Customer Relationship Management

Customer Relationship Management

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

Customer LoyaltyCommitted to purchasing

merchandise and services from a retailer

Resist efforts of competitors to attract the loyal customer

Emotional attachment to retailer

CRM Process Cycle

Learning

Action

Collecting Customer DataTypes of Information in the

Customer DatabaseApproaches for Collecting

InformationPrivacy Concerns

Information in Each Customer Data

History of purchasesCustomer contacts by retailer

(touch points)Customer preferencesDescriptive information about

customerCustomer’s responses to

promotions

Approaches for Collecting Information

Need to connection contacts with a specific customer identifier

Ask for identifying informationEncourage use of frequent shopper

cardsLink checking account number

and/or third party credit cards to customer

Privacy ConcernsControl over Collection

Do customers know what information is being collected?

Do customers feel they can decide on the amount and type of information collected by retailers?

Control over UseDo customers know how the information

will be used by the retailer?Will the retailer share the information with

third parties?

Concerns When Using Electronic Channels

Information collected without the awareness of customers

Collecting click stream data using cookies

Fair Information PracticesNotice and awareness

Comprehensive statement about information storage, manipulation, and dissemination

Choice/consentOpt-in and Opt-out options

Access/participationCustomer able to confirm accuracy

Integrity/securityControls for theft and tampering

Enforcement/redressMechanism to insure compliance

Analyzing Customer DataData Mining – technique used to

identify patterns in data.Market Basket AnalysisIdentifying Market SegmentsIdentifying Best Customers

The Customer Pyramid

Most ProfitableCustomers

Least ProfitableCustomers

RFM AnalysisRecency, Frequency and Monetary AnalysisRFM Target Strategies

Recency

Frequency

Monetary (Rs)

0-2 m

3-4m 5-6m

>6m

1-2 <1000 First-time customers

Low-value customers1-2 >1000

3-4 <3000 Early repeat customers

Defectors

3-4 >3000

5-6 <5000 High-value customers

Core defectors5-6 >5000

>6 <10000

>6 >10000

Customer Retention Programs

Frequent Shopper ProgramsSpecial Customer ServicesPersonalizationCommunity

Effective Frequent Shopper Programs

Tier Based on Customer ValueOffer Choices of RewardsReward all TransactionsTransparent and SimpleIssues:

Expenses to be justifiedImpact on loyalty questionableEasily duplicated – difficulty to get competitive advantage

Implementing CRM ProgramsNeed systems and data bases

+Close coordination between

departments – marketing, MIS, store operations, HR

Shift in orientation from:Product Centric to Customer Centric