Unit 30:Chapter 3 Customer Relationship Management

Building Customer Relationships, 1:1 Relationship Marketing Defined Stakeholders Customer Relationship Management (CRM) CRM Benefits CRM’s Facets CRM Building Blocks 1. CRM Vision 2. CRM Strategy 3. Valued Customer Experience 4. Organizational Collaboration 5. CRM Processes 6. CRM Information 7. CRM Technology CRM Metrics

Building Customer Relationships, 1:1

Cisco: Develops long-term customers relationships one at a time (1:1) & handle millions of these close relationships thanks to information. A customer with an investment in software and high satisfaction is brand loyal:

Will not easily be enticed by competition. Will slowly spend an increasing amount of money on additional products/services and also refer others.

Relationship capital: A firm’s ability to build and maintain relationships with customers, suppliers, and partners may be more important than a firm’s land, property, and financial assets.

Building Customer Relationships, 1:1

A major shift in marketing practice:
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from mass marketing to individualized marketing, from focusing on acquiring lots of new customers to retaining and building more business from a smaller base of loyal high-value customers.

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Industrial firms have practiced customer relationship management for a long time, Consumer services market (e.g., the local hair salon) + consumer packaged goods are now considering how to build long-term customer relationships, 1:1.

Internet technologies can facilitate relationship marketing, yet many firms that purchase and install relationship-management technologies are losing money on them.

Organizational Collaboration 5. Valued Customer Experience 4. CRM Vision 2. CRM Technology CRM Metrics .Overview Building Customer Relationships. 1:1 Relationship Marketing Defined Stakeholders Customer Relationship Management (CRM) CRM Benefits CRM’s Facets CRM Building Blocks 1. CRM Strategy 3. CRM Information 7. CRM Processes 6.

enhancing. and commercializing customer relationships through promise fulfillment. maintaining.  .Relationship Marketing Defined  Relationship marketing(= 1:1 marketing): is about establishing. mutually beneficial relationships in the long term.  The balanced scorecard customer focus was created from this idea.  Good relationships are built when company personnel meet the promises made by salespeople and promotional messages.  Promise fulfillment = when firms make offers in their marketing communications programs. customer expectations will be met through actual brand experiences. Firms try to build profitable.

rather than share of market.  Firm focuses on share of mind = share of customer = share of wallet. From Ivory powder for washing baby clothes and Pampers diapers to Crest toothpaste for the family and Olay cosmetics for themselves. It tries to build relationships with mothers who will buy increasing numbers of P & G products over the years. one at a time (1:1).  Procter and Gamble:    Must differentiate its brands of laundry detergent for sale to the masses.Relationship Marketing Defined Relationship marketing:  Involves two-way communication with individual stakeholders. .

Mass marketing Discrete transactions Short-term emphasis Relationship marketing Continuing transactions Long-term emphasis Two-way communication /collaboration Retention focus Share of mind Customer Differentiation One-way communication Acquisition focus Share of market Product Differentiation Continuum from Mass Marketing to Relationship Marketing .

Overview Building Customer Relationships. CRM Vision 2. CRM Strategy 3. Organizational Collaboration 5. CRM Information 7. 1:1 Relationship Marketing Defined Stakeholders Customer Relationship Management (CRM) CRM Benefits CRM’s Facets CRM Building Blocks 1. CRM Processes 6. Valued Customer Experience 4. CRM Technology CRM Metrics .

  Business customers (the B2B market): P&G uses Internet technologies to work with numerous wholesale and retail intermediaries. . Employee relationship building is handled by human resources departments. The 4 stakeholder groups most affected by Internet technologies are: Employees. Difficult to persuade buyers when employees are not happy.     1. Employees are instrumental in building relationships with customers = they have to be trained + to have access to data & systems used for relationship management. Firm’s suppliers: GE uses the Internet to receive bids from its suppliers (lowers transaction costs + enhances competition + speeds order fulfillment).Stakeholders  Firms also use relationship marketing techniques to build mutually supportive bonds with stakeholders other than consumers. 2. Business customers in the supply chain.

Other businesses that join with the firm for some common goal but not for transactions with each other (not-for-profit organizations.   . or governments).Stakeholders 3. 4. Marketers must differentiate between business customers and final consumers because different tactics are often employed in the B2C and B2B markets. Consumers.  Lateral partners. The individuals who are end users of products and services.

CRM Vision 2. CRM Strategy 3.Overview Building Customer Relationships. Valued Customer Experience 4. Organizational Collaboration 5. CRM Information 7. 1:1 Relationship Marketing Defined Stakeholders Customer Relationship Management (CRM) CRM Benefits CRM’s Facets CRM Building Blocks 1. CRM Technology CRM Metrics . CRM Processes 6.

someone else will. Firms are recognizing that if they don’t keep their customers happy.Customer Relationship Management (CRM) CRM:  Is used to define the process of creating and maintaining relationships with business customers or consumers. and growing customers.    . Is a holistic process of acquiring. retaining. Includes all online and offline relationship management.

CRM Processes 6. Valued Customer Experience 4. CRM Information 7.Overview Building Customer Relationships. CRM Strategy 3. Organizational Collaboration 5. CRM Vision 2. CRM Technology CRM Metrics . 1:1 Relationship Marketing Defined Stakeholders Customer Relationship Management (CRM) CRM Benefits CRM’s Facets CRM Building Blocks 1.

A 5% increase in customer retention translates to 25% to 125% profitability in the B2B market. The cost of acquiring a new customer is typically five times higher than the cost of retaining a current one.S.    . Customer defection rates are near 20% per year.CRM Benefits  Key CRM benefit = its cost-effectiveness. businesses saved $155 billion between 1998 and 2000 by using Internet technology for both CRM and Supply Chain Management. Consider the following:   U.

500 Total number of customers 11 Total number of customers 23 Maximizing Number of Customers Source: Adapted from Peppers and Rogers (1996) .500 Retain 5 current customers $ 500 ($100 each) Total cost $2.Acquisition Emphasis Gain 6 new customers ($500 each) Retention Emphasis $3.500 Total cost $3.000 Gain 3 new customers ($500 each) Retain 20 current customers ($100 each) $1.000 $3.

= They know who to call in the firm when they have questions. .   Loyal customers are experienced customers = They know the products well. Higher response rates to promotional efforts yield more profits. Loyal customers cost less to service. Sales teams can be more effective when they get to know individual customers.CRM Benefits  Retention is less costly than acquisition because:    Reduced promotion costs for advertising and discounts.

Each dissatisfied customer tells 10 people about the unhappy experience. he tells his 6. and products to their friends. and toys to its book customers. stores. he doesn’t tell his six friends. and personal Web pages).  Positive word of mouth can attract many new customers. = The heart of CRM. chat. Word-of-mouth:    Satisfied customers recommend Web sites. newsgroups. but negative word of mouth can drive them away.000 friends” (through e-mail. BUT “If you have an unhappy customer on the Internet.   .CRM Benefits  Increase the amount purchased by each customer: Amazon cross-sells by offering music. videos.

retention. Softwares allow customer service reps on the telephone with a customer to take control of the user’s mouse and guide her around the company Web site. Most service occurs post-purchase when customers have questions or complaints.Customer Service (eg)   Customer service permeates every stage of customer acquisition. Mercedes-Benz takes customer service to a new level with its “teleweb” technology:  The consumer types a question into a Mercedes representative.   .  The consumer & representative discuss the question while viewing the same Web pages. and development practices.

Internet users are concerned about online privacy + the misuse of personal information and don’t want it shared with others unless they give permission. for their own business health + for the image of the profession. marketers must address this issue before regulators make them do it. CRM is based on trust:     The information customers give companies on Web forms. in e-mail. + not sharing information with other companies unless permission is granted. Information is used to improve the relationship by tailoring goods. to opt-out of e-mail lists.1. and marketing communications to meet individual needs. It means allowing consumers to request removal of their information from databases. or in other ways will be used responsibly. Marketers must use customer and prospect information responsibly. . Real-time profiling and other techniques monitor online consumers behavior. services. CRM Vision Guarding Customer Privacy     Using customer data is very tempting to marketers.

 What’s a marketer to do?   Build relationships through dialogue and through better target profiling. Firms must listen to customers and prospects and give them what they want. spam.1. CRM Vision Guarding Customer Privacy  Intrusions into people’s lives: Junk mail. Individuals do not get upset with firms who send valuable and timely information to them. repeated telephone calls = examples of marketing messages that can upset consumers.  Why?   Retention & development of customer relationships are more profitable than one-time customer transactions. Marketers can use consumer information to build more precise target profiles. .

and correct personally identifiable information.  Giving users choice and consent over how their personal information is used and shared.1. an independent.  Posting notice and disclosure of collection and use practices regarding personally identifiable information via a posted privacy statement. update. and access measures in place to safeguard. CRM Vision TRUSTe  To help Web sites earn the trust of their users. nonprofit privacy initiative named TRUSTe provides its seal and logo to any Web site meeting its philosophies:  Adopting and implementing a privacy policy that factors in the goals of your individual Web site & consumer anxiety over sharing personal information online.  Putting data security and quality. .

org .truste.TRUSTe Builds User Trust Source: www.

CRM Vision TRUSTe  In addition.  The security procedures in place to protect users’ collected information from loss. use.  Who is collecting the information. sites must publish the following information on their sites to gain the TRUSTe seal:  What personal information is being gathered by your site.  How the information will be used.  With whom the information will be shared. .  The choices available to users regarding collection.  How users can update or correct inaccuracies in their pertinent information. and distribution of their information. or alteration.1. misuse.

CRM Processes 6.Overview Building Customer Relationships. CRM Strategy 3. CRM Technology CRM Metrics . Organizational Collaboration 5. Valued Customer Experience 4. CRM Vision 2. 1:1 Relationship Marketing Defined Stakeholders Customer Relationship Management (CRM) CRM Benefits CRM’s Facets CRM Building Blocks 1. CRM Information 7.

FAX-on-demand. and automated telephone routing = examples of technology that assist in moving customers through the life cycle. Important tools that aid firms in customizing products to groups of customers or individuals include “push” strategies that reside on the company’s Web and email servers.      . bar code scanners help to collect information about consumer behavior and characteristics. Incoming toll-free numbers. electronic kiosks.7. Cookies. voice mail. The Internet is the first fully interactive + individually addressable low cost multimedia channel. Databases and data warehouses store and distribute these data from online and offline touch points. These information allow to develop marketing mixes that better meet individual needs. and “pull” strategies that are initiated by Internet users. CRM Technology   Technology greatly enhances CRM processes. Web site logs.

CRM Technology Company-Side Tools  There are important e-marketing tools used by firms to push customized information to users. serve advertising banners relevant to user interests.  Users are unaware that marketers are collecting data + using these technologies to customize offerings.7.  Cookie files allow ad-server firms to see the path users take from site to site and.com get a greeting by name + users don’t have to remember passwords to every site for which they are registered. Cookies  Cookie files are the reason that customers returning to Amazon. .  Cookies keep track of shopping baskets and other tasks so that users can quit in the middle and return to the task later.

Real-time profiling occurs when special software tracks a user’s movements through a Web site. the company’s server looks for the cookie file and uses it to personalize the site. and whether he purchases or not. Data mining involves the extraction of hidden predictive information in large databases through statistical analysis. Web log analysis Data mining Real-time profiling Collaborative filtering Outgoing e-mail Distributed EMail Chats Bulletin Boards Marketers use e-mail databases to build relationships by keeping in touch with useful and timely information. This file keeps track of which pages the user visits. and used to capture data and present targeted communication. how long he stays. A firm may listen to users and build community by providing a space for user conversation on the Web site iPOS terminals Interactive Point of Sale terminals are located on a retailer’s counter. the visit is recorded in the Web server’s log file. then compiles and reports on the data at a moment’s notice. E-mail can be sent to individuals or sent en masse using a distributed e-mail list. Every time a user accesses a Web site. Collaborative filtering software gathers opinions of like-minded users and returns those opinions to the individual in real-time. Selected E-Marketing “Push” Customization Tools .Company-Side Tools (push) Cookies Description Cookies are small files written to the user’s hard drive after visiting a Web site. When the user returns to the site.

and much more.7. (customize Web pages based on visitor behavior). . firms can do many things. Data Mining  Marketers don’t need a priori hypotheses to find value in databases. but use software to find patterns of interest. CRM Technology Web Site Log  By performing Web log analysis.  Softwares can also tell which sites the users visited immediately before arriving + what key words they typed in at search engines to find the site + user domains.

What’s new? This can all be done online inexpensively via e-mail and customized Web pages = Real-time profiling = tracking user clickstream in real time. display a Web page offering a concert T-shirt.  . For example.     American Express has done this for years: It sends bill inserts to groups of customers based on their previous purchasing behavior.7. the software could be set to use the following rule: If a customer orders a Dave Matthews Band CD. CRM Technology Real-Time Profiling  Customer profiling uses data warehouse information to help marketers understand the characteristics and behavior of specific target groups. Allows marketers to profile + make instantaneous and automatic adjustments to site promotional offers and Web pages.

at its site.    BOL. CRM Technology Collaborative Filtering  In the offline world. an international media and entertainment store uses collaborative filtering software to observe how users browse and buy music. games. The more time a user spends at the site.com notes that it realized increased revenues from using this software. the more it will learn about her behavior/preferences + the better able it will be to present relevant products.7.com. and achieved a positive ROI within months.  Collaborative filtering software gathers the recommendations of an entire group of people + presents the results to a like-minded individual. . individuals often seek the advice of others before making decisions. software. BOL.

mypoints.com .MyPoints Rewards Members for Time Spent Online Source: www.

     . MyPoints advertises “responsible” e-mail messaging = consumers agree to receive commercial messages within their e-mails. CRM Technology Outgoing E-Mail  E-mail is used to communicate with individuals or lists of individuals (distributed e-mail) to increase their purchases. and loyalty. Permission marketing dictates that customers will be pleased to receive e-mail for which they have opted-in. some of which go directly to customers as points.7. all for reading targeted e-mail ads and shopping at selected sites. MyPoints rewards consumers with points and gift certificates. MyPoints client companies pay a fee for these e-mails. satisfaction. Many companies maintain e-mail distribution lists for customers and other stakeholders.

000 or more e-mails at the click of a mouse for less than the cost of 1 postage stamp. The Internet provides the technology for marketers to send 500.7. CRM Technology Outgoing E-Mail   Spam does not build relationships but instead focuses on customer acquisition.  It means talking and listening to consumers as if they were friends. Sending them as often as users require. . Offering users the chance to be taken off the list at any time. Relationship-building e-mail requires:     Sending e-mails that are valuable to users.

commerce.Chat Opportunities with the U.gov .S. Government and Its Citizens Source: www.

.7. iPOS Terminals  Small customer facing machines near the brick-and-mortar cash register.  They can gather survey and other data + present individually targeted advertising and promotions as well. CRM Technology Chat and Bulletin Boards  Firms build community + learn about customers and products through real-time chat and bulletin board/newsgroup e-mail postings at its Web site.  Expedia send e-mail notes to users who participate in the chats with offers of special tours. used to record a buyer’s signature for a credit card transaction.  Analysis of these exchanges is used in the aggregate to design marketing mixes that meet user needs.

 Agent software often relies on more than one interaction.  A user might type in “computer” on the Dell site and then be presented with either laptop or desktop options to narrow the search. CRM Technology Client-Side Tools  Based on a user’s action at her computer or handheld device.  The customer “pull” that initiates the customized response.7. . Agents = Shopping agents and search engines match user input to databases and return customized information.

such as search engines and shopping agents. customers telephone a firm. Experiential marketing gets the consumer involved in the product to create a memorable experience. and select options to request a FAX be sent on a particular topic. E-mail queries. such as the PalmPilot. FAX-on-demand Incoming e-mail Selected E-Marketing “Pull” Customization Tools . complaints. pagers. listen to an automated voice menu.Client-Side Tools (pull) Agents Experiential marketing Individualized Web portals Wireless data services Web forms Description Agents are programs that perform functions on behalf of the user. Personalized Web pages users easily configure at Web sites such as MyYahoo! and many others. With FAX-on-demand. or compliments initiated by customers or prospects comprise incoming e-mail. Wireless Web portals send data to customer cell phones. offline or online. Web form (or HTML form) is the technical term for a form on a Web page that has designated places for the user to type information for submission. and PDAs. and is the fodder for customer service.

experiencebased campaign to promote CK One. The movie and sports industries are adept at creating online experiences.  This type of offline/online integration. when combined with customized experiences. builds positive relationships between customers and brands.  . Calvin Klein developed an interactive. each with social dilemmas representative of those in the target market.  The advertising invited viewers to e-mail campaign characters. the unisex fragrance. and each e-mail received standard replies that developed the characters a bit more. CRM Technology Experiential Marketing  On the Internet.7.  The advertising included 3 characters.

CRM Technology Individualized Web Portals  The Wall Street Journal’s online edition allows individual customers to create a personalized Web page based on keywords of interest. Webridge sells partner and customer relationship management software (PRM/CRM) that allows businesses to access all the data they need on demand.    Individualized Web portals are more often used to build relationships in the B2B market than the B2C market. and track various operations. catalogs.7.  A structural bond is created with individual customers = boost loyalty. = A huge improvement over the previous method. where buyers searched through piles of brochures.  Helpful for business readers who want to monitor stories about their competitors. Allow supply chains access inventory and account information. . and price lists that included many products not carried by channel partners and were constantly out-of-date.

stock quotes.   .  Wireless users only want text data due to the screen size of wireless devices and download time for graphics. As users customize this information.com offer users news headlines. they give serving firms a better idea of how to better serve them and. build relationship. weather in selected cities. CRM Technology Wireless Data Services  They are included as a separate tool because of their rapid growth and distinctive features.7. sports scores. and more to users on pagers. Services such as AvantGo.

com allow Internet users to send and receive FAX transmissions at their Web sites. firms often want information sent via FAX machine.7. or Internet access is not available so the document cannot be sent as an e-mail attachment. FAX-on-Demand  In the B2B market. .  Many sites strive to build the number of registered users as a prelude to transactions.   Why would a user use this service as opposed to an e-mail attachment? When the document is not in digital form.  Services such as eFax. a signature is needed. CRM Technology Web Forms  Many corporate Web sites use Web forms for a multitude of purposes from site registration and survey research to product purchase.

Often an automated customer service program acknowledges the message via e-mail and indicates that a representative will be responding shortly.7. Research shows that firms are getting much better at responding to incoming e-mail. CRM Technology Incoming E-Mail    Post-transaction customer service is an important part of the customer care life cycle. The Web online channel = a feedback button or form that delivers an email message to the corporation. Companies should include feedback options online only if they have staff in place to respond: E-mail addresses on a Web site imply a promise to reply.   .

How are company-side and client-side customization tools different? Explain your answer. 4.Review Questions 1. 2. Explain why relationship capital is the foundation of future business. real-time profiling. . 8. 5. 7. What are the main benefits of CRM? Why do companies use sales force automation and marketing automation? Why do e-marketers see community-building as an important aspect of CRM? ? Explain how data mining. 6. Define relationship marketing and contrast it with mass marketing. 3. collaborative filtering. and outgoing e-mail help firms customize offerings.

4. 3. Explain the difference between share of mind and share of market. As a consumer.Discussion Questions 1. If good relationship marketing means firing a company’s least-profitable or most-costly customers. Which tools do you think are more powerful for building relationships— company-side tools or client-side tools? Why? Compare and contrast the concept of differentiating customers with that of differentiating products. suggest how this might be accomplished without causing them to criticize the company to their friends. 2. 5. would you be more likely to buy from a Web site displaying the TRUSTe seal and logo than from a competing Web site without the TRUSTe affiliation? Explain your answer .

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