Chapter 21: Customer Relationship Management (CRM) Prepared by Amit Shah, Frostburg State University Designed by Eric Brengle, B-books, Ltd. Copyright 2010 by Cengage Learning Inc. All Rights Reserved 1

Copyright 2010 by Cengage Learning Inc. All Rights Reserved Chapter 21 Customer Relationship Management Learning Outcomes Define customer relationship management Explain how to identify customer relationships with the organization Understand interactions with the current customer base Outline the process of capturing customer data LO1 LO2 LO3 LO4 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Copyright 2010 by Cengage Learning Inc. All Rights Reserved Chapter 21 Customer Relationship Management Learning Outcomes LO5 Describe the use of technology to store and integrate customer data Describe how to identify the best customers Explain the process of leveraging customer information throughout the organization LO6 LO7 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

What is Customer Relationship Management? Chapter 21 Customer Relationship Management What is Customer Relationship Management? Define customer relationship management. LO1 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Customer Relationship Management Chapter 21 Customer Relationship Management Customer Relationship Management A company-wide business strategy designed to optimize profitability, revenue, and customer satisfaction by focusing on highly defined and precise customer groups. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Customer Relationship Management Cycle Chapter 21 Customer Relationship Management Customer Relationship Management Cycle Identify customer relationships Store and integrate customer data using IT Capture customer data based on interactions Identify best customers Understand interactions with current customer base Leverage customer information Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Implementing a CRM System Chapter 21 Customer Relationship Management Implementing a CRM System Key Points: Customers take center stage The business must manage the customer relationship across all points of customer contact Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Review Learning Outcome Customer Relationship Management LO1 Chapter 21 Customer Relationship Management Review Learning Outcome Customer Relationship Management Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Identify Customer Relationships Chapter 21 Customer Relationship Management Identify Customer Relationships Explain how to identify customer relationships with the organization. LO2 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Identify Customer Relationships Chapter 21 Customer Relationship Management Identify Customer Relationships Customer-Centric - The company customizes its product and service offering based on data generated through interactions between the customer and the company. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

comments and feedback on product or service performance. Chapter 21 Customer Relationship Management Learning An informal process of collecting customer data through customer comments and feedback on product or service performance. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Knowledge Management The process by which learned Chapter 21 Customer Relationship Management Knowledge Management The process by which learned information from customers is centralized and shared in order to enhance the relationship between customers and the organization. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Experiential observations Collected Information Includes: Chapter 21 Customer Relationship Management Knowledge Management Qualitative facts Customer actions Comments Experiential observations Collected Information Includes: Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Interaction The point at which a customer and a company Chapter 21 Customer Relationship Management Interaction The point at which a customer and a company representative exchange information and develop learning relationships. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Review Learning Outcome Identifying Customer Relationships LO2 Chapter 21 Customer Relationship Management Review Learning Outcome Identifying Customer Relationships Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Interactions of the Current Customer Base Chapter 21 Customer Relationship Management Understand interactions with the current customer base. LO3 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Interactions of the Current Customer Base Chapter 21 Customer Relationship Management Requested Service Channel Past Relationship Current transaction Customer Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Interactions of the Current Customer Base Chapter 21 Customer Relationship Management Interactions of the Current Customer Base Touch-Points - All possible areas of a business where customers communicate with that business. Point-Of-Sale Interactions - Communications between customers and organizations that occur at the same point of sale, normally in a store. Online http://www.bestbuy.com Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Review Learning Outcome Interactions with Current Customer Base LO3 Chapter 21 Customer Relationship Management Web Point of Sale Kiosk Delivery, Installation Survey Product Registration Customer Service Customer Copyright 2010 by Cengage Learning Inc. All Rights Reserved

capturing customer data. Chapter 21 Customer Relationship Management Capture Customer Data Outline the process of capturing customer data. LO4 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Capture Customer Data Store visits Conversations with salespeople Chapter 21 Customer Relationship Management Store visits Conversations with salespeople Interactions via the Web Traditional phone conversations Wireless communications Online http://www.geico.com Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Review Learning Outcome Capturing Customer Data LO4 Chapter 21 Customer Relationship Management Review Learning Outcome Capturing Customer Data Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Store and Integrate Customer Data Chapter 21 Customer Relationship Management Store and Integrate Customer Data Describe the use of technology to store and integrate customer data. LO5 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Customer Data Data Warehouse - A central repository for data from various functional areas of the organization that are stored and inventoried on a centralized computer system. Database - A collection of data, especially one that can be accessed and manipulated by software. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Review Learning Outcome Store and Integrate Customer Data LO5 Chapter 21 Customer Relationship Management Review Learning Outcome Store and Integrate Customer Data Database Compiled list Response list Data Warehouse :::::::::::::::::::::::::::::::::::::::::: :::::::::::::::::::::::::::::::::::::::::: \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\ /////////////////////////////////////////////////////////// ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Identifying the Best Customers Chapter 21 Customer Relationship Management Identifying the Best Customers Describe how to identify the best customers. LO6 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Data Mining A data analysis procedure that identifies significant Chapter 21 Customer Relationship Management Data Mining A data analysis procedure that identifies significant patterns of variables and characteristics that pertain to particular customers or customer groups. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Copyright 2010 by Cengage Learning Inc. All Rights Reserved Chapter 21 Customer Relationship Management Data Analysis Predictive modeling Lifetime value analysis Recency-frequency-monetary analysis Customer segmentation Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Customer Segmentation Chapter 21 Customer Relationship Management Customer Segmentation The process of breaking large groups of customers into smaller, more homogeneous groups Generates a “profile” or picture of the customers’ similar demographic, geographic, and psychographic traits Focuses on best customers Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Recency-Frequency-Monetary Analysis Chapter 21 Customer Relationship Management Recency-Frequency-Monetary Analysis Identifies customers mostly like to purchase again Identifies and ranks “best customers” Identifies most profitable customers Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Data Manipulation Techniques Chapter 21 Customer Relationship Management Data Manipulation Techniques Lifetime Value Analysis Predictive Modeling A data manipulation technique that projects the future value of the customer over a period of years. A data manipulation technique in which marketers try to determine what the odds are that some other occurrence will take place in the future. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Review Learning Outcome Identify the Best Customers LO6 Chapter 21 Customer Relationship Management Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Leverage Customer Information Chapter 21 Customer Relationship Management Leverage Customer Information Explain the process of leveraging customer information throughout the organization. LO7 Copyright 2010 by Cengage Learning Inc. All Rights Reserved

CRM Marketing Database Applications Chapter 21 Customer Relationship Management Campaign management Retain loyal customers Cross-selling other products and services Designing targeted marketing communications Reinforcing customer purchase decisions Inducing product trial by new customers Increasing effectiveness of distribution channel marketing Improving customer service Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Campaign Management Developing product or service offerings customized Chapter 21 Customer Relationship Management Campaign Management Developing product or service offerings customized for the appropriate customer segment and then pricing and communicating these offerings for the purpose of enhancing customer relationships. Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Chapter 21 Customer Relationship Management Campaign Management Communicating offerings in a way that enhances customer relationships Developing customized offerings for appropriate segment Pricing these offerings attractively Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Retaining Loyal Customers Chapter 21 Customer Relationship Management Retaining Loyal Customers Retaining an additional 5 percent of customers increases profits by as much as 25 percent Improving customer retention by 2 percent can decrease costs by as much as 10 percent Loyalty programs reward loyal customers for making multiple purchases Loyalty programs provide information about customers and trends Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Cross–Selling Other Products and Services Chapter 21 Customer Relationship Management Cross–Selling Other Products and Services CRM provides opportunities to cross-sell related products Cross-sell to customers with demographic, lifestyle, or behavioral characteristic matches Internet companies use product and customer profiling to reveal cross-selling opportunities Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Targeted Marketing Communications Chapter 21 Customer Relationship Management Targeted Marketing Communications Infrequent Users Moderate Users Heavy Users Offer direct incentives, such as a price discount Offer more reinforcement of past purchase decisions Design around loyalty and reinforcement of purchase Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Reinforcing Customer Purchase Decisions Chapter 21 Customer Relationship Management Reinforcing Customer Purchase Decisions Cognitive dissonance is the feeling consumers experience when they recognize inconsistency between values and opinions and their purchase behavior Thanking customers help cement a long-term, profitable relationship Update customers periodically on the status of their order Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Increasing Effectiveness of Distribution Channel Marketing Chapter 21 Customer Relationship Management CRM Databases RFID technology Multichannel Marketing Online http://www.kidsdadsmoms.com Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Improving Customer Service Chapter 21 Customer Relationship Management Improving Customer Service Level of customer service is influential in customer retention Customer retention – the percentage of customers that repeatedly purchase products from a company Copyright 2010 by Cengage Learning Inc. All Rights Reserved

Review Learning Outcome Leveraging Customer Information LO7 Chapter 21 Customer Relationship Management Campaign management Retaining loyal customers Cross-selling other products Designing targeted marketing communications Reinforcing purchase decisions Inducing product trial by new customers Increasing effectiveness of distribution channel marketing Improving customer service Marketing Information CRM Database Applications Copyright 2010 by Cengage Learning Inc. All Rights Reserved