Chapter 11

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If you don’t know what makes them tick, you lose your
customers since you cannot serve them in the way they
prefer.

But if you know what customers expect from you and

you meet or even give them more than their expectation,
you will be assured of repeat business from them.

For example, if your customers expect reliable delivery

and you don't disappoint them, you stand to gain repeat
business.

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Customer Relationship
Management CHAPTER 1
2

(CRM)
• A business philosophy and set of strategies, programs,
and systems that focus on identifying and building
loyalty with a retailer’s most valuable customers.

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Traditional Interaction

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CRM Identifying Top Customers are Crucial
CHAPTER 1
2

Not all of your customers are equal. Far from it.

Some earn you more profit than others. And

some might even waste your time.

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CRM Identifying Top Customers are Crucial
CHAPTER 1
2
…..cont’d

According to the Pareto principle:

80% of your profits come from 20% of your customers.

Therefore, you
really want to
focus on those
20% of
customers who
are essential for
your business!
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CRM Identifying Top Customers are Crucial
CHAPTER 1
2
…..cont’d

CRM software provides analytical tools that can help to

identify a firm’s top customers. It can also help identify
the customers who are taking up most of the company’s
time – the customers that aren’t vital for company!

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CRM CHAPTER 1
2

• So, since all customers are not equally profitable,

it goes to say that customers need to be treated
differently
• Retailers now concentrate on providing more value to
their best customers using targeted promotions and
services to increase their share of wallet (the
percentage of the customers’ purchases made from the
retailer)

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Customer CHAPTER 1
2

Loyalty

• Committed to purchasing merchandise and services

from a retailer
• Resist efforts of competitors to attract them

• Emotional attachment to retailer

• Personal attention
• Memorable positive experiences

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Can Offering Price Discounts Achiev
Customer Loyalty? e CHAPTER 1
2

No!
Business strategies
like this can be
copied by
competitors.
These strategies encourage
customers to be always
looking for the best deal
rather than developing a
relationship with a your
company.
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The CRM CHAPTER 1
2

Process

CRM is an interative process that turns customer data into

customer loyalty through four activities:
1. Collecting customer data
2. Analyzing the customer data and identifying target
customers
3. Developing CRM programs
4. Implementing CRM programs

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CRM ProcessCycle CHAPTER 1
2

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Collecting Customer Data: Customer Database
CHAPTER 1
2

• Transactions – a complete history of purchases

• Purchase date, price paid, items bought, whether or not
the
purchase was stimulated by a promotion
• Customer contacts by retailer (touch points) --visits to
web site, inquires to call center, direct mail sent to
customer
• Customer preferences
• Descriptive information about customer
• Demographic data
• Customer’s responses to marketing activities
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Collecting Customer Data:
Identifying Information which is needed
CHAPTER 1
2

Approaches that store-based retailers use:

• Asking for information to identify their customers
• Telephone number, name and address
• Offering frequent shopper cards
• Loyalty programs that identify and provide rewards to
customers who patronize a retailer
• Private label credit card (that has the store’s name on
it)
• Connecting Internet purchasing data with the stores

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Privacy CHAPTER 1
2

Concerns

• Control over Collection

• Do customers know what information is
being collected?
• Do customers feel they can decide upon the
amount and type of information collected
by retailers?
• Control over Use
• Do customers know how the information
will be used by the retailer?
Steve Cole/Getty Images

• Will the retailer share the information with

third parties?
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Heighten Privacy
Concerns
When Using Channel
CHAPTER 1
2

Electronic
• Information collected
without the awareness
of customers

• Collecting click stream

data using cookies
Similar to an invisible
person videotaping a
customer as they walk
through a store
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Customer’s to
Decision
OfferInformatio
CHAPTER 1
2

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Protecting Customer
Privacy:
Difference betweenU.S.and EU
CHAPTER 1
2

Europe US
• Stringent consumer privacy laws • Limited protection in specific
• Information can only be collected for areas
specific purposes • Credit reporting
• Purpose must be disclosed to customer • Video rentals
• Information can only be used for • Banking
specific purpose • Medical records
• Information cannot be exported to
• Consumers must
countries with less stringent regulations
explicitly tell retailers not to use
• Consumers own their personal their personal information
information, and retailers must get
consumers to explicitly agree to share
this personal information
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Analyzing Customer Data
and Identifying Target
CHAPTER 1
2

Customers
Analyze the customer database and
convert the data into information
that will help retailers develop
programs for building customer
loyalty
Data Mining – technique used to
identify patterns in data
• Market Basket Analysis
• Identifying Market Segments
• Identifying Best Customers

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Market Basket CHAPTER 1
2

Analysis

Data analysis focusing upon the

composition of the customer’s market
basket – what items are bought
during a single shopping occasion
Uses:
• Adjacencies for displaying
merchandise
• Joint promotions
e
• Bananas in the cereal aisle as well as in the fruit section
• Tissues with cold medicine

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 Market Basket Analysis: Asda CHAPTER 1
2

Product Placed Near

Bananas cornflakes, produce
Kleenex paper goods, cold
Measuring spoons medicine
Torches Housewares
Boaster biscuits cake ingredients

Insect spray hardware,

Halloween costumes
coffee
camping gear
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Which Customer Probably Has CHAPTER 1
2

the Greatest Lifetime Value?

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Custome Pyramid CHAPTER 2 11
1
CHAPTER

Platinum
Best
Most loyal
Least price sensitive

80-20 rule:
80% of sales or profits come from
20% of the customers

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Custome Pyramid CHAPTER 1
2

Iron
Doesn’t deserve
as much
attention

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Implementing CRM CHAPTER 1
2

Programs

• More than CRM management, computer systems, and

communication about the importance of customers.
• In addition…..
• Close coordination between departments –
Marketing, MIS, Operations, HR
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Shift in orientation:
• Product Centric

• Customer Centric 48
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