Customer Relationship Management: A Database Approach MARK 7397 Spring 2007 James D. Hess C.T. Bauer Professor of Marketing Science 375H Melcher Hall Class 2

Four Perils of CRM 1. Implementing CRM before creating a customer strategy 2. Installing CRM technology before creating a customer- focused organization 3. Assuming that high tech CRM is better than low tech 4. Stalking, not wooing, customers

Potential Repurchase Frequency High Retention Strategy -Loyalty rewards -Communication Personalization Strategy -Differentiation -Operations Low CRM has low payoffAcquisition Strategy -Data Analytics -Attract Angels LowHigh Potential Degree of Customizability 1. Implementing CRM before creating a customer strategy

2. Installing CRM technology before creating a customer-focused organization Management often has “marketing myopia” (focus on existing products rather than customer needs): “We are in the business of selling filing cabinets” rather than “We are in the business of storing and accessing paper records.” CRM-Forum 2001 study of problems with CRM Organizational change 29% Company politics22% Lack of CRM understanding20% Lack of CRM skills 6% Software problems 2%

3. Assuming that high tech CRM is better than low tech A customer bought a $45,000 Lexus and on the way how from the dealer turned on the radio. He discovered his favorite classical radio stationed was programmed on the first channel button. He pushed the second button and it had his regular news station. The third button had his daughter’s favorite rock station. When he got home, he called the Lexus dealer to ask whether they were psychic. “No,” said the salesperson, “We just had the mechanic note the settings on your trade-in car and set the radio in the your new Lexus for you.”

4. Stalking, not wooing, customers Isn’t CRM just capturing names and addresses from customer transactions and then up-selling or cross selling them in the future? Customers just want there lives made easier.

Customer Satisfaction driven by the gap between the customer's expectation of performance and their perceived experience of performance American Customer Satisfaction Index

Declining Customer Satisfaction- Examples (American Customer Satisfaction Index) with products and services Source: University of Michigan

Preventing the Premature Death of CRM CRM from the Consumer’s Viewpoint 1.Too many trivial one-to-one relationships is untenable 2.Relationships are give and take 3.Companies focus on best customers only 4.Companies often create rather than solve problems for customers Relevant Rules of Friendship 1.Provide emotional support 2.Respect privacy and preserve confidence 3.Be tolerant of other friendships Does CRM court customer friendship?

What are some of your examples of delightful customer relationships? Flying Billing Lodging Retail  GE Capital: $25 annual fee for people that did not have at least $25 in interest changes  Schwab answers the phone in 15 seconds for Signature clients with $100,000 assets  Starwood Hotels ejected customers from rooms to make way for “Platinum” club member  Best Buy stocks merchandise that appeals to “angels” and has cut ties to Is this bad news for consumers? The New Consumer Apartheid

Privacy is valued To a Radio Shack clerk: My zip code's none of your business. But so is identity At a hotel reception desk: Do you know who I am? What are Americans Concerned With?* Loss of personal privacy56% Healthcare54% Crime53% Taxes52% * October 2001 Harris Interactive survey

Permission Marketing 92% of people surveyed in 2001 feel positively about companies that ask permission before sharing information. Opting In: Can I send you stuff? Opting On: Will you agree to listen? Opting When: Will you tell me when you will listen? Opting Where: Where do you want to listen? Opting How: How should I reach you? Opting Now: Should I be “always on” for you?

How should companies interact with reluctant customers? With Don Peppers, Dr. Rogers co-authored The One to One Future (Currency/Doubleday 1993), celebrating its 11th year in print, was named by Inc. magazine's editor, George Gendron, as "one of the two or three most important business books ever written" and is widely acknowledged as the bible of the customer strategy revolution. Martha Rogers Adjunct Professor of Marketing – Duke University Ph.D. University of Tennessee, 1983