Class Discussion Notes MKT March 27, 2001

Customer Relationship Management Relationship marketing Establish Maintain Enhance Commercialize Fulfill the promise Facilitate 2 way communication Focus Share of mind Share of customer Share of wallet

Customer Relationship Management Stakeholders Employees Business customers and suppliers Other partners Consumers

Customer Relationship Management Relationship levels Financial Uses pricing strategies Social Uses personal communication May also use pricing strategies Structural Creates solutions to customer problems

Customer Relationship Management CRM process Identify customers Sales force Personal encounters Bar code scanner data Web site activity Personal disclosure Automated tracking

Customer Relationship Management CRM process – cont’d Differentiate customers 80/20 rule Identifying high-value customers Data mining Profiling Real-time data collection Look for RFM Analyze LTV (lifetime value) Evaluate sales growth over time Determine individual service costs

Customer Relationship Management CRM process – cont’d Customize the marketing mix Tailored marketing communications messages Retaining customers Feedback loop Integrating CRM with SCM Keeps inventories low Facilitates better product design Provide timely, helpful information to the customer

Customer Relationship Management CRM benefits Increased profits Customer acquisition vs retention Retention costs are less Reduced promotion costs Effective sales team Loyalty = experience Loyal customers cost less to service Increase amount purchased Cross-selling Upselling

Customer Relationship Management Increased profits – cont’d CRM metrics Lifetime value (LTV) Average order value (AOV) Recency, frequency, monetary analysis (RFM) Average annual sales over time New customer acquisition cost Current customer retention cost (1/5 of new) Cost per customer – high and low value Share of customer spending 80/20 rule % of customer retention Rate of customer recovery Referral revenue Price premium

Customer Relationship Management CRM benefits – cont’d Word of mouth communication and referrals Each unhappy customer tells 10 people about the experience Chat rooms Newsgroups Personal web pages Partnership synergy Increased sales Lower development or maintenance costs Affiliate programs = more revenue Customer’s perception of value add

Customer Relationship Management CRM benefits – cont’d Customer benefits Choice reduction Personalized service Brand loyalty

Customer Relationship Management Building CRM Target the right customers Own the customer’s total experience Streamline processes Provide 360 degree review within the firm Let customers help themselves Help customers do their jobs (B2B) Deliver personalized service Foster community

Customer Relationship Management Customization tools Small segment customization – company-side tools “Push” Collaborative filtering Software that gathers opinions of similar users Data mining Extracting predictive information from databases Profiling Understanding user characteristics and behavior Outgoing Customized pricing, distribution, messages Permission marketing Spam

Customer Relationship Management Customization tools – cont’d Small segment customization – client-side tools “Pull” Agents Shopping Search enginges Negotiation agents Experiential marketing Customer involvement

Customer Relationship Management Customization tools – cont’d Individual customization – company-side tools “Push” Cookies Web site log Real time profiling Outgoing

Customer Relationship Management Customization tools – cont’d Individual customization – client-side tools “Pull” Individualized web portals Training B2B Wireless data services PDAs Cell phone Pager Web forms Product registration Purchase Market research Fax on demand Incoming Customer feedback Automated responses

Customer Relationship Management Building community Chat rooms Ex-employees Bulletin boards Distributed Professional discussion groups Intranet Providing internal information to employees Extranet Linked networks sharing information B2B suppliers

Customer Relationship Management Guarding consumer privacy TRUSTe guidelines Adopt and implement a privacy policy Post notice and disclosure of information collection parctices Give users consent Put security measures in place Publish the following information on the site: What information is being gathered Who is collecting the information How the information will be used Who will information be shared with Opt-out Security procedures Updating information AMA code of ethics for Internet marketing