Class Discussion Notes MKT 390 - 401

March 27, 2001

Customer Relationship Management

Relationship marketing Establish Maintain Enhance Commercialize Fulfill the promise Facilitate 2 way communication Focus

Share of mind Share of customer Share of wallet

Customer Relationship Management

Stakeholders Employees Business customers and suppliers Other partners Consumers

Customer Relationship Management

Relationship levels Financial

Uses pricing strategies Social

Uses personal communication May also use pricing strategies

Structural Creates solutions to customer problems

Customer Relationship Management

CRM process Identify customers

Sales force Personal encounters Bar code scanner data Web site activity

Personal disclosure Automated tracking

Customer Relationship Management

CRM process – cont’d Differentiate customers

80/20 rule Identifying high-value customers

Data mining Profiling Real-time data collection

• Look for RFM• Analyze LTV (lifetime value)• Evaluate sales growth over time• Determine individual service costs

Customer Relationship Management

CRM process – cont’d Customize the marketing mix

Tailored marketing communications messages Retaining customers

Feedback loop

Integrating CRM with SCM Keeps inventories low Facilitates better product design Provide timely, helpful information to the customer

Customer Relationship Management

CRM benefits Increased profits

Customer acquisition vs retention Retention costs are less

• Reduced promotion costs• Effective sales team• Loyalty = experience• Loyal customers cost less to service

Increase amount purchased Cross-selling Upselling

Customer Relationship Management

Increased profits – cont’d CRM metrics

Lifetime value (LTV) Average order value (AOV) Recency, frequency, monetary analysis (RFM) Average annual sales over time New customer acquisition cost Current customer retention cost

• (1/5 of new) Cost per customer – high and low value Share of customer spending

• 80/20 rule % of customer retention Rate of customer recovery Referral revenue Price premium

Customer Relationship Management

CRM benefits – cont’d Word of mouth communication and referrals

Each unhappy customer tells 10 people about the experience

E-mail Chat rooms Newsgroups Personal web pages

Partnership synergy Increased sales Lower development or maintenance costs Affiliate programs = more revenue Customer’s perception of value add

Customer Relationship Management

CRM benefits – cont’d Customer benefits

Choice reduction Personalized service Brand loyalty

Customer Relationship Management

Building CRM Target the right customers Own the customer’s total experience Streamline processes Provide 360 degree review within the firm Let customers help themselves Help customers do their jobs (B2B) Deliver personalized service Foster community

Customer Relationship Management

Customization tools Small segment customization – company-side tools “Push”

Collaborative filtering Software that gathers opinions of similar users

Data mining Extracting predictive information from databases

Profiling Understanding user characteristics and behavior

Outgoing e-mail Customized pricing, distribution, messages Permission marketing Spam

Customer Relationship Management

Customization tools – cont’d Small segment customization – client-side tools “Pull”

Agents Shopping Search enginges Negotiation agents

Experiential marketing Customer involvement

Customer Relationship Management

Customization tools – cont’d Individual customization – company-side tools “Push”

Cookies Web site log Real time profiling Outgoing e-mail

Customer Relationship Management

Customization tools – cont’d Individual customization – client-side tools “Pull”

Individualized web portals Training B2B

Wireless data services PDAs Cell phone Pager

Web forms Product registration Purchase Market research

Fax on demand Incoming e-mail

Customer feedback Automated responses

Customer Relationship Management

Building community Chat rooms

Ex-employees Bulletin boards Distributed e-mail Professional discussion groups Intranet

Providing internal information to employees Extranet

Linked networks sharing information B2B suppliers

Customer Relationship Management

Guarding consumer privacy TRUSTe guidelines

Adopt and implement a privacy policy Post notice and disclosure of information collection

parctices Give users consent Put security measures in place Publish the following information on the site:

What information is being gathered Who is collecting the information How the information will be used Who will information be shared with Opt-out Security procedures Updating information

AMA code of ethics for Internet marketing