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7/29/2019 Lec 1.6 CRM[1]
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CRM
Keeran Jamil
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A customer service approach that focuseson building long-term and sustainablecustomer relationships that add value both
for the customer and the company
Customer Relationship Management
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Customer Relationship Management
Information stored on existing customers (andpotential customers) is analysed and used to thisend.
Automated CRM processes are often used to
generate automatic personalised marketingbased on the customer information stored in thesystem.
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Customer Relationship Management
According to a 2007 series of IBM surveysthat polled nearly 20,000 consumersshowed that those retailers that integrate
customer-focused initiatives throughout theirbusinesses have a greater number of
Advocates and often out-perform theircompetitors.
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Customer Relationship Management
Advocates are 3 types of customers:
who recommend their retailer to their friends and
family, who would increase their purchase amount if
their retailer offered products found at other
stores, who would stay with their retailer even if another
retailer offered a competitive product.
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Customer Relationship Management
If you can keep customers loyal, their profitabilityaccelerates much faster than in traditional
businesses.
Acquiring online customers is 20-30% more
expensive than for traditional businesses; thisexplains why start-ups remain unprofitable for 2-3 years.
Building long-term relationships with customersis essential for any business. Failure to do thiscaused failure of many dot.coms.
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Learning about Consumer Behavior Online
Model of consumer behavior online
independent(or uncontrollable) variables
interveningormoderatingvariables
decision-making process
dependent variables
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Learning about ConsumerBehavior Online (cont.)
Prentice Hall 2004
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Learning about Consumer Behavior Online(cont.)
Independent variables
Personal characteristics
Environmental variables
Social variables
Cultural/community variables
Other environmental variables
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Learning about Consumer Behavior Online(cont.)
Intervening (moderating) variables
variables are those that can be controlled by vendors
Dependent variables: the buying decisions
customer makes several decisions
to buy or not to buy?
what to buy?
where, when, and how much to buy?
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Customer Relationship Management
Retailers can deliver a satisfying shoppingexperience by understanding who their corecustomers are and what customers expect from
the brand experience.
Customer behavioural data, allows the analyticaltechniques to segment and predict andultimately lead to an increase in customerretention.
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Prentice Hall 2004 12
Consumer Decision Making Process
5 phases of the generic purchasedecision model:
1. need identification
2. information search
3. evaluation of alternatives
4. purchase and delivery
5. after-purchase evaluation
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Prentice Hall 200413
Consumer Decision Making Process (cont.)
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Prentice Hall 2004 14
CRM and Its Relationship with EC
Extent of service
1. Customer acquisition (prepurchase support)
2. Customer support during purchase
3. Customer fulfillment (purchase dispatch)
4. Customer continuance support(postpurchase)
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CRM Approach
A useful method of acquiring repeat customers
Identification: building a customer profile usuallyduring acquisition
Differentiation: segmenting and classifyingcustomers usually during retention
Interaction: dealing with customers during the
buying phase usually during retention Communications: with customers for follow-on
dealings usually during extension
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THREE STAGES
3 Stages for Obtaining Repeat Visits
Magnetic: acquisition: obtaining visitors by
promotion and attractive marketing Sticky: retention: keeping customers on-
site and engaging in revenue-generating
activities Elastic: extension: persuading customers
to engage in further activities and to return
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Stage 1
ACQUISITION
Marketing: a strategy for traffic building
which results in first-time visits by potentialcustomers.
From this it is important to glean as much
information as possible on who thecustomer is, why they visited, and whetherthey may be contacted again.
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Prentice Hall 2004 18
One-to-One Marketing and Personalisation in EC
One-to-one marketing: Marketing that treatseach customer in a unique way
Personalization: The matching of services,
products, and advertising content to individualconsumers
User profile: The requirements, preferences,behaviors, and demographic traits of a particularcustomer
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Prentice Hall 2004 19
One-to-One Marketing and Personalisation in EC(cont.)
Major strategies used to compile userprofiles
Solicit information directly from the user
Observe what people are doing online
Build from previous purchase patterns
Perform marketing research
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Stage 2
RETENTION Stage two is primarily concerned with
giving the customer a satisfactoryexperience whilst on the site such thatthey will wish to return.
There are two goals :
retain as customers of the organisation
and retain as a community of loyal online
customers
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Prentice Hall 2004 21
One-to-One Marketing and Personalisation in EC(cont.)
Customer loyalty Customer loyalty: Degree to which a customer will
stay with a specific vendor or brand
Increased customer loyalty produces cost savings
through: lower marketing costs
lower transaction costs
lower customer turnover expenses
lower failure costs
E-loyalty: Customer loyalty to an e-tailer (electronicretailer)
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Prentice Hall 2004 22
One-to-One Marketing and Personalisation in EC(cont.)
Online networking and other applications
Forums
Chat rooms
Usenet groups
E-mail newsletters
Discussion lists
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Stage 3
EXTENSION
So how do we getcustomers to comeback?
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Prentice Hall 2004 24
One-to-One Marketing and Personalisation in EC(cont.)
Trust in EC
Trust: The psychological status of involvedparties who are willing to pursue further
interaction to achieve a planned goal Trust is influenced by many variables
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Prentice Hall 2004 25
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One-to-One Marketing and Personalisation in EC(cont.)
How to increase EC trust between buyers and sellers trust is
determined by:
degree of initial success that each partyexperienced with EC and with each other
well-defined roles and procedures for all partiesinvolved
realistic expectations as to outcomes from EC
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Prentice Hall 2004 27
One-to-One Marketing and Personalisation in EC(cont.)
Issues in personalisation
brand recognition
security mechanisms help solidify trust
disclose and update latest business status andpractices to potential customers and to buildtransaction integrity into the system
guarantee information and protection privacy throughvarious communication channels
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One-to-One Marketing and Personalisation in EC(cont.)
Collaborative filtering:A personalisation method thatuses customer data to predict, based on formulasderived from behavioral sciences, what other products orservices a customer may enjoy; predictions can be
extended to other customers with similar profiles.
Legal and ethical issues in collaborative filtering
Invasion-of-privacy issues
Permission-basedpersonalisation tools to requestcustomer permission
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Interaction and Communications
Interaction Interaction: on-site interactions e.g FAQs,
creating a personal product
FAQs : should be easy to submit a FAQ,rank FAQs by popularity
Communications
Personalisation or customisation of emailcontent according to customer profile,
Direct Email : Opt-in/Opt-out
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Customer Relationship Management
opt-in policy/permission-based marketing
An opt-in policy requires a potential customerto self-select theservices they wish to subscribe to, and how any information they
provide may be used. Also referred to aspermission-basedmarketing.
In practise, an opt-in policy involves creating forms where servicessuch as email newsletter subscriptions are unchecked by default.
The benefit of this approach is that a user who has activelyconsidered the offering before signing-up, is a more qualifiedpotential customer.
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Customer Relationship Management
opt-out policy
An opt-out policy is where an existing customerreceives electroniccommunicationsusually on the basis of a prior relationship
without providing express permission.
The European Union Privacy and Electronics CommunicationDirective (introduced in 2003), makes provision for electroniccommunications (both email and text/SMS) to be initiated with
existing customers on the conditions that: the communication relates to products or services similar to
those originally provided, and
the customer is provided with a means of opting-out of furthercommunication.
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Privacy and Electronic Communications
(EC Directive) Regulations 2003
Opt-in: consent to receive marketing emails Opt-out: ask not to receive marketing emails
All e-mail marketing messages regardless of recipient: sender must not conceal their identity
sender must provide a valid address for opt-out requests.
For unsolicited e-mail marketing messages to individuals: Can only send if:-1. Recipients email address collected during a sale or negotiations for a sale
2. Sender only sends promotions relating to similar products and services3. When details collected, recipient given option to opt-out which not taken
OR1. Receiver has given prior consent
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To engage a customer in an online relationship
A customer profile is needed showing a minimum of how to contact customer, their product interests their demographics.
On subsequent visits customer can be identified as havingvisited before. Can be achieved by a) asking customer to logon (register) to the site or b) using cookies.
NB records may need compliance with Data Protection law asking customer to register too early can be detrimental. EU is taking a negative view of the use of cookies.
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Prentice Hall 2004 34
Cookies
A data (text) file that is placed on a usershard drive by a Web server, frequentlywithout disclosure or the users consent,
that collects information about the usersactivities at a site
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Each file is a text file, there is usually one file for each Web site youhave visited - the server of the website has placed cookies on yourmachine.
For example, a Web site might generate a unique ID number foreach visitor and store the ID number on each user's machine usinga cookie file.
You can see all of the cookies that are stored on your machine. Themost common place for them to reside could be in the c drive.
You can see which Web site placed the file on your machine by
looking at the file name (the information is also stored inside thefile).
Cookies
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Benefits of CRM
Provides:
choices of products and services
fast problem resolution and response
easy and quick access to information
Limitations of CRM
Requires integration with a companys other
information systems which is costly
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CRM implementation issues
Steps in building EC strategy focused oncustomer:
1. focus on the end customer2. systems and business processes that are
designed for ease of use and from the endcustomers point of view
3. efforts to foster customer loyalty
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Five factors required to implement aCRM program effectively:
1. Customer-centric strategy
2. Commitments from people
3. Improved or redesigned processes
4. Software technology
5. Infrastructure
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Web-related metrics a company uses to determine
the appropriate level of customer support:
Response time
Site availability
Download time
Timeliness
Security and privacy
On-time order fulfillment
Return policy
Navigability
Ri h D i L
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Ritchey Design Learnsabout Customers
The Problem Ritchey Design, Inc. is a relatively small
designer and manufacturer of mountain bike
components Sells its products to distributors and/orretailers, who then sell them to individualconsumers
Its 2005 Web site was more a status symbolthan a business tool
http://www.ritcheylogic.com/
Rit h D i L
http://www.ritcheylogic.com/http://www.ritcheylogic.com/http://www.ritcheylogic.com/7/29/2019 Lec 1.6 CRM[1]
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Ritchey Design Learnsabout Customers (cont.)
Visitors could get information where Ritcheyproducts were sold
It did not give customers all the information
they wanted It did not enable the company to gain insight
into its customers wants and needs
Rit h D i L
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Ritchey Design Learnsabout Customers (cont.)
The Solution In late 2005, Ritchey reworked the Web site
so that the company could hear from its
customers directly set up customer surveys on the site offered visitors who answer the surveys a chance
to win free Ritchey products
visitors enter their names and addresses and thenanswer questions about the companys products
Rit h D i L
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Ritchey Design Learnsabout Customers (cont.)
Web Trader software automatically organisesand saves the answers in a database and isused to help make marketing and advertising
decisions Questions are changed to learn customers
opinions about any new products Ritcheydevelops
Saves $100,000 on product development peryear
Rit h D i L
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Ritchey Design Learnsabout Customers (cont.)
An online catalog educates retailers andconsumers about the technologicaladvantages of Ritcheys high-end
components over competitors parts Visitors browse the product catalog that
includes detailed descriptions and graphics ofRitcheys products
Rit h D i L
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Ritchey Design Learnsabout Customers (cont.)
The Results ritcheylogic.com sells only team items such as
t-shirts, bags, water bottles, and other gear
directly to individuals online The company does not sell bike parts toindividuals directly online because it wants tomaintain its existing distribution system
Dealers can place orders on the site
http://www.ritcheylogic.com/
Rit h D i L
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Ritchey Design Learnsabout Customers (cont.)
The site is basically used in B2C EC only forthe basic activities in Internet marketing:
communicating with customers
conducting market research delivering advertising
Rit h D i L
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Ritchey Design Learnsabout Customers (cont.)
What we can learn
Illustrates the benefits a company can derivefrom changing its Web site from a passive
one to one with interactivity Interactive Web site allows the company to: learn more about its customers
educate customers
use the site for customer service