Chapter 21 Customer Relationship Management CRM

21
Customer Relationship
Management (CRM)
Professor Close
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1

Learning Outcomes
LO 1 Define customer relationship management
LO 2 Explain how to identify customer relationships

with the organization
LO 3 Understand interactions with the current customer

base
LO 4 Outline the process of capturing customer data

Learning Outcomes
LO 5 Describe the use of technology to store and

integrate customer data
LO 6 Describe how to identify the best customers
LO 7 Explain the process of leveraging customer

information throughout the organization

What Is Customer
Relationship Management?
Define customer
relationship
management

What Is Customer
Relationship Management?
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.

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

Implementing a CRM System
Key Points:
1. Customers take center stage
2. Business must manage the customer

relationship across all points of
customer contact

Identify Customer Relationships
Explain how to
identify customer
relationships with
the organization

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.

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

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.

Knowledge Management
Experiential
observations
Comments
Collected
Information
Includes: Customer actions
Qualitative facts

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

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.

Understand Interactions
of the Current Customer Base
Understand
interactions
with the current
customer base

Exhibit 21.2
Customer-Centric Approach for
Managing Customer Interactions
© Image Source/Jupiterimages
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

Capture Customer Data
Outline the
process of capturing
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

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.

Store and Integrate
Customer Data
Describe the use of

technology to store
and integrate
customer data

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

Store and Integrate
Customer Data
Response list Compiled list
::::::::::::::::::::::::::::::::::::::::::
::::::::::::::::::::::::::::::::::::::::::
Database \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
///////////////////////////////////////////////////////////
~~~~~~~~~~~~~~~~~~~~~~~~~~
~~~~~~~~~~~~~~~~~~~~~~~~~~
Data Warehouse

Identify the Best Customers
Describe how to
identify the best
customers

Identifying the Best
Customers
Data Mining:
A data analysis approach that identifies
patterns of characteristics that relate to
particular customers or customer groups.

Data Mining
 Identify and profile the best customers

 Calculate their lifetime value
 Predict purchasing behavior

Data Analysis
Customer segmentation
Recency-frequency-monetary analysis
Lifetime value analysis
Predictive modeling

Customer Segmentation
Customer
Segmentation:
The process of breaking large groups of

customers into smaller, more homogeneous
groups.

Recency-Frequency-
Monetary Analysis
1. Identifies customers most likely to

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

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

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

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.

Campaign Management
Developing customized
offerings for appropriate segment
Pricing these offerings

attractively
Communicating offerings in a way

that enhances customer relationships

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

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

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

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

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

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

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

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.

Email Marketing Bumps Web site
Traffic
Beyond the Book
Looking for return customers? Email marketing

gets customers to click back. Being well-
established, trusted, and easy makes email the
ideal medium for marketers to get the word out.
Online traffic is fairly simple to track, and using
customer information gathered from online
purchases offers businesses a relatively simple
way to establish a relationship with customers.
Source: “Email marketing ‘a trusted method,’” www.directnews.co.uk, Wednesday November 11, 2009.

Chapter 21 Videos
Method – Customer Relationship

Beyond the Book
Management
How has method identified customer relationships
within the organization?
What does the company do to nurture those
relationships?
http://www.cengage.com/marketing/boo
k_content/1439039429_lamb/company_c
lips/ch21.html

Chapter 21 Customer Relationship Management CRM

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Chapter 21 Customer Relationship Management CRM

Uploaded by

Copyright:

Available Formats

21

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1

LO 1 Define customer relationship management

LO 2 Explain how to identify customer relationships

LO 3 Understand interactions with the current customer

LO 4 Outline the process of capturing customer data

LO 5 Describe the use of technology to store and

LO 6 Describe how to identify the best customers

LO 7 Explain the process of leveraging customer

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 3

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 4

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 5

Encourage and track customer interaction with the company

Foster customer-satisfying behaviors

Link all processes of the company from its customers

Allows companies to tightly focus in on their target markets

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 6

Leverage customer Understand interactions

Capture customer data

Store and integrate

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 7

1. Customers take center stage

2. Business must manage the customer

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 8

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 9

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 10

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 11

Knowledge Management is…

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 12

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 13

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 14

• The success of CRM can be directly

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 15

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 16

All possible areas of a business

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 18

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 19

Conversations with salespeople

Interactions via the Web

Traditional phone conversations

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 20

In a CRM system, channel interactions are

Interactions between the company and the

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 21

Describe the use of

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 22

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 23

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 24

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 25

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 26

 Identify and profile the best customers

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 27

Lifetime value analysis

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 28

The process of breaking large groups of

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 29

1. Identifies customers most likely to

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 30

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 32

Retain loyal Inducing product trial

Designing targeted Improving

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 33

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 34