Customer Relationship

Management
Part 4: Operational CRM
Operational CRM
• Chapter 9: Software Tools and Dashboards
• Chapter 10: Loyalty Programs: Design and Effectiveness
• Chapter 11: Campaign Management
• Chapter 12: Impact of CRM on Marketing Channels
Chapter 9: Software Tools and Dashboards

Firms have different requirements and different

competencies and must ensure that their implementation
method satisfies their requirements and highlights their
competencies.
Chapter 9: Software Tools
and Dashboards

1. CRM Implementation Options

2. CRM Software and Applications
CRM Implementation Options

1. Developing Software In-House

2. Buying Licensed CRM Software
3. Outsourcing a Managed Service
Developing Software In-House

Requires the company:

• To define all its requirements, pay for software
development, and bear all the R&D costs internally.
• To invest heavily in storage, application software and
hardware, all of which add considerably to the overhead
costs.
Developing Software In-House
Advantages
• Tailor-made solution
• Does not rely on any CRM
software vendor
• Smoother transition for the
majority of employees using
the system.
Disadvantages
• Most expensive option
• Difficult to attract and retain
the employees needed to
solve data warehousing
challenges
Buying Licensed CRM Software

• Still need to develop the IT infrastructure and integrate

the new software with existing applications.
• This solution can be sold as a block or as independent
modules.
Buying Licensed CRM Software
Advantages
• Proven to be effective
• Company will only need to
adapt its IT structure to
integrate the new solution.
Disadvantages
• Still expensive
• Time-consuming
• May not completely fit
company's needs and
structure
• Difficult to change CRM
system
Outsourcing a Managed Service

• The outsourcing company provides the hardware,

software, and human resources in exchange for a
monthly fee.
• Implementation takes less time because applications
are already built and operational and the outsourcing
company has an incentive to get the system running
so that it can initiate service and fees.
Outsourcing a Managed Service
Advantages
• The upfront costs are lower
• The firm does not need to
recruit or develop internal IT
skills
• Less time to set up
Disadvantages
• Have to rely on CRM
services providers
• Higher risk since firms do
not possess skills or
knowledge
• Would not fit firm’s specific
requirement
CRM Software and Applications

Stage-Wise Implementation Enterprise Wide CRM Solution

• Offered in different, • The company buys the sales

independent modules, which automation software and the
are adapted to a specific contact management module
department’s needs CRM from different providers.
Software and Applications. • Individual components may be
• The enterprise wide CRM not the best on the market but
solution is composed of all different components are
different modules from the fully compatible.
same provider.
Chapter 9: Reviews

1. CRM Implementation Options

2. CRM Software and Applications
Chapter 10:
Loyalty Programs: Design and Effectiveness

From a business standpoint, it is

more important to identify and
nurture relationships
specifically with profitable
customers. This is where loyalty
programs come in.
Chapter 10:
Loyalty Programs: Design and Effectiveness

1. What Is Loyalty? Behavioral Versus Attitudinal Loyalty

2. What Is a Loyalty Program? Definition and Key
Objectives
3. Problems with Loyalty programs
4. Design Characteristics of Loyalty Programs
5. Drivers of Loyalty Program Effectiveness
What is Loyalty?
What is Loyalty?

Behavioral Loyalty Attitudinal Loyalty

• Refers to the observed • Refers to a customer’s
actions that customers perceptions and attitudes
have demonstrated toward toward a particular
a particular product or product or service.
service.
What is Loyalty program?

• Whether contractual or motivated through incentives,

the success or failure of a LP depends ultimately on
the profitability of the customer.
• Loyalty programs work to identify, reward, and
retain specifically profitable customers.
What is Loyalty program (LP)?

• An LP comprises a marketing process that generates

rewards for customers, based on their repeat purchases
or engagement with the brand.
• The term LP subsumes the many different forms of
reward programs.
Key objectives of LPs

1. Building true (attitudinal and behavioral) loyalty

2. Efficiency profits
3. Effectiveness profits
4. Value alignment
 Building true loyalty

• Aims to build greater customer commitment, greater word of

mouth to the product or organization
• Encompasses various factors: degree of involvement in the
product category, visibility of product usage, or the value
expressive nature of the product, ...
Efficiency profits

• Profits that result from a change in customer’s buying behavior

due to the loyalty program
• Measured in terms of the immediate profit consequences as
compared to profit consequences without loyalty programs – net of
the LP cost
• This change in behavior can be measured in several ways:
• Basket size
• Purchase frequency acceleration
• Price sensitivity
• Share of category requirements (SCR) or share of wallet
• Retention
• Lifetime duration
Effectiveness profits

• Refer to the medium- to long-term profit

consequences realized through the development
of better knowledge about customer preferences.
• Allow sustainable value creation for customers
through customization of products or
communication
• Most likely to generate sustainable competitive
advantage since it produces the highest profits in
the long run
Value alignment

• Aims to match the cost to serve a particular

customer with the value that the person
brings to the firm
• To ensure that their best customers get their
best service
Problems with Loyalty programs
• Although LPs have become widespread and popular, the
benefits are not always clear.
• From consumer perspective, the length of time and amount of
points needed for reward redemption is one of the reasons to
abandon loyalty programs.
• Most companies need to revisit their business model, not
only to reflect on the impact of loyalty programs on their bottom
line, but also to determine how customer service initiatives
add value and ensure future revenue streams.
Design Characteristics of Loyalty Programs

1. Reward Mechanism
2. Reward Structure
3. Participation Requirements
4. Payment Function
5. Sponsorship
6. Cost and Revenue of LPs
Reward Mechanism

• Transaction - based: awarding consumers for

purchases
• Engagement-based: awarding the consumer due to
his/her engagement such as writing reviews,
downloading the mobile LP app, communicating in
social media, or in-store check-ins....
Reward structure

• The principal motivation for consumers to enroll in LPs

is to accrue benefits from rewards from their purchase
transactions over time.
• From a consumer’s perspective, the rewards attained
through an LP membership are the key design benefit.
Reward structure

1. Hard vs. soft rewards: Financial or tangible rewards (hard)

differ from those based on psychological or emotional benefits
(soft).
2. Product proposition support (Choice of rewards)
3. Aspirational value of reward
4. Rate of rewards
5. Tiering of rewards
6. Timing of rewards
Participation Requirements

• The requirements for becoming a member and the way

points get collected.
• Voluntary or Automatic Enrollment
• Open versus Closed Loyalty Programs
Payment Function

• It has become common practice to endow loyalty cards

with a payment function.
• Paying with a loyalty card can facilitate a comfortable
purchase process for customers, and companies benefit
as well because it is easier to generate purchase
statistics at the individual customer level.
Sponsorship

• Refers to supply-side features that describe the LP

owner.
• Single- versus Multi-Firm LP
• Within/Across Sectors
• Ownership
Cost and Revenue of LPs

• Cost factors include set-up/implementation,

operating, and variable costs.
• Revenues: direct (eg. membership fees, sales of
special editions) and indirect (eg. the retention and
development of existing customer relationships and the
acquisition of new customers)
Drivers of Loyalty Program Effectiveness

The factors that drive the effectiveness of a loyalty

program can be structured into three main categories:
1. LP design characteristics
2. Customer characteristics
3. Firm characteristics
LP design characteristics

Three key questions must be answered to determine if a

LP is effective:
1. From the consumer’s perspective, are rewards
attainable?
2. From the consumer’s perspective, are rewards
relevant?
3. From the firm’s perspective, is the LP design aligned
with desired goal(s)?
Customer characteristics

• The key customer characteristic relevant to the

effectiveness of LPs is the skewness of the
customer value distribution (or value
heterogeneity).
• This skewness varies greatly across industries.
• In some industries, the value of individual customers
or accounts is widely similar, whereas in others,
these values diverge greatly.
Firm characteristics

Factors relevant to LP effectiveness in terms of

organizational characteristics include the:
• Perishability of a product.
• Breadth and depth of the firm offering the product at the
store/retail level.
The Seven-Point Checklist for Successful LP
Design and Implementation
1. Clearly determine your LP’s goals
2. Align the design of your LP with the characteristics of your
market, your customer base, and your firm
3. Manage the costs of LPs
4. Measure the predicted benefits of the LP for your organization
5. Avoid withdrawing an existing LP, which can have negative
consequences in the form of customer dissatisfaction and
defection
6. Design the LP to achieve maximum effectiveness in marketing
operations
7. Ensure that your firm has the necessary capabilities to manage
its LP effectively
THE 7-POINT CHECK-LIST FOR SUCCESSFUL LP
DESIGN AND IMPLEMENTATION
1. Is your LP’s goal compatible with marketing strategy?
2. Is the design of your LP aligned with the characteristics of your market, customer base, and
your firm?
3. Is cost management of LPs possible by mitigating costs via low marginal cost rewards or via
contributions from manufacturers?
4. For determining predicted benefits of your LP can you attempt a trade-off analysis between
cost and gains of the LP program?
5. If LPs are withdrawn, design faults will not only result in losses due to the program but have
more lasting impact in the form of customer dissatisfaction
6. Chances for strategic success of your LP are highest if your goal is to achieve effectiveness
profits in your marketing operations
7. Do you have the necessary capabilities within your firm for LP management? (e.g., data
storage, data analysis, and learning)
Chapter 10: Reviews

1. What Is Loyalty? Behavioral Versus Attitudinal Loyalty

2. What Is a Loyalty Program? Definition and Key
Objectives
3. Problems with Loyalty programs
4. Design Characteristics of Loyalty Programs
5. Drivers of Loyalty Program Effectiveness
Chapter 11: Campaign Management

1. Campaign Planning and Development

2. Campaign Execution
3. Analysis and Control
4. Campaign Feedback
Campaign Planning and Development

1. Setting Objectives and Strategies

2. Identifying Customer Segments
3. Developing the Communication Strategy
4. Developing the Offer
5. Campaign Budget
6. Testing
Setting Objectives and Strategies

• Campaign objectives should be in line with overall marketing

and corporate objectives.
• These objectives are often from the four following categories:
1. Market penetration (increase usage or market share);
2. Market extension (find new user groups or enter new
segments);
3. Product development (new products or services)
4. Diversification (new markets and products, new
strategies).
Setting Objectives and Strategies

1. Who do you want to target?

• i.e., Who are the targeted customer segments?
2. Where should you target?
• i.e., What are the channels, and points of contact?
3. How do you get to them?
• i.e., What is the communication strategy and offer?
4. When is the best time?
• i.e., When should you schedule the campaign?
Identifying Customer Segments

Purchase behavior:
• is recorded in the CRM database
• will allow the marketer to segment by product need and by LTV
Profile data:
• will relate the individual customer to his or her response to past
campaigns, allowing the implementation of an ROI-driven
marketing campaign,
• also identify tastes, needs, and preferences of customers, and
therefore can be used to target new customers accurately
Identifying Customer Segments

Three types of customer groups:

1. The existing customers,
2. The prospects,
3. The defectors
Developing the Communication Strategy
• Marketing communications (marcom) are targeted
interactions between the company and its customers and
prospects, using one or more media, such as direct mail,
newspapers and magazines, television, radio, telemarketing,
and the Internet.
• Integrated marketing communications (IMC) is a process
that involves the management and organization of the
marketing communication tools (media, messages, promotions,
and channels) in a way that delivers a clear and consistent
message about the company and about the product.
Developing the Communication Strategy

1. To whom the campaign is directed (the target audience),

2. What the campaign message is (content),
3. Which are the best contact channels or media to deliver
the content
Developing the Offer
• Consists of offering the customer some kind of incentive
which will induce him to buy or to ask the company for
more information.
• a free product sample (e.g., getting a free sample of a
shampoo in the mail)
• price-related incentives (e.g., buying two CDs for the price of
one),
• an item providing information on the firm (e.g., a free
promotion video about the firm’s new products).
Campaign Budget
A mix of estimates for both directly measurable and less
easily measured activities (e.g., the longterm effect of
advertising)
1. Preset budgeting
2. Budgeting for an allowable marketing cost
3. Budgeting with the competitive parity method
4. Budgeting with the objective and task method
5. Budgeting with the percentage of sales method
6. Budgeting with key performance indicators
7. Budgeting using the lifetime value method
Testing

Conducting a comparison between different ways of

proceeding with a campaign
1. Take the current set-up of the campaign and use it as
the control for the test.
2. Select the element you want to test and change it.
3. Select a sample of your target customers and run a
test with the changed element.
Testing

Benefits of Testing
• Showing real behavior
• Augmenting and validating research
• Stimulating creativity
• Minimizing financial risk
• Uncovering ways to reduce costs
Campaign Execution

• Implementation and Coordination

• Monitoring and Fine-Tuning
Implementation and Coordination

1. Campaign program
2. Campaign schedule
3. Activity schedule
Monitoring and Fine-Tuning

• Acting on the first results will allow a timely corrective

action.
• The more up-to-date is the report, the more useful the
corrections will be
• The planning may be revised
• The media selection may be adjusted
Analysis and Control
Evaluating campaign results:
• to improve their customer knowledge
• to improve future campaigns
1. Measuring Campaign Results
2. Response Analysis
3. Profile Analysis
Campaign Feedback
• Record all relevant data about campaign planning,
implementation and results.
• Model relationships between the data gathered, the
controllable variables and the campaign results.
• Apply this knowledge to future campaigns. If information is
not sufficient, test the important variables to fill the gaps in
knowledge
Chapter 11: Reviews

1. Campaign Planning and Development

2. Campaign Execution
3. Analysis and Control
4. Campaign Feedback
Chapter 12: Impact of CRM
on Marketing Channels
1. CRM and Marketing Channels
2. CRM and Multichannel Design
3. CRM and Multichannel Management
CRM and Marketing Channels

1. What Are Channels?

2. Managing Customer Relationships Through Indirect
Channels
3. Managing Customer Relationships Through Direct
Channels
4. Multichannel Trends and CRM
What Are Channels?
• refers to the flow of the organization’s offerings to ultimate end
users, as well as of sales proceeds from the customer back to the
focal firm
• refers to the mode of communication between a firm and its
customers
Managing Customer Relationships Through
Indirect Channels
Managing Customer Relationships Through
Direct Channels
Multichannel Trends and CRM

• Trend 1: The Proliferation of Direct Channels

• Trend 2: Multichannel as the Norm
• Trend 3: Multichannel Shoppers
• Trend 4: Research Shoppers
CRM and Multichannel Design

1. Attributes of Multichannel Designs

2. Designing Optimal Multichannel Offers
Attributes of Multichannel Designs

Three critical questions arise:

• How broad the offered variety of routes should be.
• Which types of channels to implement and combine.
• How intensively to use each route (i.e., store density)
Designing Optimal Multichannel Offers
Designing Optimal Multichannel Offers
CRM and Multichannel Management

1. Managing Multichannel Systems:

Integration Versus Separation
2. Managing Multichannel Shoppers
3. Managing Research Shoppers
Managing Multichannel Systems:
Integration Versus Separation
Managing Multichannel Systems:
Integration Versus Separation
Managing Multichannel Shoppers

• Multichannel shoppers are more loyal than single-channel

shoppers.
• Multichannel shoppers spend more money because they see
advertisements more frequently than single-channel shoppers.
• Multichannel shoppers purchase more frequently than single-
channel shoppers because shopping is possible in every
situation.
• Only customers who typically shop frequently and spend much
money actually use multiple channels for purchase (Customer
self-selection).
Managing Research Shoppers
Chapter 12: Reviews

1. CRM and Marketing Channels

2. CRM and Multichannel Design
3. CRM and Multichannel Management