1. CUSTOMER RELATIONSHIP MANAGEMENT Chapter 11 by Jennifer Read & Janelle Rogers

2. CHAPTER OVERVIEW What is Customer Relationship Management (CRM)? What is Customer Loyalty? The CRM Process Cycle Collecting Customer Data Customer Database Identifying Information Customer Privacy & CRM Programs Analyzing Customer Data & Identifying Target Customers Developing CRM Programs Implementing CRM Programs 3. WHAT IS CUSTOMER RELATIONSHIP MANAGEMENT (CRM)? A business philosophy and set of strategies, programs, and systems that focuses on identifying and building loyalty with a retailers most valued customers. 4. CUSTOMER RELATIONSHIP MANAGEMENT GOAL Goal: The retailers goal or objective of CRM is to create a base of loyal customers and increase its share of wallet Share of wallet: The percentage of the customers purchases made from the retailer. 5. CUSTOMER LOYALTY What is customer loyalty? Customers who are committed to purchasing merchandise and services from the retailer and will resist the activities of competitors attempting to attract their patronage. 6. THE CRM PROCESS CYCLE 7. COLLECTING CUSTOMER DATA Set-Up a Customer Database to include: Transactions Customer Contacts Customer Preferences Descriptive Information Responses to Marketing Activities 8. IDENTIFYING INFORMATION Four ways retailers can obtain customer data: Ask customers for identifying information Use biometrics to identify customers Offer frequent shopper programs Connect Internet and store purchasing data 9. Customer Identifying Information asking a customer for information such as their phone number or zip code, upon check-out. Biometrics uses a fingerprint to identify a customer by a swipe of their fingerprint upon check-out. Frequent-Shopper Programs also known as loyalty programs, they identify and provide rewards to customers who patronize a retailer. Connecting Internet Purchasing Data with the Stores check store website to see if customer used third party credit card; obtain shipping information. 10. PRIVACY & CRM PROGRAMS Privacy Concerns: Control over personal information when engaging in marketplace transactions Knowledge about the collection and use of personal information Cookies text files that identify online visitors when they return to a web site. 11. PROTECTING CUSTOMER PRIVACY Opt In Retailers must get consumers to agree to share their personal information. Opt Out Consumers can decide not to share their personal information. 12. FAIR INFORMATION PRACTICES Fair information practices set by the Federal Trade Commission: Notice and Awareness Choice/Consent Access/Participation Integrity/Security Enforcement/Redress 13. ANALYZING CUSTOMER DATA & IDENTIFYING TARGET CUSTOMERS Retail Analytics: Statistical techniques/models to find patterns in customer purchase data. Market Basket Analysis Type of retail analytics that focuses on the basket of products purchased. Identifying the Best & Most Profitable Customers Customer Lifetime Value The expected contribution from customers to the retailers profits. 14. THE CUSTOMER PYRAMID Platinum Best Most loyal Least price sensitive 80-20 rule: 80% of sales or profits come from 20% of the customers 15. Platinum Customers with top 25% of CLVs. Most profitable and loyal customers; not overly concerned about merchandise prices. Gold Purchases significant amount from retailer; prices play a larger role in purchasing decision making; not as loyal of a customer; patronize some of the retailers competitors. Iron Purchases a modest amount from retailer; no special treatment due to spending levels, loyalty and profitable. Lead Customers with lowest CLVs. These customers can make a negative contribution to the firms income; demands a lot of attention but doesnt buy a lot, or they return merchandise often. 16. RFM ANALYSIS RFM Analysis (recency, frequency, monetary anaylsis): Used by catalog retailers and direct marketers to identify: The retailers best prospects on basis of how recently they made a purchase How frequently they make purchases How much they bought 17. DEVELOPING CRM PROGRAMS Customer Retention Frequent-Shoppers Programs Special Customer Services Personalization Community 18. FREQUENT-SHOPPER PROGRAMS Frequent-Shopper Programs are used to build customer databases; suggestions for designing programs that build repeat purchases and loyalty: Use tiers Offer choices Incorporate charitable contributions Reward all transactions Feature transparency and simplicity 19. SPECIAL CUSTOMER SERVICES Retailers who provide high-quality customer service to its best customers. Private parties Exclusive offers 20. PERSONALIZATION Offer unique benefits to individual customers Develop programs for small groups or individuals (1-to-1 Retailing) 21. COMMUNITY 4th step in building customer retention and loyalty: Develop sense of community by offering community activities. Customers tend to think of retailer as family. 22. CONVERTING GOOD CUSTOMERS INTO BEST CUSTOMERS The process of increasing sales from good customers: Customer alchemy turning iron and gold customers into platinum (top of the pyramid) customers! Add-on selling a way to achieve customer alchemy (sell more products and services) to existing customers 23. DEALING WITH UNPROFITABLE CUSTOMERS Unprofitable customers cost a business more money than is profited. The process of no longer selling to unprofitable customers is referred to as getting the lead out. 24. IMPLEMENTING CRM PROGRAMS To effectively implement CRM programs, coordination is required between the Human Resources, Marketing, IT, Store Operations, and the Management Team.