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Retailers in the U.S. are convinced that customer relationship management (CRM) is one of the most important aspects of their business. However, the sector in general has not utilized the full potential of these programs, and the industry will be striving to elevate its CRM game in the future. That's good news not only for customers, but also for the providers of CRM technologies and services. "Although the implementation of CRM is at different levels among individual retailers, I think that as an industry, retailers have seen the effectiveness of using CRM," Mike Gatti, executive director of the Retail Advertising Marketing Association, told CRM Buyer. "Those programs not only help retailers understand who their best customers are, they have also helped them focus their spending," he noted. "You can pinpoint your sales programs better and be more effective in areas like targeted direct marketing," RAMA is associated with the National Retail Federation. In its Retail Horizons 2008-2009 survey of 400 executives at 153 retailers, NRF found that focusing on customer satisfaction and retention was a primary objective. Traditional marketing , based on merchandising and driving traffic through stores through heavy advertising and discounting, may never disappear -- but retailers are now paying equal attention to programs that emphasize the individual customer -- referred to as "customer centric." "We were impressed that in the survey, customer considerations were the top priority for three straight years from 2007 through 2009," said Janet Murphy, president of Ogden Associates. "That was significant during a gloomy period when belt-tightening and other factors were also important," she told CRM Buyer. Ogden conducted the survey work for NRF. "Good systems infrastructure and applications are essential both to retailers' day-to-day survival and to their ability to gain market share in the dog-eatdog environment that many will face in 2009," NRF reported. "While retailers will be watching IT expenditures with particular care in the coming months, they will continue to invest in processes and technology related most closely to their most fundamental business strategies," the report states. "In this context, the currents of transformation toward a more customer-centered, knowledge-based, and integrated way of doing business will continue to dominate the IT agenda."
Given the commitment to a customer-oriented future, retailers will need to focus on the programs and e-commerce tools that will best support a viable CRM effort.
The foundation for a robust CRM program still requires the generation of data regarding broad consumer trends and, increasingly, more and better information on individual consumers. "At the end of the day, database technology and data analytics will be the crucial element for the retail sector," Chris Fletcher, research director at AMR Research, told CRM Buyer. Traditional retailers that operate through extensive physical stores, as well as online retailers, already gather huge amounts of data about their customers. Past transactions, credit information and demographic data are relatively easy to compile. "Retailers have spent big bucks on this, and they have tons of data at their disposal. So far that has worked in helping them target specific marketing campaigns using special offers and discounts and things like that," Ogden's Murphy said. Currently, retailers may use ZIP code and income level data, say from monitoring home sale prices in a section of the country, for direct mail campaigns to motivate consumers to visit a store. However, such efforts are still a blunt instrument. Enhancing that data with specific customer information is the next challenge. For example, it should be possible at the point of sale (checkout) for a store to generate a coupon related to the amount or type of purchase that could trigger repeat business and create customer loyalty. Similar customer engagement data can be developed by tracking an individual's visit to a store Web site, where browsing behavior can be captured. Subsequent visits from the same customer's computer can trigger special messages or offers related to the browsing history. With the integration of such detailed information from a variety of sources, individual customer needs can be determined and an array of responses generated to improve the entire customer experience.
Retailers increasingly are using a variety of "channels" to reach consumers, including in-store kiosk displays, e-commerce, call centers, catalog sales, and mobile devices. "There is good progress in deploying these tools, but right now there is still somewhat of a silo approach, in that retailers haven't fully integrated all the data they are generating from these channels," AMR's Fletcher said. "So it's hard for them to get a complete view of the customer." Retailers plan to aggressively pursue multichannel marketing with increased investments in related technologies. Twenty-one percent of respondents to a survey conducted by AMR Research reported investing between US$5 million and $10 million in cross channel operations in 2008, and 46 percent planned to upgrade their company's third generation of cross-channel systems by the end of 2010. However, only 30 percent of respondents reported having tight integration of their cross-channel and merchandising systems. Investing in integration programs will clearly be a major goal for retailers in the near future.
The development of social networking has not gone unnoticed in the retail sector. With the rise of YouTube, Facebook and Twitter, another marketing channel has emerged. Both online and brick-and-mortar retailers have adapted social networking mechanisms, such as enabling customers to provide product reviews that can help other customers evaluate those products. However, social networking tools are still at an early stage of development in the sector. "For most retailers, social networking is an interesting phenomenon to monitor, and they want to be a part of it," Sallie Burnett, president of Customer Insight Group, told CRM Buyer. "It's kind of a big black box, and they don't know quite what their prime objective is for using it." A few retailers have quickly seen the potential for social networking, Burnett said, citing Best Buy's (NYSE: BBY) adoption of Twitter for use by store employees and customers.
Brand Identity and Advocacy
Customer loyalty activities have been in place in the U.S. for nearly a century, going as far back as Green Stamps More recently, the airline model of frequent flyer points has been adopted for retail rewards programs. All of these require a high degree of e-commerce facilitation tools that fit right into the CRM mold. This trend is increasing, with the added twist of brand advocacy, observed Burnett. "A satisfied customer can be helpful in passing the word to neighbors whether they are next door or on the Web. The idea is to provide opportunities for customers to actually advocate a product or a retail outlet to their acquaintances," she said. The use of social networking tools enhances a consumer's ability to advocate. While jokes and cartoons are widely recirculated via email, individuals also share a lot of personal financial and business information, Burnett pointed out. With the retail sector moving to more consumer-oriented marketing, the use of dynamic CRM programs in the sector is likely to continue expanding. "Retailers today understand the value proposition behind CRM, in that it offers a complete and consolidated view of their customers to truly understand their purchasing behaviors," Dave Burton, product director for CRM services at Epicor, told CRM Buyer. With such programs, he said, "retailers can better satisfy the needs and desires of their clientele, gain better insight into which promotional tactics are most successful, encourage improved brand loyalty, and increase wallet share with these customers."
Due to limited space, first of all I will briefly discuss the core processes of managing loyalty of sales and marketing in the retail sector. To begin with, we need to attract customers to apply for membership willingly (enquiries, application and relevant service can be done through shop counters, call centre and company website). Next, we can collect relevant customer information, including family, work and personal information. Then we can encourage members to use their membership cards when they are purchasing through POS. After a certain period of time, POS sales data can be uploaded to CRM's business intelligence for data modeling and relevant analysis. After different categories of customer groups are created, we can study their behaviour patterns and devise corresponding product strategies, as well as design different sales and marketing activities according to the characteristics of different customer groups. After the implementation of sales and marketing activities, we can assess the results and learn from customers' reaction through CRM's business intelligence. We can realise that the membership scheme is crucial in these processes. Through the membership card system we can observe a more accurate relationship between customers and products. Before the establishment of this relationship, it was difficult to quickly keep track of the change of
customers' purchasing characteristics from the huge amount of information, or to understand potential customer demands and the products' consumption cycle. Even when we had the purchasing information of highvalue customers, we still couldn't know which type of customers would buy which rank of products, or whether they would continue to purchase other relevant products in this shopping mall or supermarket. In the original circumstance, that kind of analysis, which has a strong strategic and sales orientation, was just unavailable. To have effective sales and marketing activities, more experiments are needed. After obtaining valuable experience we can focus on promoting marketing activities that are proved effective. According to the core processes mentioned previously, we will discover more quickly that which kind of product display has the greatest effect on which type of customers, and whether they are the customers whom we are concerned. For the surge of sales of a new product in the past month, we may also know which kind of customers made the purchase, whether their purchasing behaviours will be long lasting, how would this affect other similar products, and whether the overall profits of the target customer group are decreasing. A discussion of profits will be followed by product costs. We will suddenly find that to carry out a complete customer and product analysis, we need to handle information of our POS system and financial system as well as those of suppliers' management systems collectively. This is because the best selling product may not be the most profitable one. A product with high gross profit may also come with high warehouse cost, transportation cost and display cost and therefore, its net profit may be little. Thus, a high-level analysis of the retail sector demands high quality of basic information supply. Certainly, a relevant team organisation is essential to execute such kind of loyalty of sales and marketing processes. After all, this is about the creation of a customer-centered organization that includes customer group management personnel, promotion of business that closely related to customers, as well as inter-departmental co-operation. In turn, this will enhance the overall sales. Below are some advices: . Have a Precise Objective and Plan about How Could Loyalty of Sales and Marketing Management Save Costs and Increase Revenue It's the retail sector's common knowledge that customer relationship management plan is a relatively large investment. Most people will expect a few million dollars for the information technology budge, but few people know that to manage a profitable customer loyalty solution will incur more investment. It is advised that before investment, the focus should be placed on the issue of where the financial benefits will come from. With such a
focus, the objective of a customer relationship management plan will be amended to gaining the maximum value for the retailer and its suppliers. Thus, to create better financial revenue will become the focus of all processes, from plan design, analysis, data collection to customer benefits and operation, etc. Meanwhile, it will become possible to invest appropriate costs in achievable financial return. By doing so, the original unit of a cost centre can become a profit centre. (For details please refer to the special topic of CRM ROI in this year's Greater China CRM annual conference) . Allow Consumer Product Suppliers to Participate at the Very Beginning Valuable information of the retail sector can be utilized by consumer product suppliers for a better understanding of customers, so as to ensure that products supplied can satisfy customer demands. Certainly, suppliers may be requested to pay for information supply or to share the cost of the solution mutually. Since consumer product suppliers are eager to access solution information in order to transform from traditional supply to customeroriented supply, usually they are willing to cover the cost. . Turn Customer Relationship Management into Customers' Two-way Channel After providing their information to the enterprises, gradually customers will participate in and use the solution. What can they gain from the membership scheme? Perhaps a lower price. What if they get involved in the development of a new product? Perhaps the product will become more desirable as an extension of a current product. For example, the T-shirt may have a new favourable colour, or a certain kind of vitamin will be added into a favourable juice. To success is more than obtaining more customer information and launching more products; the establishment of a firm customer relationship is more important. Provide customers with the products that they wish, they will then become loyal to you. Now, I wonder if you are fond of the retail sector as much as I am, or would like to apply for the membership of a large-scale supermarket immediately so as to experience their customer relationship management?
Retail and CRM prove Partners for Success!!!!
A look at most industries will show that each of them in turn are doing their own little bit towards understanding the importance of customer focus. What is the retail industry doing on its part? What efforts are they making to interact with their customers? Several retailers have endeavored to add that extra personal touch and several more have not. The need for focusing a whole lot more on the customer has been acutely felt by them and they have tried to accommodate it. The past few years has witnessed a strong upsurge in the number of retailers looking for a lifetime strategy that will cater to their customer requirements. What have they come up with? Most of them have seen that the need of the moment is a customer strategy that caters to lifetime responsibilities. As a result they have turned to a customer strategy - CRM retail software to fulfill those needs. Let's take a look at some of the ways in which retailers have sought to hang onto their most valuable customers prior to employing CRM:
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Offering workshops and classes wherein the customer can have a hands on learning experience Offering repeated demonstrations Mailbox offerings catered to suit the individual customer Offering the chance to try before you buy Maintaining the line of communication with the customer Encouraging customer feedback and making sure that it is paid attention to Providing customers with a chance to share their experiences with other customers Treating their customers as friends not as mere customers Little unique gifts and customized mailbox offers ensures that their best customers keep coming back.
All this is magnificent, but the added edge is what is needed. It is the extra touch that has proved so necessary and that serves as the edge over the competitor. Why should retailers opt for CRM? What does it offer the retail industry? Probably the most important advantage CRM has over all other customer strategies is its lifetime approach. CRM is not for a mere single transaction. The benefits of CRM technology extend over a lifetime and deal with the customer relationship for that entire period. Retailers experience a vast difference when they treat their customers as a partner. This serves to basically improve the entire supply chain. The wholesaler as well benefits when the retail industry maintains and sustains a good relationship with the customer. Another factor that contributed to CRM success in the retail industry is the failure of enterprise resource (ERP) systems in lending the competitive edge that is needed. CRM retail software encourages good marketing which includes the usage of CRM software as a means of collecting and managing customer information, using that information to segment your market and basically endeavoring to do so, on the
basis of this collated information. It means using a CRM product to collect and manage customer intelligence to segment your database by common interests, purchasing history, demographics and other relevant customer information. CRM enables retailers to address the right information to the most appropriate customer segment. It helps the retail industry to send personalized messages to each customer with information catered to his likes. CRM helps retailers take their customers successfully through the sales and marketing process.
Why opt for CRM?
Market analysts dispute the correct figure but all are of the opinion that companies will pour billions of dollars into the CRM industry. This is because of its ability to maneuver customer relationships in the direction of profitability. The philosophy behind adopting retail CRM - the way the retail industry treats its customers influences future profitability. Net result? Companies are making bigger investments in CRM solutions. Retail CRM serves to support marketing, sales, and service processes involved in the business. CRM causes changes in the organization and the business work processes. CRM helps achieve a way of managing customer relationships in a better manner. Partner Relationship Management is yet another offshoot of CRM projects. It serves to support channel partners and all other channels as well between an enterprise and its end customers.
What's new in the retail industry?
eCRM that basically serves to allow organizations to interact with their customers via the corporate Websites
CRM Retail Software Benefits:
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targeting prospects acquiring new customers campaign management lead distribution long-term relationship value effective selling processes forecasting transactions done at the lowest cost better service and handling post-sales service support issues with call center
Useful Tips for the Retail Industry employing CRM :
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don't back off at the first problem defined the project plan involve the right people
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choose appropriate technology train new employees maintain system support give them an easy way to get answers
The Bottom Line?
Retailers need CRM!!! There is no disputing the fact that this is one strategy the retail industry cannot afford to gloss over. The rewards are huge and need to be availed of if one wants to succeed in a competitive business world.Conclusion
This is to conclude that the organized retailing in India is progressing towards a tough competitive environment where only those retailers would survive who can understand their customers and develop a strong bond with them by developing and implementing appropriate CRM strategies and programs effectively. In the time to come, CRM is going to be the most dominant marketing tool to enhance the overall retailer performance.
This year, the retail industry is one that is expected to adopt significant CRM implementations, as the rise in digital outreach is changing retailers’ marketing orientation in a big way. Online shopping is fast becoming some customers’ preferred method, and with its omnipresence has come some very sophisticated purchasing portals. According to the folks at CRM Buyer, this past Cyber Monday (November 30, 2009), American shoppers sent $887 million over the internet, which was a 5% increase from the amount spent the year prior. And along with such internet expenditures comes a rise in internet marketing, which is fast becoming essential to retailers’ CRM programs. E-commerce has certainly made its mark on the way retailers get their products out: years ago, they focused on merchandising, and now retailers are examining customer needs and becoming more customer-centric. Shopping online offers users a better means of bargain hunting, and reading and writing reviews, to help them make the most informed purchasing decisions. Customers expect every retailer to give them a personal experience, and retailers of all sizes are seeking platforms to help them reach even individual customers more effectively, and so are turning to full CRM implementations. While most retailers acknowledge the benefits of CRM for retail implementations (according to the National Retail Federation), such deployments have had varied degrees of success. Part of the problem is there is no strict definition of CRM for retail; another issue is that many retailers prefer outreach methods that offer immediate results. CRM implementations take time to delivery ROI, but email marketing campaigns
can offer an instant boost, thus many retailers are comfortable with what is, largely, a band aid solution. But the National Retail Federation still found that of 400 retail executives surveyed at the beginning of last year, two-thirds of them had implemented CRM programs the year before, and the other third planned to in 2009. The interest is there even if the patience has not been, but that will likely change with the increase in specified customer focus. Retailers are looking to implement more multi-channel outreach, social networking, and brand advocacy/loyalty programs in the future, and CRM for retail will likely be a big part of that. In addition to streamlining some of the aforementioned outreach processes, CRM will also help retailers recognize their best customers and spend their marketing funds more wisely. In the coming years, it is quite likely that retailers will change their marketing tacks to fit with their CRM programs. The other side of that coin is that retail CRM platforms will offer greater insight into consumer trends.
CRM Implementation - What you should know
CRM implementation differs from organization to organization but there are a few common steps one needs to follow to ensure a successful implementation. There are many factors that could influence the success of CRM implementation. Some of them are:
Clear cut objectives are essential and they need to be communicated effectively to the entire organization. Business goals are absolutely essential and need to be clearly defined. Similarly goals of the CRM implementation and how it supports organization goals should also be intimated to employees. Let employees know how important CRM success is to the organization.
Solution to Suit Business Objectives
A business needs to look for a CRM solution that fits its needs, not the other way around. This step is vitally important and spells success. When choosing a CRM solution every business organization has to ensure that it chooses a CRM solution that fits into the organizations requirements. It is wrong to try and adjust organization requirements to the chosen CRM solution. If this is done organization goals will not be achieved and the CRM process will have disastrous results.
Focus on All Business Aspects
In most cases the technology will have less to do with the CRM success. Therefore it is important to focus as much importance on communication training and other aspects as much as the technology involved. It is important to involve management at several levels, focus on communication need and indulge in adequate training of the concerned employees throughout the organization. If these items receive a level of focus comparable to the technical system, CRM implementation stands a better chance of succeeding.
Define the Business Problem
A business needs to clearly define the business problem see what benefits it wants to achieve and adopt the required measures. It is imminently important to clearly identify the business problem that the company needs to resolve. An organization needs to
absolutely identify the desired benefits and make sure that the expected returns are generated at every stage. It is important to break down the entire process into smaller pieces that can be individually handled effectively.
Establishing Proper Metrics
Since companies normally wait for a five year period to see a return on investment. Every organization has to compulsorily define performance metrics to ensure that it measures the return on investment adequately.
Business Processes not Technology
In order to succeed at CRM all companies need to understand that it is not about technology alone but about business processes as well. While CRM changes a company's business processes technology supports the processes. Most businesses make the mistake of actually assuming that the CRM is only about technology alone. This hampers business process development.
Most employees tend to stick with their old ways and are reluctant to adapt to changes, It needs to be understood that the implementation of CRM involves immense changes and employees need to adapt themselves to it. From the very beginning of the implementation employees will have to adopt new attitudes to help deliver the customer experience properly to customers. Organizations need to make sure that their employees are provided with sufficient training to ensure that they handle this aspect of the customer experience adequately and efficiently.
Using Skilled Managers
Organizations need to make sure that they use the most highly skilled and experienced group of professionals possible. CRM aspects are complex and what is needed most is a team that has CRM expertise and business knowledge. The team should be adequately trained and sufficiently equipped both intellectually and technologically to carry out the CRM implementation successfully.
Choose the Right Methodology
Decide whether to use the classical or modern methodology bearing in mind that ease of usage, cost effectiveness and efficiency need to be gained. This is an important step in the CRM implementation as it has a bearing on the entire process.
Choose the Right Vendors
Companies need to know the vendors through looking at them from this perspective alone. This involves the process of scrutinizing the vendor and seeing whether or not the vendor can fulfill the requirements of the business. Only if this is possible can the vendor be selected. You may not find a vendor that basically fulfills every single objective but at least an organization will be aware of it.
Ease of Usage
The entire objectives of the CRM process are hampered if the CRM choice is difficult to use. It is highly essential to ensure that the system speaks of ease of usage and the ability to be easily customizable. Employees implementing CRM and forming a part of the CRM process range from the mediocre level right to management and to the employee at the very forefront. It is imperative that the business ensure that the CRM software chosen is easy to use and implement not only by a few employees but by everyone using the system. This is a step that needs to be taken at the time of choosing the CRM technology.
Relationship marketing is critical to any organization that wants to maintain and grow revenue and profitability from its existing customer base as well as attract new customers. Effective relationship marketing aligns to various means and channels that are permission based and provide accurate and relevant information to each recipient.
We believe effective relationship marketing requires incorporating real time personalization (RTP) in to your communications so that there is a much higher degree of relevance and customization based on the customers history and preferences. The key benefits of working with and using our capabilities for relationship marketing include integrated and synchronized communications from one resource and transparency between customer data and the results of your marketing initiative. We view relationship marketing as a continuous process that requires ongoing analysis to mine customer responses, identify trends and create communications, offers and or upsell opportunities in real time that align to those efforts.
The success of any customer relationship management program revolves around customer data. Some clients express a concern that they don’t have the proper data or mechanisms in place to gather data to execute an effective relationship management program. This is where the benefit and utility of our cross media capabilities provides great benefit and opportunity. We can develop and initiate programs and campaigns designed to gather, mine and or align data for scaling up to an ongoing relationship marketing programs. From online surveys, landing page sequencing and more effective segmentation to simple call center interview questions and messaging we can make relationship marketing work for you and your customers. Effective customer retention programs through relationship marketing help drive and increase customer profitability that increases over time. In addition customer acquisition costs are minimized the longer the relationship. That is why we believe prospects that have been pre-qualified to have a strong interest and desire to purchase are at the entry point of any relationship marketing program.
Relationship Marketing was first defined as a form of marketing developed from direct response marketing campaigns which emphasizes customer retention and satisfaction, rather than a dominant focus on sales transactions. As a practice, Relationship Marketing differs from other forms of marketing in that it recognizes the long term value of customer relationships and extends communication beyond intrusive advertising and sales promotional messages. With the growth of the internet and mobile platforms, Relationship Marketing has continued to evolve and move forward as technology opens more collaborative and social communication channels. This includes tools for managing relationships with customers that goes beyond simple demographic and customer service data. Relationship Marketing extends to include Inbound Marketing efforts (a combination of search optimization and Strategic Content), PR, Social Media and Application Development. Just like Customer relationship management(CRM), Relationship Marketing is a broadly recognized, widely-implemented strategy for managing and nurturing a company’s interactions with clients and sales prospects. It also involves using technology to, organize, synchronize business processes (principally sales and marketing activities) and most importantly, automate those marketing and communication activities on concrete marketing sequences that could run in autopilot (also known as marketing sequences). The overall goals are to find, attract, and win new clients, nurture and retain those the company already has, entice former clients back into the fold, and reduce the costs of marketing and client service.  Once simply a label for a category of software tools, today, it generally denotes a company-wide business strategy embracing all client-facing departments and even beyond. When an implementation is effective, people, processes, and technology work in synergy to increase profitability, and reduce operational costs.
Relationship Marketing refers to a long-term and mutually beneficial arrangement where both the buyer and seller have an interest in providing a more satisfying exchange. This approach attempts to transcend the simple purchase-exchange process with a customer to make more meaningful and richer contact by providing a more holistic, personalized purchase, and uses the experience to create stronger ties. According to Liam Alvey , relationship marketing can be applied when there are competitive product alternatives for customers to choose from; and when there is an ongoing and periodic desire for the product or service.
Fornell and Wernerfelt used the term "defensive marketing" to describe attempts to reduce customer turnover and increase customer loyalty. This customer-retention approach was contrasted with "offensive marketing" which involved obtaining new customers and increasing customers' purchase frequency. Defensive marketing focused on reducing or managing the dissatisfaction of your customers, while offensive marketing focused on "liberating" dissatisfied customers from your competition and generating new customers. There are two components to defensive marketing: increasing customer satisfaction and increasing switching barriers. Modern consumer marketing originated in the 1950s and 1960s as companies found it more profitable to sell relatively low-value products to masses of customers. Over the decades, attempts have been made to broaden the scope of marketing, relationship marketing being one of these attempts. Arguably, customer value has been greatly enriched by these contributions. The practice of relationship marketing has been facilitated by several generations of customer relationship management software that allow tracking and analyzing of each customer's preferences, activities, tastes, likes, dislikes, and complaints. For example, an automobile manufacturer maintaining a database of when and how repeat customers buy their products, the options they choose, the way they finance the purchase etc., is in a powerful position to develop one-to-one marketing offers and product benefits. In web applications, the consumer shopping profile can be built as the person shops on the website. This information is then used to compute what can be his or her likely preferences in other categories. These predicted offerings can then be shown to the customer through cross-sell, email recommendation and other channels. Relationship marketing has also migrated back into direct mail, allowing marketers to take advantage of the technological capabilities of digital, toner-based printing presses to produce unique, personalized pieces for each recipient. Marketers can personalize documents by any information contained in their databases, including name, address, demographics, purchase history, and dozens (or even hundreds) of other variables. The result is a printed piece that (ideally) reflects the individual needs and preferences of each recipient, increasing the relevance of the piece and increasing the response rate.
Relationship marketing has also been strongly influenced by reengineering. According to (process) reengineering theory, organizations should be
structured according to complete tasks and processes rather than functions. That is, cross-functional teams should be responsible for a whole process, from beginning to end, rather than having the work go from one functional department to another. Traditional marketing is said to use the functional (or 'silo') department approach. The legacy of this can still be seen in the traditional four P's of the marketing mix. Pricing, product management, promotion, and placement. According to Gordon (1999), the marketing mix approach is too limited to provide a usable framework for assessing and developing customer relationships in many industries and should be replaced by the relationship marketing alternative model where the focus is on customers, relationships and interaction over time, rather than markets and products. In contrast, relationship marketing is cross-functional marketing. It is organized around processes that involve all aspects of the organization. In fact, some commentators prefer to call relationship marketing "relationship management" in recognition of the fact that it involves much more than that which is normally included in marketing. Martin Christopher, Adrian Payne, and David Ballantyne at the Cranfield School of Management claim that relationship marketing has the potential to forge a new synthesis between quality management, customer service management, and marketing. They see marketing and customer service as inseparable. Relationship marketing involves the application of the marketing philosophy to all parts of the organization. Every employee is said to be a "part-time marketer". The way Regis McKenna (1991) puts it:
"Marketing is not a function, it is a way of doing business . . . marketing has to be all pervasive, part of everyone's job description, from the receptionist to the board of directors.
Relationship marketing relies upon the communication and acquisition of consumer requirements solely from existing customers in a mutually beneficial exchange usually involving permission for contact by the customer through an "opt-in" system. With particular relevance to customer satisfaction the relative price and quality of goods and services produced or sold through a company alongside customer service generally determine the amount of sales relative to that of competing companies. Although groups targeted through relationship marketing may be large, accuracy of communication and overall relevancy to the customer remains higher than
that of direct marketing, but has less potential for generating new leads than direct marketing and is limited to Viral marketing for the acquisition of further customers.
A key principle of relationship marketing is the retention of customers through varying means and practices to ensure repeated trade from preexisting customers by satisfying requirements above those of competing companies through a mutually beneficial relationship This technique is now used as a means of counterbalancing new customers and opportunities with current and existing customers as a means of maximizing profit and counteracting the "leaky bucket theory of business" in which new customers gained in older direct marketing oriented businesses were at the expense of or coincided with the loss of older customers. This process of "churning" is less economically viable than retaining all or the majority of customers using both direct and relationship management as lead generation via new customers requires more investment. Many companies in competing markets will redirect or allocate large amounts of resources or attention towards customer retention as in markets with increasing competition it may cost 5 times more to attract new customers than it would to retain current customers, as direct or "offensive" marketing requires much more extensive resources to cause defection from competitors. However, it is suggested that because of the extensive classic marketing theories center on means of attracting customers and creating transactions rather than maintaining them, the majority usage of direct marketing used in the past is now gradually being used more alongside relationship marketing as its importance becomes more recognizable.. It is claimed by Reichheld and Sasser  that a 5% improvement in customer retention can cause an increase in profitability of between 25 and 85 percent (in terms of net present value) depending on the industry. However Carrol, P. and Reichheld, F. dispute these calculations, claiming they result from faulty cross-sectional analysis. According to Buchanan and Gilles , the increased profitability associated with customer retention efforts occurs because of several factors that occur once a relationship has been established with a customer.
The cost of acquisition occurs only at the beginning of a relationship, so the longer the relationship, the lower the amortized cost. Account maintenance costs decline as a percentage of total costs (or as a percentage of revenue).
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Long-term customers tend to be less inclined to switch, and also tend to be less price sensitive. This can result in stable unit sales volume and increases in dollar-sales volume. Long-term customers may initiate free word of mouth promotions and referrals. Long-term customers are more likely to purchase ancillary products and high margin supplemental products. Customers that stay with you tend to be satisfied with the relationship and are less likely to switch to competitors, making it difficult for competitors to enter the market or gain market share. Regular customers tend to be less expensive to service because they are familiar with the process, require less "education", and are consistent in their order placement. Increased customer retention and loyalty makes the employees' jobs easier and more satisfying. In turn, happy employees feed back into better customer satisfaction in a virtuous circle.
Relationship marketers speak of the "relationship ladder of customer loyalty". It groups types of customers according to their level of loyalty. The ladder's first rung consists of "prospects", that is, people that have not purchased yet but are likely to in the future. This is followed by the successive rungs of "customer", "client", "supporter", "advocate", and "partner". The relationship marketer's objective is to "help" customers get as high up the ladder as possible. This usually involves providing more personalized service and providing service quality that exceeds expectations at each step. Customer retention efforts involve considerations such as the following:
1. Customer valuation - Gordon (1999) describes how to value customers and categorize them according to their financial and strategic value so that companies can decide where to invest for deeper relationships and which relationships need to be served differently or even terminated. 2. Customer retention measurement - Dawkins and Reichheld (1990) calculated a company's "customer retention rate". This is simply the percentage of customers at the beginning of the year that are still customers by the end of the year. In accordance with this statistic, an increase in retention rate from 80% to 90% is associated with a doubling of the average life of a customer relationship from 5 to 10 years. This ratio can be used to make comparisons between products, between market segments, and over time. 3. Determine reasons for defection - Look for the root causes, not mere symptoms. This involves probing for details when talking to former customers. Other techniques include the analysis of customers' complaints and competitive benchmarking (see competitor analysis). 4. Develop and implement a corrective plan - This could involve actions to improve employee practices, using benchmarking to determine best corrective practices, visible endorsement of top management, adjustments to the company's reward and recognition systems, and the use of "recovery teams" to eliminate the causes of defections.
A technique to calculate the value to a firm of a sustained customer relationship has been developed. This calculation is typically called customer lifecycle value. Retention strategies also build barriers to customer switching. This can be done by product bundling (combining several products or services into one "package" and offering them at a single price), cross selling (selling related products to current customers), cross promotions (giving discounts or other promotional incentives to purchasers of related products), loyalty programs (giving incentives for frequent purchases), increasing switching costs (adding termination costs, such as mortgage termination fees), and integrating computer systems of multiple organizations (primarily in industrial marketing). Many relationship marketers use a team-based approach. The rationale is that the more points of contact between the organization and customer, the stronger will be the bond, and the more secure the relationship.
Relationship marketing and traditional (or transactional) marketing are not mutually exclusive and there is no need for a conflict between them. A relationship oriented marketer still has choices at the level of practice, according to the situation variables. Most firms blend the two approaches to match their portfolio of products and services. Virtually all products have a service component to them and this service component has been getting larger in recent decades. (See service economy and experience economy.) Many big brands are involved with Experiential Marketing and some of the best 'big-brand' marketing campaigns are conducted by specialist Relationship Marketing or Experiential Marketing Agencies. Some of the most well known brands and marketing campaigns include:
Relationship marketing also stresses what it calls internal marketing. This refers to using a marketing orientation within the organization itself. It is claimed that many of the relationship marketing attributes like collaboration, loyalty and trust determine what "internal customers" say and do. According to this theory, every employee, team, or department in the company is simultaneously a supplier and a customer of services and products. An employee obtains a service at a point in the value chain and then provides a service to another employee further along the value chain. If internal marketing is effective, every employee will both provide and receive exceptional service from and to other employees. It also helps employees
understand the significance of their roles and how their roles relate to others'. If implemented well, it can also encourage every employee to see the process in terms of the customer's perception of value added, and the organization's strategic mission. Further it is claimed that an effective internal marketing program is a prerequisite for effective external marketing efforts. (George, W. 1990)
The six markets model
Christopher, Payne and Ballantyne (1991) from Cranfield University goes further. They identify six markets which they claim are central to relationship marketing. They are: internal markets, supplier markets, recruitment markets, referral markets, influence markets, and customer markets. Referral marketing is developing and implementing a marketing plan to stimulate referrals. Although it may take months before you see the effect of referral marketing, this is often the most effective part of an overall marketing plan and the best use of resources. Marketing to suppliers is aimed at ensuring a long-term conflict-free relationship in which all parties understand each others' needs and exceed each others' expectations. Such a strategy can reduce costs and improve quality. Influence markets involve a wide range of sub-markets including: government regulators, standards bodies, lobbyists, stockholders, bankers, venture capitalists, financial analysts, stockbrokers, consumer associations, environmental associations, and labor associations. These activities are typically carried out by the public relations department, but relationship marketers feel that marketing to all six markets is the responsibility of everyone in the organization. Each market may require its own explicit strategies and a separate marketing mix for each. Relationship Marketing Concept In our haste to gain media visibility, we sometimes overlook Extension's most important marketing resource - our relationships with people! This is ironic since the backbone of Extension's success is based on commitments of volunteers, legislators, lay leaders, and our staff members. Educational organizations who wish to survive the competitive "shake-out" period of the 1990s, will need more than media attention. Emerging marketing research indicates that heightened public awareness of organizations is only a first step in the marketing process.1
Building constructive relationships with selected target audiences is more important to Extension's long-term marketing success than acquiring widespread public awareness. Relationship marketing is the process of attracting, maintaining, and enhancing relationships with key people.2 This marketing process applies to Extension since funding is garnered from a few sources and continuous educational programs are delivered to specific audiences. Successful Relationship Marketing Techniques The greatest challenge confronting Cooperative Extension during the next 20 years will be persuading county, state, and federal legislators to financially support Extension. Quality educational programs that meet critical community needs are a prerequisite for funding. However, quality, need-fulfilling programs aren't enough. Targeted relationship marketing initiatives that raise Extension's credibility with decision makers are no longer a luxury, but a necessity for public funding. As Boldt notes, Extension staff must become effective at relationship marketing to understand emerging governmental priorities and influence future financial support.3 Typically, decision makers have only a small window of exposure to view Extension programs. Extension must focus its message on the critical difference it makes on the lives of voters. Keys to successful communication with decision makers include:
1. Coordinate communications. Communications with elected officials
must be coordinated by one person in each county and state office. This coordination eliminates duplication of efforts and maximizes the impact of Extension's educational message. The elected officials should be contacted by both staff and well-trained clientele. 2. Know your elected officials. Identify all local, state, and federal elected officials in your area. Collect basic information on their background and interests. This data collection can be done by adult or 4-H youth volunteers. Elected officials should be visited personally by a team of staff and volunteers on a year-round basis. Assign one volunteer and, if possible, one staff member to visit key elected officials. Before the visit, review information sheets and, if possible, attend a meeting that the elected official is participating in. This homework will help identify and target critical issues that the official is interested in. Target the educational message to meet the official's interests.4
3. Get organized. Develop a file of success stories on significant
Extension programs and issues that can be shared with elected
officials. Tailor the distribution of success stories to personal/professional interests and needs of targeted legislators. 4. Develop a communication plan. Volunteers and staff should speak oneon-one with key elected officials. Information sheets can be filled out on the key officials by volunteers. Personal visits with legislators should be planned and opportunities for personalized education through other means identified. 5. Conduct effective legislative visits. Face-to-face visits with legislators by clientele who live in their districts are most effective. When a group is involved, there should be one spokesperson. Make an appointment for a short, well-planned visit and present your views rationally. Facts, figures, balance sheets, and other evidence can be convincing. Develop a one-page information summary to leave with the legislator or staff member. Personal visits and written communications must be planned as part of a continuous, year-long dialogue with legislators. Remember to include the elected official's secretarial and aide staff. These staff members are literally the eyes and ears of the elected officials. It's imperative to get to know them personally. Contact staff members regularly on a year-round basis, don't wait until budget season. Get to know them, and give them a chance to know you. As you plan your legislative visit, determine the most important issues to be discussed. Still More Relationship Marketing Techniques Invite elected officials to Extension educational events. Make sure they are given a visible and active role in the meeting, such as keynote speaker, member of a panel, etc. If the officials can't come, they'll send a representative from their staff. When they visit, make sure they're given appropriate recognition and media coverage. Send newsletters and other pertinent information to them. Occasionally include information about elected officials in your newsletters, remembering pictures are effective. Send success stories, copies of letters of praise from clientele, news of staff awards, etc. Collect news clippings of programs, photocopy, and send them to elected officials periodically. If you have a feature article, a personal delivery is often effective. Seek advice year-round from elected officials. Ask them if Extension staff can serve on appropriate committees that match professional responsibilities. This makes the communication two-way, rather than Extension always informing elected officials about needs and programs.
One of the most effective ways of educating decision makers is breakfast or dinner forums. These forums can feature short reports outlining Extension's program areas (achievements and future direction), a meal, informal conversation, and feedback between decision makers, staff, and key clientele. Make meetings short - no longer than one hour and lively. Deliver what you promise - on time and in a visible fashion.5 Conclusion As Extension field staff and administrators develop marketing plans, it will be critical to the success of these to include relationship marketing strategies. While these relationship marketing initiatives could target key representatives of the general public, clientele, media, and decision makers an audience critical to Extension's future viability is that of elected officials. In developing, maintaining, and enhancing relationships with elected governmental officials, we need to employ "high touch and personalized technology" communication strategies. By using imagination to portray Extension's commitment and ability to address important community issues, our professional future will be secure. To paraphrase Ralph Waldo Emersen, future times can be very good if we know how to make them so through key relationships
CRM with Internet Chat
While CRM is not a technology within itself, it is often used with technological tools to build stronger relationships with customers. The Internet has become an important part of CRM. As more people begin conducting business over the Internet, it has become necessary for CRM vendors to create applications that are web based. There are a number of Internet technologies that are directly connected to CRM and one of these is online chat tools. Internet chat is a communications tool that has existed for a number of years. However, many companies are just now seeing the benefits of using it in a way that can allow them to effectively communicate with their customers. When Customer relationship management systems were first introduced, they were developed with client-server tools. Because of the rapid popularity of the Internet, more vendors are creating CRM solutions that are web based. They are typically used by call centers and technical support departments. A number of companies are now using chat software to facilitate better communications with their clients. It is important to realize
that text based chat programs predate the World Wide Web by a number of years. However, combining this technology with the Internet has allowed it to be user-friendly. In addition to this, the latest chat programs have functions such as video and audio. There are a number of benefits a company can gain by adding chat functions in their CRM programs. Perhaps one of the most powerful benefits is that many customers are already familiar with chat programs, especially those that use the Internet frequently. Even though new forms of technology are typically challenged by many people, chat programs have become widely popular since their introduction. A number of statistics indicate that millions of people are logging into online chat rooms on a regular basis. Some of these chat rooms are dedicated to specific subjects, and the members will frequently log in to chat about them. Chat rooms can allow customer service representatives to serve multiple clients at one time. In addition to this, setting up an online chat room is much cheaper than establishing a call center. In traditional call centers, it is not uncommon for customers to wait 15 minutes or more before they can speak to a live customer service representative. Not only is this annoying, but it is expensive for the company to maintain. Long wait times are especially a problem at the call centers of large corporations. With chat software, a customer can get service as soon as they sign in. Chat software has become an important part of CRM that responsible companies will want to look into. Another impressive thing about chat software is that it can automatically record the conversation that takes place. Perhaps one of the most powerful advantages of chat software is the cost. A small to medium sized business can set up a customer support department that is entirely comprised of chat programs, and they can provide their customers with faster service than they would find in most call centers. The Internet has allowed small businesses to compete at a very high level. While most small businesses could not afford the costs involved with setting up a call center, online chat programs have allowed them to achieve the same objectives for a lower price. Some have even said that it is very likely that chat programs may eventually make call centers obsolete.
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