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University of Washington EMBA Program
“Relationship Marketing & CRM Intro ”
Instructor: Elizabeth Stearns
Relationship Marketing
• Marketing on the Differences
• Marketing with a Memory• Demassifying the Communications Process
• Customizing Communications and
Products/Services
Relationship Marketing Attributes
• Evolutionary process, not an event
• Experience-based, not transaction-based
• Mutually beneficial, two way
• Emotional and/or logical appeals
Relationship Process
MeasurementMeasurement
On-going DialogueOn-going Dialogue
Database SupportDatabase Support
CommunicationCommunication ObjectivesObjectives
Customer SegmentationCustomer Segmentation
Brand Equity / PromiseBrand Equity / Promise
Relationship Marketing
• Relationship marketing recognizes that prospects and customers can be at different points of awareness, interest and intent-to-buy along the prospectivity continuum
• Persuasion is a process: Dialogue precedes purchase/engagement for most products and services
Model of Market ProspectivityUnaware
Vague Awareness
Category Familiarity
Brand Familiarity
Passive Consideration
Active Interest
Purchase Usage
Understand Your Customers
• Their Demand for Your Product or Service
• Their Changes over Time
• Their Growth Needs
• Their Technology/Personal Service Conundrum
• Their Available Choices for Solutions
Their Value to You!
Some Customers are Worth More!
$$$$ $$$ $$
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Brand Relevance to Customers
“To enhance customer loyalty, a company must strengthen the relationship with the brand”
“A focus on loyalty segmentation provides strategic and tactical insights that assist in building strong brands”
David Aaker, “Building Strong Brands”
Customer Loyalty
• Reduced or No Desire to Switch
• Increased Perception of Value / Quality
• Reduced Risk of Buying (More)
• Trial New Products or Services
Customer Loyalty
• Feels Recognized and Special
• Volunteers Information
• Positive Word of Mouth / Recommends to
Others
Satisfaction =
Performance minus Expectations
“One of my customers cornered me at a charity board meeting
and told me, “I got a call after I picked up my car asking if I
was satisfied with the sales experience. Then I got a call after
the car was serviced, asking if I was satisfied with the service
experience. Finally, another surveyor called several weeks later
to check if I was happy with the ownership experience. So when
am I going to get a call asking if I’m satisfied with the
satisfaction survey experience?””
Reichheld, The Loyalty Effect
Make Surveys Count!
Why Relationship Marketing?
Economic Value to Keeping Customers
2% Retention equals approximately 10% reduction in costs
Why Customers Are More Valuable Over TimeC
omp
any
Pro
fit
Time
Base Profit
Increased Purchases & Higher Balances
Reduced Operating Costs
Referrals
Price Premium
CustomerAcquisitionCost
• Profit Comes from Different SourcesReichheld & Sasser, Jr.
Relationship Marketing Can Increase Lifetime Value
• Increase the retention rate
• Increase the referral rate
• Increase the spending rate
• Decrease the direct costs
• Decrease the marketing costs
CRM
The CRM Goal
Individual Permission – Based Interaction
The CRM Process
CRM
Interact& Deliver
Understand &Differentiate
Acquire& Retain
Develop &Customize
Customer Experience Cycle
CustomerUnderstanding
Customer Experience Cycle
CustomerUnderstanding
•Stages of the Purchase Cycle•Length of each Stage•Related Complexity of Each Stage•Indicators of When a Customer Enters a Stage•Frequency at Which a Customer Repeats the Cycle•Level of Resources Directed at Each Stage
Customer Purchase Cycle
Customer Experience Cycle
CustomerUnderstanding
•Information•Convenience•Efficiency•Price•Reputationetc.
Customer Needs
Customer Experience Cycle
CustomerUnderstanding
•Tied to specific stages of the purchase cycle.•Inbound and outbound.•Cross-channel and cross-media.•Situation-driven or driven by a deeper understanding of customer needs and behaviors
Customer Interaction Opportunities
CustomerUnderstanding
Corporate Comm./Public Relations
Advertising
Customer Care Web
CallCenter
Point of Sales/Service
MarketingCommunicationsField Sales
CustomerValue
CustomerSatisfaction
CustomerLoyalty
Business FocusProducts Sales Channels Marketing Services Customers
Organizational StructureProduct
Management
Place
Management
Promotion
Management
Channel
Management
Contact
Management
Customer
Management
Business MetricsProduct
Performance
Place
Performance
Program
Performance
Customer
Revenues
Customer
Satisfaction
Customer
Lifetime Value
and Loyalty
Customer InteractionMass
Transaction
Opportunistic
Promotion
Targeted
Campaigns
Segment-Specific
Communication
Customer-Contact
Integration
Individual
Permission-Based
Interaction
TechnologyTransaction
Processing
Data
Maintenance
Data
Access
Data
Maintenance
Data
Marts
Customer
Touchpoint
Systems
CRM Transformation Map
CRM Implementation
1. Situation Assessment– Internal evaluation of your capabilities– External evaluation of the customer’s experience with your org.
2. CRM Gap Analysis– Comparison between an organization's current state and the desired state. It
is essential to define the desired customer experience.
3. CRM Action Plan– Cost to implement– Benefit– Feasibility (organizational readiness, senior management acceptance, etc.)– Time
StrategyFormulation
ProgramFormulation
Contention
DifferingPerspectives
Marketing
FinanceHuman Resources
R&D
Operations
Sales
Project Planning
Consensus Execution
CoordinationCreativity
The Strategy Development and Implementation Process
Designing Offers for Customers
Offer
CostValue
PriceTimeEffortRisk
TechnicalInnovation
SalesRelation-ship
BrandEquity
Delivery Services
Product
A Business Focus on Customers Means:
• The organization's primary focus is on acquiring, deepening, and retaining customer relationships.
• The business model is based on optimizing value delivered to customers to maximize value received from them.
• Customers are at the core of the organization's value system, and the unifying force across business units and functions.
Business FocusProducts Sales Channels Marketing Services Customers
Organizing around CRM• Appoint segment managers, each responsible for
acquisition, development, and retention of their customer segment.
• Create a cross-functional Customer Relationship department, which will ensure that CRM strategies are successfully implemented across the organization
• Implement staff training, performance measurement and compensation based on CRM
Organizational StructureProduct
Management
Place
Management
Promotion
Management
Channel
Management
Contact
Management
Customer
Management
• Customer Revenues– Who are the top customers in terms of revenue?
– Are revenues from any customer segment increasing or decreasing?
• Customer Satisfaction– For which customer segments has satisfaction increased or decreased?
– How do satisfied customers differ from dissatisfied customers?
• Customer Loyalty and Value– How can we increase customer profitability?
– What drives loyalty for our most profitable customers? How can we increase customer loyalty?
– Which prospects should our organization focus on in order to “clone” our best customers?
Customer Metrics
Business MetricsProduct
Performance
Place
Performance
Program
Performance
Customer
Revenues
Customer
Satisfaction
Customer
Lifetime Value
and Loyalty
Developing Customer-Focused Metrics and Analyses
• Collect the Right Customer Data• Increase Your Customer I.Q.
– Customer Profiling– Customer Segmentation– Customer Valuation
• Profitability• Lifetime Value• Share of Wallet
– Customer Lifecycle– Customer Attitudes– Customer Changes
• Create and Track a Customer Scorecard
Arthur Hughes’ Chrysler Story
• Letter to Lee Iacocca
• Eastern Region (Baltimore) Sales Manager
“Mr Hughes, I have your letter here to Mr Iacocca. Now Mr Hughes, I want to assure you that we do have a database. I’ve looked you up, and you’re on it!”
Arthur Hughes’ Chrysler Story (continued)
db Marketing Conference/Chrysler Exec/25 million names
“So, you are in charge of the Chrysler database?”“Yes, I am.”“Well, tell me. What are you doing with your database?”“Oh,” he said, “we have it on a UNIX platform.”.”
! ! ! ! ! ! ! ! ! ! !
Two Kinds of Database People
• ConstructorsPeople who build databasesMerge/Purge, Hardware, Software
• CreatorsPeople who understand strategyBuild loyalty and repeat sales
• You need both kinds!
CEO’s Brain
Quality FirstCustomer FocusCustomer FirstService QualityCustomer Satisfaction
CostsRevenuesMarket ShareBudgetsIncentivesCompensationStrategic PlansProfitsMarket Value
Right Side Left Side
A CRM System is:• Any application that supports the collection, cleansing, and
maintenance of, and/or access to, customer information, and that provides this information to appropriate entities in support of CRM applications.
Including…• Customer databases• Marketing applications• Data mining applications• Sales force automation systems• Customer care applications• Online applications
TechnologyTransaction
Processing
Data
Maintenance
Data
Access
Data
Maintenance
Data
Marts
Customer
Touchpoint
Systems
CRM Systems Issues• It is important to develop a customer information plan, including:
– Where and how to efficiently collect customer data– How to transform data into meaningful, practical information– How to distribute customer information throughout the organization
• Build a business case for your system• Determine whether your system should be in-house or
outsourced, based on:– Solution scope– Core competencies– Time horizons– IT resources
CRM Systems Issues
• Monitor the quality of your data, including:– Data coverage
– Data accuracy
– Data precision
– Data relevance
• Make the data accessible to people who can put it to use• Gain the acceptance of employees who will be using the
system
Aspects of Measuring CRM Success:• Internal CRM Capabilities• Customer Interactions
– Create a customer interaction scorecard
• Customer Dynamics– Customer acquisition– Customer growth & development (cross-sell, upsell)– Customer retention– Customer reactivation
• Operational Efficiencies• Bottom-Line Business Metrics
– Increased revenues– Decreased costs– Increased competitive differentiation
Think like a Customer: 10 rules for Building Customer Relationships
1. The “average customer” does not exist – get to know us2. Make our experience special: Give us something to talk about.3. If something is wrong, fix it quickly.4. Guarantee our satisfaction.5. Trust us, and we’ll trust you. (respect)6. Don’t take us for granted.7. Our time is as important as your time.8. The details are important to us – they should be to you, too9. Employ people who are ready, willing, and able to serve us10. We care whether you’re a responsible corporate citizen.
