Retailing Strategy Retail Market Strategy Financial Strategy Site Location Customer Relationship Management “customer-centric retailing” Retail Locations Organizational Structure and HR Management Information Systems

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. What is loyalty? Liking a retailer? Frequently shopping a retailer?

A Loyal Customer . . . Is committed to purchasing merchandise and services from a retailer Resists efforts of competitors to attract the loyal customer Has an emotional attachment to retailer Personal attention Memorable positive experiences Brand building communications programs

CRM Process Learning Action Collect Customer Data Analyze Customer Data & Identify Target Customers Learning Develop CRM Programs Implement CRM Programs Action

What Customer Data to Collect? Data Mining – technique used to identify patterns in data Market Basket Analysis Identifying Market Segments Identifying Best Customers

Collecting Customer Data Types of Information in the Customer Database Approaches for Collecting Information Privacy Concerns

Information About Each Customer in the Database History of purchases Purchase date, price paid, SKUs bought, whether or not the purchase was stimulated by a promotion Customer contacts by retailer (touch points) Visits to web site, inquires to call center, direct mail sent to customer Customer preferences Descriptive information about customer Customer’s responses to promotions

Approaches for Collecting Customer Information Need to have information connected with a specific customer identifier Ask for identifying information Telephone number Name and address Use frequent shopper cards Link checking account number and/or third party credit cards to customer

The Customer Purchase Cycle How the customer relates to the retailer: Uncover a need/ problem Discover where problem can be solved Visit stores Purchase product/ services Consume product/ services Customer “Lock-in” The Key: Consistent execution of your “promise”  Builds trust. Customer trust that your store will always deliver  Loyalty. BUT, your store’s “promise” is only as strong as your weakest link. So CRM software should help you – as a retailer – to manage the major elements of the customer life cycle. And that’s what we do. We make marketing, selling and customer service software to address each of these stages. And even though we have these broken down into major categories, it’s important to realize that marketing – for example – is a process that never really ends. Retailers always want to be ready to sell a customer products or services at any point along the life cycle. To be profitable, a retail must always be selling – and that’s what our software helps a retailer to do.

What is a customer centric relationship? Customer Contact Relationship Right Person Right Message Right Media Right Time Lifetime of Value My Products My Behavior My Needs My Permission specific to me, ever-changing understood and rewarded consulted but pre-empted respected and developed A relationship is more than good customer service. Though that is vital… Efficient, simple, 360°, constant, unobtrusive, consistent with store “promise” It is more than intelligent one-off interactions. Though these are valuable… Every time you interact with a customer a loyalty contact is being made Relationships are longer term and broad-based. They create loyal advocates… You design, configure and promote products specifically for me You understand my past behavior - and you reward me for it You consult me on my needs - but you also pre-empt and surprise me You respect my permission - and you develop it, given my preferences

CRM problems in retailing How the customer relates to the retailer: Uncover a need/ problem Discover where problem can be solved Visit stores Purchase product/ services Consume product/ services Customer How retailers try to match the customer’s purchase cycle: Retailer Customer & Business Analysis Marketing Programs/ Campaigns/ Offers Store Operations/ Execution Selling Process Delivery, Setup, Installation Scheduling Customer Service Process But here are the problems: So CRM software should help you – as a retailer – to manage the major elements of the customer life cycle. And that’s what we do. We make marketing, selling and customer service software to address each of these stages. And even though we have these broken down into major categories, it’s important to realize that marketing – for example – is a process that never really ends. Retailers always want to be ready to sell a customer products or services at any point along the life cycle. To be profitable, a retail must always be selling – and that’s what our software helps a retailer to do. Difficult to manage customer data Time consuming, non-targeted campaigns Inconsistent Execution at Stores Disjointed or “single visit” selling process Inconsistent field service process Cost-center mentality

Successful Customer Centric Strategies: 4 Key Elements CRM Strategy Components Consistency Across Functions Execution Performance Monitoring Effective Segmentation Customer Experience Business Processes Right Skill Sets & Mindsets Right Technology Marketing Sales Service Vendors, etc. Implementation Planning Setting Goals Agents of Change in Management Measuring Progress Rewarding Results

Customer Segmentation CRM Strategy Components Enables an organization to understand: Which customers / segments are most profitable How to most effectively market to, sell to, and provide service to these customers With this knowledge, a company can determine which segments will drive the greatest returns Segmentation begins with the development of the customer profile: Demographics Purchasing history Customer Life Cycle information Key Questions: Who do we want to target, and why? What’s the value of “owning” this segment? What data do we have? Quality? Expenses & benefits to improve? Effective Segmentation Customer Experience Business Processes Right Skill Sets & Mindsets Right Technology

“Maximizing the Customer Experience” It is the total of the interactions a customer has with a company’s products It starts the moment a customer thinks of your product It does not end until the customer is completely satisfied with it Source: “The Customer Experience,” Net Company, Fall 1999.

Maximizing the Customer Experience Addresses 3 Questions How smoothly do you solve your customers’ problems? How well do you meet customer needs? How quickly do you anticipate what they’ll want next? Source: “The Customer Experience,” Net Company, Fall 1999.

Maximizing the Customer Experience CRM Strategy Components Customer Experience: Maximize the customer experience during the buying process Capabilities: Use the right capabilities (people, process, and technology) to maximize the use of customer information Understanding Customer Value Segmentation: Give each segment what they want Financial Value: Understanding the financial value of executing the strategy successfully. It’s not an expense; it’s an investment Key Questions: How and where do my key segments interact with my brand? Effectiveness/ efficiency of driving to different channels? Effective Segmentation Customer Experience Business Processes Right Skill Sets & Mindsets Right Technology

Well Defined Business Processes CRM Strategy Components Automating an ill-defined or inefficient business process will only accelerate the pace at which an organization achieves poor results A CRM strategy must focus on designing processes based on customers’ perceptions & needs Processes can include: Marketing Campaign Designs Store Layout Pricing Strategy Sales-floor Service Training Order Management Service Tracking Returns Management Each of these processes needs to be coordinated with the other processes Effective Segmentation Customer Experience Business Processes Right Skill Sets & Mindsets Right Technology

Skills & new mindsets CRM Strategy Components A customer centric strategy will changes the dynamics of how people interact and how a company makes decisions Managing this change is critical when implementing a customer centric strategy The change management required entails the realigning of skill sets and mindsets Example: Teaching selling skills without changing attitudes will lead to poor prospect-to-buyer conversion rates—& will not maximize the customer experience To support the culture change required, many companies have found it necessary to: Realign their reward systems Reconfigure its compensation schemes Effective Segmentation Customer Experience Business Processes Right Skill Sets & Mindsets Right Technology

Right Technology CRM Strategy Components The right technology is the final linchpin in a CRM strategy Enables an organization to track every customer interaction, regardless of where, when, or how the interaction occurs The right technology will satisfy the following criteria: Consolidated customer data source Company & industry-specific functionality Network availability & support Scalable Support for all devices (networked computers, handhelds, cash registers) Effective Segmentation Customer Experience Business Processes Right Skill Sets & Mindsets Right Technology

Metrics linked to rewards can stimulate change Area Old Metric New Metric Marketing Response Rate Cost per Response Lifetime Value by Segment % of Customer Base Buying Products Gross Margin GM by Customer Segment % of Category Spending / Segment Services Cost per Service % of Total Spend/ Segment Impact on Retention Store Sales Same Store Sales Same Customer Sales Referral Rate / Store Customers None Customers in Loyalty Program Customer Retention Rate

Retailers’ Use of Frequent Shopper Programs

Elements in Effective Frequent Shopper Programs Tier Based on Customer Value Offer Choices of Rewards Non-monetary incentives Reward all Transactions Transparent and Simple

Retailer Personalization

Converting Good Customers to Best Customers Cross-selling Add-on selling

Implementing CRM Programs Need systems, databases Close coordination between departments – marketing, MIS, store operations, HR Shift in orientation + Product Centric Customer Centric