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

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 2
 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

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

 What Is Customer
Relationship Management?

Define customer
relationship
management

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

 What Is Customer
Relationship Management?

Customer Relationship
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.

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

 Customer Relationship
Management Strategy
Organize
Organizethe
thecompany
companyaround
aroundcustomer
customersegments
segments

Encourage
Encourageand
andtrack
trackcustomer
customerinteraction
interactionwith
withthe
thecompany
company

Foster
Fostercustomer-satisfying
customer-satisfyingbehaviors
behaviors

Link
Linkall
allprocesses
processesof ofthe
thecompany
companyfrom
fromits
itscustomers
customers
through
throughits
itssuppliers
suppliers

Allows
Allowscompanies
companiesto
totightly
tightlyfocus
focusin
inon
ontheir
theirtarget
targetmarkets
markets

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

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

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

 Implementing a CRM System

Key Points:

1. Customers take center stage

2. Business must manage the customer

relationship across all points of
customer contact

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

Identify Customer Relationships

Explain how to
identify customer
relationships with
the organization

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

 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.

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

 Identify Customer
Relationships

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

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

 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.

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

 Knowledge Management
Experiential
Experiential
observations
observations

Comments
Comments
Collected
Collected
Information
Information
Includes:
Includes: Customer
Customer actions
actions

Qualitative
Qualitative facts
facts

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

 Empowerment

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

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

 Successful CRM
Occurs when a customer and a
company representative exchange
information and develop learning
Interaction
Interaction relationships

• The success of CRM can be directly

measured by the effectiveness of the
interaction between the customer and the
organization.

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

 Understand Interactions
of the Current Customer Base

Understand
interactions
with the current
customer base

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 Exhibit 21.2
Customer-Centric Approach for
Managing Customer Interactions

© Image Source/Jupiterimages
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 17
 Interactions of the
Current Customer Base

All
Allpossible
possibleareas
areasof
ofaabusiness
business
Touch
TouchPoints
Points where
wherethe
thecustomers
customerscommunicate
communicate
with
withthat
thatbusiness.
business.

Communications
Communicationsbetween
between
Point-of-Sale
Point-of-Sale customers
customersandandorganizations
organizationsthat
that
Interactions occur
occuratatthe
thepoint
pointof
ofsale,
sale,normally
normally
Interactions in
inaastore
store

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

 Capture Customer Data

Outline the
process of capturing
customer data

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

 Capture Customer Data
The traditional approach for acquiring data from
customers is through channel interactions.

Store
Store visits
visits

Conversations
Conversations with
with salespeople
salespeople

Interactions
Interactions via
via the
the Web
Web

Traditional
Traditional phone
phone conversations
conversations

Wireless
Wireless communications
communications

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

 Capture Customer Data

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.

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

 Store and Integrate
Customer Data

Describe the use of

technology to store
and integrate
customer data

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

 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

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

 Store and Integrate
Customer Data
Response
Response list
list Compiled
Compiled list
list

::::::::::::::::::::::::::::::::::::::::::
::::::::::::::::::::::::::::::::::::::::::
Database \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
Database
///////////////////////////////////////////////////////////
~~~~~~~~~~~~~~~~~~~~~~~~~~
~~~~~~~~~~~~~~~~~~~~~~~~~~

Data Warehouse

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

Identify the Best Customers

Describe how to
identify the best
customers

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

 Identifying the Best
Customers

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

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

 Data Mining

 Identify and profile the best customers

 Calculate their lifetime value
 Predict purchasing behavior

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

 Data Analysis

Customer
Customer segmentation
segmentation

Recency-frequency-monetary
Recency-frequency-monetary analysis
analysis

Lifetime
Lifetime value
value analysis
analysis

Predictive
Predictive modeling
modeling

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

 Customer Segmentation
Customer
Customer
Segmentation:
Segmentation:

The process of breaking large groups of

customers into smaller, more homogeneous
groups.

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

 Recency-Frequency-
Monetary Analysis

1. Identifies customers most likely to

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

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

 Lifetime Value Analysis
and Predictive Modeling
Lifetime
Lifetime Value
Value Analysis:
Analysis:
A data manipulation technique that projects
the future value of the customer over a period
of years.

Predictive
Predictive Modeling:
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.
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 31
 Leverage Customer
Information

Explain the
process of leveraging
customer information
throughout the
organization

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

Exhibit 21.3
Common CRM Marketing
Database Applications
Reinforcing
Reinforcing customer
customer
Campaign
Campaign management
management purchase
purchase decisions
decisions

Retain
Retain loyal
loyal Inducing
Inducing product
product trial
trial
customers
customers by
by new
new customers
customers

Increasing
Increasingeffectiveness
effectiveness
Cross-selling
Cross-selling other
other of
ofdistribution
distributionchannel
channel
products
products and
and services
services marketing
marketing

Designing
Designing targeted
targeted Improving
Improving
marketing
marketing communications
communications customer
customer service
service

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

 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.

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

 Campaign Management

Developing
Developingcustomized
customized
offerings
offeringsfor
forappropriate
appropriatesegment
segment

Pricing
Pricingthese
theseofferings
offerings
attractively
attractively

Communicating
Communicatingofferings
offeringsin
inaaway
way
that
thatenhances
enhancescustomer
customerrelationships
relationships

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 35

 Retaining Loyal Customers
Retaining
Retainingan
anadditional
additional55percent
percentof
ofcustomers
customerscan
can
increase
increaseprofits
profitsby
byas
asmuch
muchasas25
25percent
percent

Improving
Improvingcustomer
customerretention
retentionby
by22percent
percentcan
can
decrease
decreasecosts
costsby
byas
asmuch
muchas as10
10percent
percent

Loyalty
Loyaltyprograms
programsreward
rewardloyal
loyalcustomers
customersfor
for
making
makingmultiple
multiplepurchases
purchases

Loyalty
Loyaltyprograms
programsprovide
provideinformation
informationabout
about
customers
customersand
andtrends
trends

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 36

 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

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 37

 Designing Targeted
Marketing Communications
Infrequent
Infrequent Offer direct incentives, such
Users
Users as a price discount

Moderate
Moderate Offer more reinforcement of
Users
Users past purchase decisions

Heavy
Heavy Design around loyalty and
Users
Users reinforcement of purchase

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 38

 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

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 39

 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

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 40

 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

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 41

 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

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 42

 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.

Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 43

 Email Marketing Bumps Web site
Traffic

Looking for return customers? Email marketing

Beyond the Book

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 Copyright ©2012 by Cengage Learning Inc. All rights reserved 44

 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/book_c
ontent/1439039429_lamb/company_clips/c
h21.html
Chapter 21 Copyright ©2012 by Cengage Learning Inc. All rights reserved 45