9 Customer relationship management

About CRM You have a job interview for a company such as Future Shop or Staples working in the CRM team How would you explain the terms: CRM, E-CRM Why does the company have a CRM function? Why is CRM different? What are benefits of this approach? What is CRM? It is a strategy used to learn more about customers' needs and behaviors in order to develop stronger relationships with them. http://www.cio.com/article/40295/CRM_Definition_and_Solutions An approach to building and sustaining long-term business with customers

Figure 9.1 The four classic marketing activities of customer relationship management

Customer extension techniques for online retailers (a) Re-sell Selling similar products to existing customers–particularly important in some B2B contexts as re-buys or modified re-buys. (b) Cross-sell Sell additional products which may be closely related to the original purchase, but not necessarily so. Example ? (c) Up-sell A subset of cross-selling, but in this case, selling more expensive products (d) Reactivation Customers who have not purchased for some time, or have lapsed, can be encouraged to purchase again. (e) Referrals Generating sales from recommendations from existing customers, for example member-get- member deals.

Marketing applications of CRM A CRM system supports the following marketing applications: Sales force automation (SFA). Sales representatives are supported in their account management through tools to arrange and record customer visits Customer service management. Representatives in contact centres respond to customer requests for information by using an intranet to access databases containing information on the customer, products and previous queries Managing the sales process. This can be achieved through e-commerce sites, or in a B2B context by supporting sales representatives by recording the sales process (SFA) Campaign management. Managing ad, direct mail, e-mail and other campaigns Analysis. Through technologies such as data warehouses and approaches such as data mining, which are explained further later in the chapter, customers characteristics, their purchase behaviour and campaigns can be analysed in order to optimize the marketing mix

E-CRM Applying… Internet and other digital technolog (web, e-mail, wireless, iTV, databases) to… acquire and retain customers (through a multi-channel buying process and customer lifecycle) by… improving customer knowledge, targeting, service delivery and satisfaction

E-CRM – Benefits Targeting more cost-effectively. Achieve mass customization of the marketing messages Increase depth, breadth and nature of relationship A learning relationship can be achieved using different tools throughout the customer lifecycle Lower cost

Figure 9.2 A summary of an effective process of online relationship building Customer profiling (IDIC framework- build relationships) 1 Customer identification 2 Customer differentiation 3 Customer interactions 4 Customization

Conversion Marketing Using marketing communications to change the potential customers to actual and existing customers to repeating customers Many companies invest primarily in customer acquisition but not enough in conversion. What can be done to improve the conversion rate? Web browsers or offline audiences to site visitors; Site visitors to engaged site visitors Engaged site visitors to prospects Prospects into customers Customers into repeat customers Web browsers or offline audiences to site visitors; Site visitors to engaged site visitors who stay on the site and progress beyond the homepage; Engaged site visitors to prospects (who are profiled for their characteristics and needs) Prospects into customers Customers into repeat customers

Online Buying Process What is the typical online and offline purchase process? How can online marketing communications support the purchase process? Searching behaviors Directed info seeker Undirected info seeker Directed buyer Bargain hunters Entertainment seeker

Figure 9.3 A summary of how the Internet can impact on the buying process for a new purchaser

Online Buying Process Differences btw B2C and B2B Buyer Behavior Market structure Nature of the buyer unit Type of purchase Importance of Trust Online Buying Process What is net promoter score? Ref. p.495 How to support online advocacy? Ref. p.497 How to manage online detractors?

Figure 9.4 A model of the relationship between different aspects of trust and consumer response based on the categories of Bart et al. (2005)

Figure 9.5 Percentage who consider the different information sources as important when researching/considering a product or service Source: BrandNewWorld: AOL UK/Anne Molen (Cranfield School of Management)/Henley Centre, 2004

Customer Acquisition Management The characteristics of interactive Marketing Comm From push to pull From monolog to dialog From 1:M to 1 to some and 1:1 From 1:M to M:M From lean-back to lean-forward The medium changes the nature of the standard marketing communication tools Increase in communication intermediaries Integration remains important

Figure 9.6 Online and offline communications techniques for e-commerce

Assessing Market Comm Effectiveness Acquisition cost Per visitor Per lead Per sale Bounce rate % of visitors entered the site but left immediately after viewed one page only

Figure 9.7 Measures used for setting campaign objectives or assessing campaign success increasing in sophistication from bottom to top

Online Marketing Communication Search engine marketing Assessing the effectiveness of a web campaign Ref. p. 504, Fig. 9.8 How does Google work? Crawlingindexingrankingquery request and result serving Keyphrase analysis Search-engine optimization—review

Figure 9.8 An example of effectiveness measures for an online ad campaign

Figure 9.10 Stages in producing natural search engine listings

Which are the ranking factors affecting position In Google SERPs? On-page optimization Document meta data Document content Creation of new pages Off-page optimization Link-building External links ‘Links In’ ‘Backlinks’ ‘Inbound links’ AND Internal links Behavioural Popularity of sites from toolbar Google’s search spam filters How many search ranking factors? Today is all about practical tips with examples. No theory – assuming you know – if not, see this slide. Which sectors represented. 22

Online Marketing Com-Paid Search Factors affect returns Distribution of daily budget Amount bid (Max CPC) * Clickthrough rate * Creative quality including creative testing * Match types especially negative matches Use of content network Time-of-day (day parting) Landing page quality Click fraud! * In Google AdWords, Live Search and Yahoo! Quality Score especially important

Online Marketing Communication Online PR Maximizing favorable mentions of an organization, its brands, products, to web sites on 3rd-party web sites Communication with media online Link building Blogs, podcasting and RSS Online community and social networks Marketing how your brand is presented on 3rd party sites Creating a buzz-online viral marketing

Figure 9.11 Online PR categories and activities

Affiliate marketing Online Marketing Communication Read the mini Case Study 8.4 on p. 516. Explain why companies have scaled back e-communication spending. What is online-sponsorship? http://www.davechaffey.com/E-marketing-Insights/Internet-advertising-online/Online-sponsorship What’s the differences between online sponsorship and affiliate marketing? Figure 9.12 The affiliate marketing model (note that the tracking software and fee payment may be managed through an independent affiliate network manager) Online Marketing Communication

Interactive Advertising What is media multiplier/halo effect? Purpose of Interactive Advertising Delivering content Enabling transactions Shaping attitudes Soliciting response Encouraging retention Online Marketing Communication

Interactive Advertising Interactive ad target options On a particular type of site To target a registered user’s profile At a particular time of day/week Online behavior—dynamically serving relevant content or ad that matches the interest of a site visitor. Interactive ad formats Banner size, message length, promotional incentive, animation, action phrase, company brand/logo Online Marketing Communication

Online Marketing Communication Media planning What’s the optimum mix of online/offline advertising? Ref. p.520, table 9.2 E-mail marketing Read the Mini Case Study 9.5 What are the major challenges of email marketing? What’s opt-in options for e-mail marketing? Viral marketing achieve marketing objectives through self-replicating viral processes, analogous to the spread of pathological and computer viruses. Three important factors Creative Material Seeding—Find the starting point Tracking Online Marketing Communication

Figure 9.13 E-mail response figures Source: Provided by SmartFOCUS Digital (www.smartfocusdigital.com), an e-mail service provider that send e-mails to UK and European organizations such as publishers and retailers

Figure 9.14 TopTable (www.toptable.co.uk)

Customer Retention Management Goals of Customer Retention Retain customers Keep customers using online channel Satisfaction  loyalty  profitability How to keep customers satisfied? Experience from Dell—ref. table 9.4 on p. 528 Personalization and mass customization Mass customization—deliver customized content to groups of users through web or email Collaborative filtering—deliver specific info and offers based on the interests of similar customers

Figure 9.15 Schematic of the relationship between satisfaction and loyalty Source: Adapted and reprinted by permission of Harvard Business Review from graph on p. 167 from ‘Putting the service-profit chain to work,’ by Heskett, J., Jones, T., Loveman, G., Sasser, W. and Schlesinger, E., in Harvard Business Review, March–April 1994. Copyright © 1994 by the Harvard Business School Publishing Corporation, all rights reserved

Online Community Online Community becomes important to the success of the business Various 3rd party online communities and cooperation sponsored communities have been established in the recent years. B2B, in many cases B2C, communities are commonly built based on purpose-people who do the similar jobs or achieve a similar objectives Position Interest Profession Customer Retention Management

Figure 9.16 UTalkMarketing example of a professional online community Source: www.utalkmarketing.com, the UK’s leading community website for client side marketers

Customer Retention Management Online Community Do we need an online community? How to build one? Questions to be asked before start a community Typical problems Empty community Silent community Critical community

Customer Retention Management Managing Customer activity and value Increase # of new users Increase % of active users Decrease % of dormant users Decrease % of non-activated users Retention metrics are often used Repeat-customer conversion rate Repeat customer base # of transaction per repeat customer Revenue per transaction of repeat customer

Figure 9.17 Activity segmentation of a site requiring registration

Customer Retention Management Lifetime Value Modeling Total net benefit that a customer or a group of customers will provide over their total relationship with the company What can LTV be used for? Ref. p. 535

Figure 9.18 Different representations of lifetime value calculation

Figure 9.19 An example of an LTV-based segmentation plan

Excelling in E-Commerce Service Quality Improving online service quality Tangible—easy of use and visual appeal of the site Reliability—availability of the site Responsiveness—speed of page load, speed of responses to questions, if any Assurance—quality of response, privacy and security, etc. Empathy—personalized interaction, context, task relevant help and assistance, e.g., during the purchase process

Customer Extension The goal is to increase the lifetime value of the customer What does “Focus on share of customer, not market share” mean ? (ref. p. 540, 2nd paragraph) Advanced online segmentation and target techniques Identify lifetime group Identify profile characteristics Identify behavior in response and purchase Identify multi-channel behavior Tone and style preference

Figure 9.20 Customer lifecycle segmentation

Customer Extension Advanced online segmentation and target techniques Sense, respond, and adjust Monitor customer actions or behaviour React with appropriate messages and offers Monitor response to the messages and act accordingly (RFM) value analysis Recency—how recent was the customer’s action? Frequency—How often did the customer act? Monetary—How much did the customer spent? Hurdle rate—% of customers in a group who completed an action; it can be used to compare different groups or set an objective for the group

Technology Solution for CRM Technologies in use Database is the core of the CRM Web interface becomes the main stream Emails and workflow systems are commonplace Customer self-service is the trend Types of CRM Applications Find more info about products/service Place an order Receive post-sales service Integration with back-office systems How to link with the backend legacy system is a big challenge

Figure 9.22 An overview of the components of CRM technologies

Technology Solution for CRM Single vendor solution or multiple vendors? Why the question? What’s your opinion? Data Quality CRM systems depend on the currency, completeness, and accuracy of their database Guidelines must be followed to achieve the goal Ref. p. 549 Case Study Read the case study on pp. 549-551 and answer the question: What made Tesco so successful?

Learning outcomes Outline different methods of acquiring customers via electronic media Evaluate different buyer behaviour amongst online customers Describe techniques for retaining customers and cross- and up-selling using new media.

Management issues What are the practical success factors digital media need to make customer acquisition more effective? What technologies can be used to build and maintain the online relationship? How do we deliver superior service quality to build and maintain relationships?

Activity Read the Econsultancy interview on pp 484-485 and visit http://www.warnerleisurehotels.co.uk/ Answer these questions What did Warner Breaks (WB) found about the online marketing? What did they do to attract and retain customers? What special about the older generation regarding online transactions? Do you feel that their website is well-designed for the targeted audience?

E-CRM – Activity What benefits can e-CRM produce? Ref. p. 487 What’s Wikinomics and how can a company take advantage of it to enhance CRM? Ref. p. 488 Box 9.1 What is permission marketing? Ref. p.488 What is customer profiling? Ref. p.490 What is IDIC? Identification, differentiation, interactions, and customization