Customer Relationship Management

Customer Relationship Management

Marketing Strategy and CRMMarketing Strategy and CRM

Customer Loyalty and Satisfaction

Marketing Strategy & CRM• Understanding relationship between

relationship, loyalty & profitability

• Satisfaction can be broadly characterized as a post-purchase evaluation of product quality given pre-purchase expectations

• Satisfaction is the consumer’s response to and evaluation of the perceived discrepancy between prior expectations and the actual performance of the product as perceived after its consumption.

Four Types of Loyalty

Strong

Weak

Repeat Purchase

Strong

Strength Of Affect

Weak

True

Spurious

Latent

None

Marketing Strategy & CRM

Three entirely different definitions of loyalty1.Behavioral2.Affect loyalty3.Situation specific loyalty

Brands Have Four Levels of Meaning

1. Benefits– Functional – Emotional– Internal

2. Brand personality3. Brand attributes4. Brand conveying values

What we Know about Customer Satisfaction

• Satisfied customers may not remain loyal

• Dissatisfied customers tell more people than satisfied customers

• Only a small percent of customers ever complain

• Relationships based on satisfaction are, in fact, weak

Confirmation/Disconfirmation Model of

Satisfaction

Satisfaction is the difference between what was expected and what was experienced.

– “Was our service above, below, or at the same level of what you expected?”

There are three Types of Relationships Companies

Have with Customers

• Acquaintance: Based on satisfaction

• Friendly: Based on trust• Partner: Based on commitment

Factors Intervening between

Satisfaction and Loyalty• Shear number of competitors’

offerings• Novelty seeking• Lack of personal attachment

with brand• Lack of consistency in

performance• New competitors offering

better value or a greater variety of ancillary services

• Customer expectation of future use

• Customers may not want a relationship with your firm

Developing a Loyalty Profile

of Your Customers

• Customer loyalty is based on favorable attitudes and behavioral responses such as repeat purchase. It is both– Behavioral– Attitudinal

• Customers may be emotive loyalists or deliberative loyalists.

Are Loyal Customers Always More Profitable?

• Five reasons many say yes:1. Increased number of purchases2. Tendency to “Trade-Up”3. Tendency to become less price sensitive

because of focus on convenience and purchase efficiencies

4. Word-of-mouth referrals 5. Lower cost of servicing them

New Findings Regarding Customer Retention and

Profitability• In terms of profitability per

month, short lifetime but high revenue customers were most attractive.

• Profits for long-life customers did not increase over time.

• Short-life customers paid higher prices than long-life customers.

• Some long-life customers may cost the firm more in the long run due expenses.

Loyalty, Rewards, and Frequency

Programs• More than half the United States

participates in at least one• Flying United vs. Singapore

Airlines• Loyalty programs are primarily

defensive• Are CRM only if data is used to

establish dialogue• Are useful for bringing friends

and family into the program• Are useful in creating databases

The Usefulness of CRM for any Organization

Questions To Ask Regarding CRM’s Usefulness To Any

Organization• Do we have a steep or shallow skew?• Do we have a multichannel or single-

channel value proposition?• Is our market characterized by “always a

share” or “lost for good” relationships?

CRM Strategy CycleThe “New Marketing”

Strategies

RetentionRetention

WinbackWinback

AcquisitionAcquisition

Acquisition Strategies

• Necessary to fill the pipeline since companies lose 2-40 percent of their customers every year.

• Mass media advertising still useful here.

• Capture potential user IDs and gain permission to begin dialogue.

• Begin with defining your target and goals for the acquisition campaign.

How To Develop Effective Acquisition Strategies

• Qualitative and quantitative marketing research

• Eliminate switching cost • Present your offer at the

appropriate times• Encourage word-of-mouth

referrals

Retention Strategies

• Can be based on:– Rewarding– Bonding– Service structure strategy

• With two types of bonds– Programmatic– Humanistic

Types of Retention Strategies

• Preferential treatment

• Rewarding• Employ

idiosyncratic-fit • Personalization• Customization• Cross-selling• Up-selling• Managing

migration

• Conversion• Profit driving• Brand building• Providing and

attaining • Intimacy• Online customer

management• Data mining

Preferential Treatment

…Is the customer’s perception of how much better they are treated than the company’s other customers. (Like a King!)– Marshal Field and company’s

Glamorama– VIP rooms– “Comps”

Rewarding

• Offering tangible benefits such as pricing or gift incentives to its regular customers in return for their loyalty. – Frequent flyer programs– Customer point programs– Free gifts

– Used as much in B2B as in B2C

Employ the Idiosyncratic-Fit Heuristic in Creating Loyalty

Programs• This is the tendency for customers to

be enticed by offers for which they enjoy a relative advantage.

• Increasing program requirements can enhance a customer’s likelihood of joining IF they feel they have an advantage over others.

• Make them feel that they, but few others, qualify.

Personalization

• Consumer’s perception about how warmly they are treated.

• Web related: a company-controlled web site that a customer can modify to suit their own purposes.

• Example: the personalized independently owned women’s fashion business offered by women selling out of their own homes.

Customization

“It’s one thing to train a sales staff to be warm and attentive. It’s quite another to identify, track and interact with an individual customer and then reconfigure your product or service to meet that customer’s needs.”

Peppers, Rogers, and Dorf

Customization

• Over the Web, customization refers to company-controlled web site modifications.

• Wisconsin Tourist Bureau can customize users’ web pages by emphasizing their interests through usage: fishing, hunting, boating, antiquing, hiking, biking, birding, skiing, etc.

• Companies can also develop new ideas, customize product functions and features, and collect customer info through continuous contact through many touch points.

Cross-Selling and Up-Selling

• Brooks Brothers, NRS, and Amazon• Items to include are determined by

customer habits and clever “bundling” • Of all the CRM strategies, up-selling is

the most conversation oriented – wait for the relationship to progress through acquaintanceship and trust stages and enter the commitment stage

Reducing and Reversing Downward Migration

• McKinsey says reducing downward migration can provide 2-4 times more profit than reducing attrition.

• “Migration is the change in customer value over time.

• Measuring downward migration is key, for it may be a precursor to defection.

Conversion

• Some long-time customers may be barnacles and not treasures. – If loyalty is overrated, then try to convert your

short-term, transaction-oriented customers to a more attractive segment.

• Rewards based on purchase frequency, dollar value, or profit may elevate these customers to more profitable ones.

Brand Building through CRM Can Help Companies:

– Acquire more customers– Increase customer share– Lower rate of brand defection– Express your brand through CC personnel– Enable advertising and SP to be more

targeted– Collect better metrics for management

(CLV)– Get more direct and frequent customer

inputs– Provide new types of marketing research

data– Provide new segmentation data by mining– Provide more customer need data– Provide more multichannel usage data

What Brands Do

• SYMBOLIZE–Attributes, benefits, producer’s values, culture, brand

–Personality, and users’ personalities

• EVOKE–Relationships, experiences, emotions, and life

• CREATE–Personal meaning, loyalty, friendship, and romance

Providing and Attaining Intimacy

• Customers do not want deep relationships with every company, it’s untenable– …but customers do want relationships

with companies providing them with products and services with which they are highly involved

• Lesson: companies should not try to establish bonds with every customer, just those for whom the products are important

Online Customer Management

and Data Mining

• OCM consists of– Understanding customers RSFM– Conduct customer web log analysis– Site improvement

Winback Strategies

• Sometimes referred to as “Regain Management” or “Comeback Strategies”– The process of winning back customers

who either give notice to terminate or have already ended the relationship

– Winback is the process of firms’ revitalizing relationships with customers who have defected

The Importance of Winback…

• Research has shown that a firm has a– 60- 70 percent chance of successfully

repeat-selling to an active customer– 20-40 percent chance of successfully

repeat-selling to a lost customer– 15-20 percent chance of successfully

closing the sale on a brand new customer

Questions?