Customer-centric is…
a philosophy under which the company
customizes its product and service
offering based on data generated
through interactions between the
customer and the company.
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 10
Identify Customer
Relationships
Learning is…
an informal process of collecting
customer data through customer
comments and feedback on product
or service performance.
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 11
Identify Customer
Relationships
Knowledge Management is…
the process by which learned
information from customers is
centralized and shared in order to
enhance the relationship between
customers and the organization.
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 12
Knowledge Management
Experiential
Experiential
observations
observations
Comments
Comments
Collected
Collected
Information
Information
Includes:
Includes: Customer
Customer actions
actions
Qualitative
Qualitative facts
facts
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Empowerment
Empowerment is…
delegation of authority to solve
customers’ problems quickly—usually
by the first person the customer
notifies regarding the problem.
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Successful CRM
Occurs when a customer and a
company representative exchange
information and develop learning
Interaction
Interaction relationships
• The success of CRM can be directly
measured by the effectiveness of the
interaction between the customer and the
organization.
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Understand Interactions
of the Current Customer Base
Understand
interactions
with the current
customer base
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Exhibit 21.2
Customer-Centric Approach for
Managing Customer Interactions
© Image Source/Jupiterimages
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Interactions of the
Current Customer Base
All
Allpossible
possibleareas
areasof
ofaabusiness
business
Touch
TouchPoints
Points where
wherethe
thecustomers
customerscommunicate
communicate
with
withthat
thatbusiness.
business.
Communications
Communicationsbetween
between
Point-of-Sale
Point-of-Sale customers
customersandandorganizations
organizationsthat
that
Interactions occur
occuratatthe
thepoint
pointof
ofsale,
sale,normally
normally
Interactions in
inaastore
store
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Capture Customer Data
Outline the
process of capturing
customer data
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Capture Customer Data
The traditional approach for acquiring data from
customers is through channel interactions.
Store
Store visits
visits
Conversations
Conversations with
with salespeople
salespeople
Interactions
Interactions via
via the
the Web
Web
Traditional
Traditional phone
phone conversations
conversations
Wireless
Wireless communications
communications
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 20
Capture Customer Data
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.
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Store and Integrate
Customer Data
Describe the use of
technology to store
and integrate
customer data
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Customer Data
• 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
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 23
Store and Integrate
Customer Data
Response
Response list
list Compiled
Compiled list
list
::::::::::::::::::::::::::::::::::::::::::
::::::::::::::::::::::::::::::::::::::::::
Database \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
Database
///////////////////////////////////////////////////////////
~~~~~~~~~~~~~~~~~~~~~~~~~~
~~~~~~~~~~~~~~~~~~~~~~~~~~
Data Warehouse
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 24
Identify the Best Customers
Describe how to
identify the best
customers
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 25
Identifying the Best
Customers
Data
Data Mining:
Mining:
A data analysis approach that identifies
patterns of characteristics that relate to
particular customers or customer groups.
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 26
Data Mining
Identify and profile the best customers
Calculate their lifetime value
Predict purchasing behavior
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 27
Data Analysis
Customer
Customer segmentation
segmentation
Recency-frequency-monetary
Recency-frequency-monetary analysis
analysis
Lifetime
Lifetime value
value analysis
analysis
Predictive
Predictive modeling
modeling
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 28
Customer Segmentation
Customer
Customer
Segmentation:
Segmentation:
The process of breaking large groups of
customers into smaller, more homogeneous
groups.
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 29
Recency-Frequency-
Monetary Analysis
1. Identifies customers most likely to
purchase again
2. Identifies and ranks “best customers”
3. Identifies most profitable customers
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 30
Lifetime Value Analysis
and Predictive Modeling
Lifetime
Lifetime Value
Value Analysis:
Analysis:
A data manipulation technique that projects
the future value of the customer over a period
of years.
Predictive
Predictive Modeling:
Modeling:
A data manipulation technique in which
marketers try to determine what the odds are
that some other occurrence will take place in
the future.
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 31
Leverage Customer
Information
Explain the
process of leveraging
customer information
throughout the
organization
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 32
Exhibit 21.3
Common CRM Marketing
Database Applications
Reinforcing
Reinforcing customer
customer
Campaign
Campaign management
management purchase
purchase decisions
decisions
Retain
Retain loyal
loyal Inducing
Inducing product
product trial
trial
customers
customers by
by new
new customers
customers
Increasing
Increasingeffectiveness
effectiveness
Cross-selling
Cross-selling other
other of
ofdistribution
distributionchannel
channel
products
products and
and services
services marketing
marketing
Designing
Designing targeted
targeted Improving
Improving
marketing
marketing communications
communications customer
customer service
service
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 33
Campaign Management
Campaign Management is…
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.
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 34
Campaign Management
Developing
Developingcustomized
customized
offerings
offeringsfor
forappropriate
appropriatesegment
segment
Pricing
Pricingthese
theseofferings
offerings
attractively
attractively
Communicating
Communicatingofferings
offeringsin
inaaway
way
that
thatenhances
enhancescustomer
customerrelationships
relationships
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 35
Retaining Loyal Customers
Retaining
Retainingan
anadditional
additional55percent
percentof
ofcustomers
customerscan
can
increase
increaseprofits
profitsby
byas
asmuch
muchasas25
25percent
percent
Improving
Improvingcustomer
customerretention
retentionby
by22percent
percentcan
can
decrease
decreasecosts
costsby
byas
asmuch
muchas as10
10percent
percent
Loyalty
Loyaltyprograms
programsreward
rewardloyal
loyalcustomers
customersfor
for
making
makingmultiple
multiplepurchases
purchases
Loyalty
Loyaltyprograms
programsprovide
provideinformation
informationabout
about
customers
customersand
andtrends
trends
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 36
Cross-Selling Other
Products and Services
• 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
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 37
Designing Targeted
Marketing Communications
Infrequent
Infrequent Offer direct incentives, such
Users
Users as a price discount
Moderate
Moderate Offer more reinforcement of
Users
Users past purchase decisions
Heavy
Heavy Design around loyalty and
Users
Users reinforcement of purchase
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 38
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
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 39
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
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 40
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
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 41
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
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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.
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 43
Email Marketing Bumps Web site
Traffic
Looking for return customers? Email marketing
Beyond the Book
gets customers to click back. Being well-
established, trusted, and easy makes email the
ideal medium for marketers to get the word out.
Online traffic is fairly simple to track, and using
customer information gathered from online
purchases offers businesses a relatively simple
way to establish a relationship with customers.
Source: “Email marketing ‘a trusted method,’” www.directnews.co.uk, Wednesday November 11, 2009.
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 44
Chapter 21 Videos
Method – Customer Relationship
Beyond the Book
Management
How has method identified customer relationships
within the organization?
What does the company do to nurture those
relationships?
http://www.cengage.com/marketing/book_c
ontent/1439039429_lamb/company_clips/c
h21.html
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 45
