Professional Documents
Culture Documents
Chapter 15 F
Chapter 15 F
Two-way communication
One-way communication /collaboration
4. Consumers.
The individuals who are end users of products and services.
Marketers must differentiate between business customers and
final consumers because different tactics are often employed in
the B2C and B2B markets.
Overview
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
Customer Relationship Management (CRM)
CRM:
Firms are recognizing that if they don’t keep their customers happy,
someone else will.
Overview
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
CRM Benefits
CRM benefit include increased revenue from
better prospect targeting, increase wallet
share with current customers, and retaining
customers for longer periods of time.
CRM tactic can also decrease costs, resulting
in greater profitability.
The most significant benefit is CRM’s cost
savings advantage.
CRM Benefits
Retention is less costly than acquisition because:
Word-of-mouth:
Satisfied customers recommend Web sites, stores, and products to their
friends.
= The heart of CRM.
Positive word of mouth can attract many new customers, but negative
word of mouth can drive them away.
Close more deals. Teams can effectively work together to close accounts by
scheduling events, coordinating meetings, and updating client files on every
account.
Seize all sales opportunities. Leads are recorded, routed to the right person.
Recognize "big picture" market trends. Analyze current and historical sales
data that you immediately spot changes in customer behavior or shifts in key
market indicators.
Marketing Automation
Marketing automation:
Softwares:
Take data from Web sites and databases and turns it into reports for
fine-tuning CRM efforts,
Include e-mail campaign management, database marketing, market
segmentation, Web site log analysis, and more.
Customer Service
Customer service permeates every stage of customer
acquisition, retention, and development practices, although
most service occurs post-purchase when customers have
questions or complaints.
Key tools include e-mail, online live chat, and web self-
service through FAQ (frequent ask question) and more.
Start: With a vision that fits the company culture and makes sense for
the firm’s brands and value propositions.
Why it fails? Firms do not realize how pervasive CRM are &
underestimate the costs.
When a firm installs CRM software to integrate data from the Web site and
brick-and-mortar retail operations,
Customer service reps need training and must be committed to the
initiative.
Success: The CRM vision start at the top and filter throughout the
company to keep the firm completely customer focused.
1. CRM Vision
Guarding Customer Privacy
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. Individuals do not get upset with firms who send valuable and
timely information to them.
1. CRM Vision
TRUSTe
To help Web sites earn the trust of their users, an independent,
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.
Posting notice and disclosure of collection and use practices
regarding personally identifiable information via a posted privacy
statement.
Giving users choice and consent over how their personal
information is used and shared.
Putting data security and quality, and access measures in place
to safeguard, update, and correct personally identifiable information.
1. CRM Vision
TRUSTe
In addition, sites must publish the following information on their sites to
gain the TRUSTe seal:
What personal information is being gathered by your site.
Three Levels of Relationship Marketing Source: Adapted from Berry and Parasuraman (1991)
Overview
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
3. Valued Customer Experience
Most customers want brand loyalty as much as the firms they patronize want it:
Customers patronize stores, services, and Web sites where they are treated
like individuals with important needs and where they know those needs will
be met, “satisfaction guaranteed.”
Users believe the company cares when they get an e-mail about nifty new uses
of the PalmPilot (addressed to them by name + refers to the exact product
purchased).
3. Valued Customer Experience
Customer Preferences Vary:
These options cover many technologies, using both automated and human
intervention for both synchronous (simultaneous) and asynchronous
communication.
The Internet must create valued customer experiences and firms must be adept
with many different technologies and processes, putting the focus on customers
and their preferences, not the company’s capabilities.
Automated Human
The entire supply chain can work together to single-mindedly focus on meeting
consumer needs and make higher profits in the process.
Imagine that a customer orders a particular shirt from a clothing retailer’s Web
site:
If the shirt is out of stock, the customer might see a Web screen with that message.
With an integrated CRM-SCM system, the system can instantly check inventory levels
at the retailer, the wholesaler or manufacturer to determine availability.
Then the system notify the customer and offer options: = Wait two weeks for delivery
from the manufacturer or consider a similar shirt currently in stock.
Employees
Suppliers
CRM–SCM Integration
4. Organizational Collaboration
Connecting customers with supply chain businesses provides several
advantages:
1. All firms will share transaction data = inventories can be kept low. Producers
/wholesalers receive data about consumer orders + can produce goods in a
timely manner.
2. Upstream firms can use the data to design products that better meet
consumer needs.
3. If customer service reps have up-to-the-minute information about product
inventories, they will be able to better help consumers immediately.
As more firms integrate CRM and SCM activities, they will become more
responsive to individual customer needs.
Dell Computers produces and ships customized computers within days.
This type of integration is quite difficult when a firm has many different
channels for its brands + when each firm uses different
software/hardware to manage its internal systems.
4. Organizational Collaboration
Extranet
Extranets are two or more intranet networks that are joined for the
purpose of sharing information.
Beginning:
When companies select target markets in the e-marketing plan.
When opportunities often arise when a new target group appears.
Acquire
Partners
Transact
Internet Service Extranet
Retain
Grow
Customer
Interaction Customize
Differentiate
Digging deeper into CRM techniques reveals that firms use this process to
focus on moving specific individual customers through the customer care life
cycle.
CRM Process
Source: Formulated from the ideas of Moon (2000) and Kasanoff and Thompson (1999)
5. CRM Processes
Identifying Customers
Every piece of user information goes into a database that helps firms
identify the best customers.
Some customers call more often with questions and inquiries; some
return products more frequently.
Some customers are clearly not profitable and, thus, should be “fired”
so that the firm can allocate resources profitably.
5. CRM Processes
Customizing the Marketing Mix
When a firm has identified prospects & differentiated customers according to
characteristics, behavior, needs, or value,
It can customize offerings to various segments or individuals.
Customization occurs throughout the marketing mix, not just in the product
offerings.
Marketing communication messages can be tailored to individuals and delivered
over the Internet in a timely manner.
Through customization firms can zero in on the precise needs of each prospect
and customer and build long-term, profitable relationships.
Firms can track which sites users visited before and after theirs,
They use this information to guess which competitive products are under
consideration, + learn what about users’ interests.
Tracking user behavior is useful to both users and companies, but it has its critics
because of privacy considerations.
Retailers gather information from each channel + filter it into a common database.
A customer can telephone the customer service representative to discuss a product
purchased in the brick-and-mortar store last week, and refer to an e-mail sent
yesterday, because the data are all in the database under one customer record =
A 360 degree customer view.
6. CRM Information
8 critical success factors for building successful e-business relationships
with customers:
6. Help customers do their jobs —if a firm provides products and services
to help customers perform well in their businesses, they will be loyal and
pay a premium for the help.
The Internet is the first fully interactive + individually addressable low cost
multimedia channel.
Cookies, Web site logs, bar code scanners help to collect information about
consumer behavior and characteristics.
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.
Cookies
Cookie files are the reason that customers returning to Amazon.com get
a greeting by name + users don’t have to remember passwords to
every site for which they are registered.
Cookie files allow ad-server firms to see the path users take from site to
site and, serve advertising banners relevant to user interests.
Cookies keep track of shopping baskets and other tasks so that users
can quit in the middle and return to the task later.
Company-Side Tools
(push) Description
Cookies Cookies are small files written to the user’s hard drive after visiting a
Web site. When the user returns to the site, the company’s server looks
for the cookie file and uses it to personalize the site.
Web log analysis Every time a user accesses a Web site, the visit is recorded in the Web
server’s log file. This file keeps track of which pages the user visits, how
long he stays, and whether he purchases or not.
Data mining Data mining involves the extraction of hidden predictive information in
large databases through statistical analysis.
Real-time profiling Real-time profiling occurs when special software tracks a user’s
movements through a Web site, then compiles and reports on the data at
a moment’s notice.
Collaborative filtering Collaborative filtering software gathers opinions of like-minded users
and returns those opinions to the individual in real-time.
Outgoing e-mail Distributed E- Marketers use e-mail databases to build relationships by keeping in
Mail touch with useful and timely information. E-mail can be sent to
individuals or sent en masse using a distributed e-mail list.
Chats A firm may listen to users and build community by providing a space for
Bulletin Boards user conversation on the Web site
iPOS terminals Interactive Point of Sale terminals are located on a retailer’s counter,
and used to capture data and present targeted communication.
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, and much more.
Data Mining
Marketers don’t need a priori hypotheses to find value in databases, but
use software to find patterns of interest.
7. CRM Technology
Real-Time Profiling
Customer profiling uses data warehouse information to help marketers
understand the characteristics and behavior of specific target groups.
American Express has done this for years: It sends bill inserts to groups
of customers based on their previous purchasing behavior.
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,
Allows marketers to profile + make instantaneous and automatic
adjustments to site promotional offers and Web pages.
For example, the software could be set to use the following rule: If a
customer orders a Dave Matthews Band CD, display a Web page
offering a concert T-shirt.
7. CRM Technology
Collaborative Filtering
In the offline world, individuals often seek the advice of others before
making decisions.
Collaborative filtering software gathers the recommendations of an
entire group of people + presents the results to a like-minded
individual.
iPOS Terminals
Small customer facing machines near the brick-and-mortar cash register,
used to record a buyer’s signature for a credit card transaction.
They can gather survey and other data + present individually targeted
advertising and promotions as well.
7. 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.
Agents
= Shopping agents and search engines match user input to databases
and return customized information.
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.
Client-Side Tools
(pull) Description
Agents Agents are programs that perform functions on behalf of the user,
such as search engines and shopping agents.
Experiential marketing Experiential marketing gets the consumer involved in the
product to create a memorable experience, offline or online.
Individualized Web Personalized Web pages users easily configure at Web sites such
portals as MyYahoo! and many others.
Wireless data services Wireless Web portals send data to customer cell phones, pagers,
and PDAs, such as the PalmPilot.
Web forms 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.
FAX-on-demand With FAX-on-demand, customers telephone a firm, listen to an
automated voice menu, and select options to request a FAX be
sent on a particular topic.
Incoming e-mail E-mail queries, complaints, or compliments initiated by
customers or prospects comprise incoming e-mail, and is the
fodder for customer service.
Individualized Web portals are more often used to build relationships in the B2B
market than the B2C market.
Allow supply chains access inventory and account information, and track various
operations.
Webridge sells partner and customer relationship management software
(PRM/CRM) that allows businesses to access all the data they need on demand.
= A huge improvement over the previous method, where buyers searched
through piles of brochures, catalogs, and price lists that included many products
not carried by channel partners and were constantly out-of-date.
7. CRM Technology
Wireless Data Services
They are included as a separate tool because of their rapid growth and
distinctive features.
Wireless users only want text data due to the screen size of wireless
devices and download time for graphics.
FAX-on-Demand
In the B2B market, firms often want information sent via FAX machine.
Services such as eFax.com allow Internet users to send and receive FAX
transmissions at their Web sites.
Retain
Grow
Lifetime value (LTV)—net present value of the revenue stream for any particular customer
over a number of years.
AOV over time—increase or decrease.
Average annual sales growth for repeat customers over time.
Loyalty program effectiveness—sales increase over time.
Number of low value customer moved to high value.
The numbers may look small (calculation discounts revenue to its PV).
The LTV increases after the 5th year = higher retention rate in later years.
Few customers are left in year 10.
This calculation demonstrates the benefits of retaining customers over time and
the need for building share of wallet.
It also shows that no matter how good a firm is at retaining customers, new
customer acquisition is still an important activity.
Total Retention Total Net NPV at 10-Year
Year Customers Rate Revenue Profit 15% LTV
1 1,000 60% $35,900 $ 5,900 $ 5,900 $ 66.94
2 600 65% 45,540 27,540 23,948 118.12
3 390 70% 29,601 17,901 13,536 129.15
4 273 75% 20,721 12,531 8,239 138.35
5 205 78% 15,541 9,398 5,373 143.45
6 160 79% 12,122 7,330 3,645 145.55
7 126 80% 9,576 5,791 2,504 146.81
8 101 80% 7,661 4,633 1,742 146.81
9 81 80% 6,129 3,706 1,212 146.81
10 65 80% 4,903 2,965 843 146.81