Customer Relationship

Management (CRM)

© ISTOCKPHOTO.COM/YUN ARAKON
 What Is Customer
Relationship Management?

Define customer
relationship
management

LO1
 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.
LO1
LO1
Customer Relationship
Management Strategy
Organize the company around customer segments

Encourage and track customer interaction with the company

Foster customer-satisfying behaviors

Link all processes of the company from its customers

through its suppliers

Allows companies to tightly focus in on their target markets

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
LO1
 Implementing a CRM System

Key Points:

1. Customers take center stage

2. Business must manage the customer

relationship across all points of
customer contact

LO1
Identify Customer Relationships

Explain how to
identify customer
relationships with
the organization

LO2
 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.

LO2
 Identify Customer
Relationships

Learning is…
an informal process of collecting
customer data through customer
comments and feedback on product
or service performance.

LO2
 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.

LO2
 Knowledge Management
Experiential
observations

Comments
Collected
Information
Includes: Customer actions

Qualitative facts

LO2
 Empowerment

Empowerment is…
delegation of authority to solve
customers’ problems quickly—usually
by the first person the customer
notifies regarding the problem.

LO2
 Successful CRM
Occurs when a customer
and a company
Interaction representative exchange
information and develop
learning relationships

• The success of CRM can be directly

measured by the effectiveness of the
interaction between the customer and the
organization.

LO2
 Understand Interactions
of the Current Customer Base

Understand
interactions
with the current
customer base

LO3
 Exhibit 21.2
Customer-Centric Approach for
Managing Customer Interactions

© Image Source/Jupiterimages
LO3
 Interactions of the
Current Customer Base

All possible areas of a business

Touch Points where the customers communicate
with that business.

Communications between
Point-of-Sale customers and organizations that
Interactions occur at the point of sale, normally
in a store

LO3
 Capture Customer Data

Outline the
process of capturing
customer data

LO4
 Capture Customer Data
The traditional approach for acquiring data from
customers is through channel interactions.

Store visits

Conversations with salespeople

Interactions via the Web

Traditional phone conversations

Wireless communications
LO4
 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.

LO4
 Store and Integrate
Customer Data

Describe the use of

technology to store
and integrate
customer data

LO5
 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

LO5
 Store and Integrate
Customer Data
Response list Compiled list

::::::::::::::::::::::::::::::::::::::::::
::::::::::::::::::::::::::::::::::::::::::
Database \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
///////////////////////////////////////////////////////////
~~~~~~~~~~~~~~~~~~~~~~~~~~
~~~~~~~~~~~~~~~~~~~~~~~~~~

Data Warehouse
LO5
Identify the Best Customers

Describe how to
identify the best
customers

LO6
 Identifying the Best
Customers

Data Mining:

A data analysis approach that identifies

patterns of characteristics that relate to
particular customers or customer groups.

LO6
 Data Mining

▪ Identify and profile the best customers

▪ Calculate their lifetime value
▪ Predict purchasing behavior

LO6
 Data Analysis

Customer segmentation

Recency-frequency-monetary analysis

Lifetime value analysis

Predictive modeling

LO6
 Customer Segmentation
Customer
Segmentation:

The process of breaking large groups of

customers into smaller, more homogeneous
groups.

LO6
 Recency-Frequency-
Monetary Analysis

1. Identifies customers most likely to

purchase again
2. Identifies and ranks “best customers”
3. Identifies most profitable customers

LO6
LO6 Lifetime Value Analysis
and Predictive Modeling
Lifetime Value Analysis:
A data manipulation technique that projects
the future value of the customer over a period
of years.

Predictive 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.
 Leverage Customer
Information

Explain the
process of leveraging
customer information
throughout the
organization

LO7
Exhibit 21.3
Common CRM Marketing
Database Applications
Reinforcing customer
Campaign management
purchase decisions

Retain loyal Inducing product trial

customers by new customers

Increasing effectiveness
Cross-selling other
of distribution channel
products and services marketing

Designing targeted Improving

marketing communications customer service

LO7
 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.

LO7
 Campaign Management

Developing customized
offerings for appropriate segment

Pricing these offerings

attractively

Communicating offerings in a way

that enhances customer relationships
LO7
 Retaining Loyal Customers
Retaining an additional 5 percent of customers can
increase profits by as much as 25 percent

Improving customer retention by 2 percent can

decrease costs by as much as 10 percent

Loyalty programs reward loyal customers for

making multiple purchases

Loyalty programs provide information about

customers and trends

LO7
 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

LO7
 Designing Targeted
Marketing Communications
Infrequent Offer direct incentives, such
Users as a price discount

Moderate Offer more reinforcement of

Users past purchase decisions

Heavy Design around loyalty and

Users reinforcement of purchase

LO7
 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

LO7
 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

LO7
 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
LO7
 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

LO7
 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.

LO7