Lecture 2: Understanding Customers and CRM

What is CRM? CRM is a strategy for making and sustaining customers who brings profits to company CRM is a strategy for maximizing the lifetime value of customers –todman 2001-

Goals of CRM Acquire new customers Retain good customers Develop long-term higher-spending customers from casual customers Drop bad customers

Understanding Customer Behavior Understanding customer behavior is at the core of CRM If you understand the needs of your customer - You can attract new customers - Retain existing customer

Motivation for CRM CRM is not new, it has always been practiced implicitly New business realities: - globalization, hyper-competition, technological change, customer expectation - many more customers and products new product developments require timely knowledge of customer requirements - identifying what customers want and when has become a challenge

Understanding customers Who is buying what – analyzing purchasing patterns Which prospects will become responders Market basket analysis Churn ( number or percentage of customer loss to competitors) modeling - who is leaving? - why are they leaving?

Customer contact A customer contact point is any transaction or customer interaction with the organization Typical contact type: enquires, complains, transactions, advertising The importance of interaction with customers Communication Channel - phone, fax, internet, mail, tv, magazine, print media.. Et. al. Different customers may require different communication channel

Target marketing Marketing of products to selected groups of customers that are likely to be interested in the offer

Customer segmentation Categorize customers into groups Recognize that not all buyer are alike Find subgroups people with similar behaviors The challenge is to target right level of customer

Example of Potential segments within the computer market