1. Customer Relationship Management (CRM)
Chapter 19 Customer Relationship Management
Customer Relationship Management (CRM)
CHAPTER 19
Marketing Lamb, Hair, McDaniel 9
Designed by
Eric Brengle
B-books, Ltd.
Prepared by
Deborah Baker
Texas Christian University

2. Learning Outcomes LOI LO2 LO3 LO4
Chapter 19 Customer Relationship Management
Learning Outcomes
Define customer relationship management
Explain how to establish customer relationships within the organization
Understand interactions with the current customer base
Outline the process of capturing customer data
LOI
LO2
LO3
LO4

3. Learning Outcomes LO5 LO6 LO7
Chapter 19 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

4. What Is Customer Relationship Management?
Chapter 19 Customer Relationship Management
What Is Customer Relationship Management?
LOI
Define customer relationship management
Today, information technology links marketing and its functional counterparts, making it possible for all functions to have access to the same valuable market information. Marketers respond to customer demands, and technology has enabled rapid response. Through technology, companies have been able to attract consumers, and it is the successful interaction of all business functions that keep customers returning to these companies as loyal and repeat users.

5. Customer Relationship Management
Chapter 19 Customer Relationship Management
Customer Relationship Management
LOI
A company-wide business strategy designed to optimize profitability, revenue, and customer satisfaction by focusing on highly defined and precise customer groups.
Customer Relationship Management
Notes:
Customer relationship management is the ultimate goal of a new trend in marketing that focuses on understanding customers as individuals.
What customers want today is recognition, convenience, information, helpfulness, and excellent service every time they interact with a company. A CRM system helps businesses acquire, retain, and grow customers in ways that would not be possible without it.
Information is maintained about the customer groups, then the information is used to increase customer service and satisfaction.

6. Customer Relationship Management Strategy
Chapter 19 Customer Relationship Management
LOI
Link all processes of the company from its customers through its suppliers
Foster customer-satisfying behaviors
Encourage and track customer interaction with the company
Organize the company around customer segments
Online
ERP Software
Investigate the kinds of software available to power CRM efforts. One site that contains a sizable list with new items added every month is CRM Download. Review some of the software descriptions and select the one you think would be best suited for, say, Starbucks, and another that would work better for a car manufacturer like General Motors.
Notes:
CRM is a business strategy designed to optimize profitability, revenue, and customer satisfaction by focusing on highly defined customer groups. This is accomplished by the points shown above.
The difference between CRM and traditional mass marketing can be compared to shooting a rifle and a shotgun. A rifle is the most efficient, if you have good aim. This is the CRM approach. A shotgun increases your odds of hitting the target when it is more difficult to focus. This is the mass marketing approach.
Online

7. Customer Relationship Management Cycle
Chapter 19 Customer Relationship Management
Customer Relationship Management Cycle
LOI
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
Notes:
While CRM appears to be a simplistic customer service strategy, it is only a small part of an integrated, holistic approach to building customer relationships. CRM is described as a closed-looped system that builds relationships with customers. Exhibit 19.1 illustrates this closed-loop system, one that is continuous and circular with no defined starting or end point.
The CRM cycle is initiated by identifying customer relationships within the organization.
Once the company identifies its customers and its particular products, it then determines the interaction each customer has with the company. Information gathered includes demographics, purchase frequency and amount, and distance driven to purchase.
Based on knowledge of the customer and his/her interaction with the company, the company can then acquire and capture all relevant information about the customer, including date of the last communication with the customer, how often the customer makes purchases, and whether the customer redeemed coupons sent through direct mail.
Technology plays a critical part in a CRM system which uses technology to store and integrate customer data.
Not all customers are equally important to a business. Consequently, the company uses data mining to determine its profitable and unprofitable customer segments.
Once the customer data are analyzed, they are leveraged. Data re transformed into information and disseminated throughout the organization—to the right person in the right place at the right time.

8. Implementing a CRM System
Chapter 19 Customer Relationship Management
Implementing a CRM System
Key Points:
Customers take center stage
Business must manage the customer relationship across all points of customer contact
LOI

9. REVIEW LEARNING OUTCOME Customer Relationship Management
Chapter 19 Customer Relationship Management
REVIEW LEARNING OUTCOME Customer Relationship Management
LOI

10. Identify Customer Relationships
Chapter 19 Customer Relationship Management
Identify Customer Relationships
LO2
Explain how to establish customer relationships within the organization

11. Identify Customer Relationships
Chapter 19 Customer Relationship Management
Identify Customer Relationships
LO2
Customer-Centric
The company customizes its product and service offering based on data generated through interactions between the customer and the company.
Notes:
Customer-centric is an internal management philosophy similar to the marketing concept. The company customizes its product and service offerings based on data generated through interactions with company and customer. This philosophy transcends all functional areas of the business producing an internal system where all company decisions are based on customer information.

12. Identify Customer Relationships
Chapter 19 Customer Relationship Management
Identify Customer Relationships
LO2
Learning
An informal process of collecting customer data through customer comments and feedback on product or service performance.
Notes:
A customer-centric company learns from customers about ways to enhance its product and service offerings.

13. Identify Customer Relationships
Chapter 19 Customer Relationship Management
Identify Customer Relationships
LO2
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.

14. Experiential observations Collected Information Includes:
Knowledge Management
Chapter 19 Customer Relationship Management
LO2
Qualitative facts
Customer actions
Comments
Experiential observations
Collected Information Includes:
Notes:
1. Collected information is from sources shown above.

15. Empowerment LO2 Empowerment
Chapter 19 Customer Relationship Management
Empowerment
LO2
Empowerment
Delegation of authority to solve customers’ problems quickly—usually by the first person that the customer notifies regarding the problem.
Notes:
The success of CRM can be measured by the effectiveness of the interaction between the customer and the organization.
The more empowerment a company gives its representatives, the more likely the interaction will conclude in a way that satisfies the customer.
When a customer and a company representative exchange information and develop learning relationships, it is called an interaction. With CRM, the customer, and not the organization, defines the terms of the interaction. The organization responds by designing products and services around customers’ desired experiences.

16. REVIEW LEARNING OUTCOME Identifying Customer Relationships
Chapter 19 Customer Relationship Management
REVIEW LEARNING OUTCOME Identifying Customer Relationships
LO2

17. Interactions of the Current Customer Base
Chapter 19 Customer Relationship Management
Interactions of the Current Customer Base
LO3
Understand interactions with the current customer base

18. Interactions of the Current Customer Base
Chapter 19 Customer Relationship Management
Interactions of the Current Customer Base
LO3
Requested
Service
Channel
Past
Relationship
Current
transaction
Customer
Notes:
Exhibit 19.2 illustrates the customer-centric approach for managing customer interactions. An interaction can occur through a formal or direct communication channel, and through a current transaction or previous relationship the customer has had.

19. Interactions of the Current Customer Base
Chapter 19 Customer Relationship Management
Interactions of the Current Customer Base
LO3
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 point of sale, normally in a store.
Online:
Best Buy
What evidence do you see on Best Buy’s Web site of the company’s behind-the-scenes CRM program? How many touch points can you identify at BestBuy.com?
Notes:
In a CRM system, touch points are those areas of a business where customer data are gathered and used to guide and direct the decision making within that business unit.
Through interactions, organizations learn about the expectations of customers, generate and manage knowledge about them, negotiate mutually satisfying commitments, and build long-term relationships.
Interactions can be Web-based, as well as point-of-sale.
Online

20. REVIEW LEARNING OUTCOME Interactions with Current Customer Base
Chapter 19 Customer Relationship Management
REVIEW LEARNING OUTCOME Interactions with Current Customer Base
LO3
Web
Point of Sale
Kiosk
Delivery, Installation
Survey
Product Registration
Customer
Notes:
Touch points are all areas of a business where customers have contact with the company and data might be gathered. Data gathered at each of these external touch points provides information that affect touch points inside the company.

21. Outline the process of capturing customer data
Chapter 19 Customer Relationship Management
Capture Customer Data
LO4
Outline the process of capturing customer data

22. Capture Customer Data LO4 Store visits Conversations with salespeople
Chapter 19 Customer Relationship Management
Capture Customer Data
Store visits
Conversations with salespeople
Interactions via the Web
Traditional phone conversations
Wireless communications
Online
GEICO Insurance
How comfortable are you completing the information form for an online rate quote at GEICO Insurance? Would you be more comfortable talking with a representative on the phone? How effective is the Web as a channel for this type of customer interaction?
Notes:
The traditional approach for acquiring data from customers is through channel interactions, such as the ways shown on this slide.
Large amounts of data are collected through various touch points, and creates a question of who owns these data—the customer or the company.
Online
LO4

23. REVIEW LEARNING OUTCOME Capturing Customer Data
Chapter 19 Customer Relationship Management
REVIEW LEARNING OUTCOME Capturing Customer Data
LO4

24. Store and Integrate Customer Data
Chapter 19 Customer Relationship Management
Store and Integrate Customer Data
LO5
Describe the use of technology to store and integrate customer data

25. REVIEW LEARNING OUTCOME Store and Integrate Customer Data
Chapter 19 Customer Relationship Management
REVIEW LEARNING OUTCOME Store and Integrate Customer Data
LO5
Database
Compiled list
Response list
Data Warehouse
:::::::::::::::::::::::::::::::::::::::::: ::::::::::::::::::::::::::::::::::::::::::
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///////////////////////////////////////////////////////////
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Notes:
A data warehouse is a central repository of customer data collected by an organization. The core of the data warehouse is the database. The CRM database focuses on collecting information and purchasing habits on consumers.
When a company builds the database, the first step is to develop a:
Response list—based on customers who have indicated interest in a product or a
Compiled list—created by an outside company that has collected names and contact information for potential customers

26. Identifying the Best Customers
Chapter 19 Customer Relationship Management
Identifying the Best Customers
LO6
Describe how to identify the best customers

27. Identifying the Best Customers
Chapter 19 Customer Relationship Management
Identifying the Best Customers
LO6
Data
Mining
A data analysis procedure that identifies significant patterns of variables and characteristics that pertain to particular customers or customer groups.

28. Data Mining LO6 Identify and profile the best customers
Chapter 19 Customer Relationship Management
Data Mining
Identify and profile the best customers
Calculate their lifetime value
Predict purchasing behavior
Notes:
Data mining builds models to answer questions by using existing information from a data warehouse to predict future customer behavior.
The usefulness of data mining extends beyond its ability to create a mailing list. It is used to identify the best customers, and calculate their lifetime value, while predicting their purchasing behavior.
LO6

29. Data Analysis LO6 Customer segmentation
Chapter 19 Customer Relationship Management
LO6
Predictive modeling
Lifetime value analysis
Recency-frequency-monetary analysis
Customer segmentation
Notes:
Before the data mining information is leveraged, several types of analysis are often run on the data. These are listed on this slide and described on the following slides.

30. Recency-Frequency-Monetary Analysis
Chapter 19 Customer Relationship Management
LO6
Identifies customers mostly like to purchase again
Identifies and ranks “best customers”
Identifies most profitable customers

31. Casino
Chapter 19 Customer Relationship Management
LO6
Biz Flix

32. Data Manipulation Techniques
Chapter 19 Customer Relationship Management
LO6
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.

33. REVIEW LEARNING OUTCOME Identify the Best Customers
Chapter 19 Customer Relationship Management
REVIEW LEARNING OUTCOME Identify the Best Customers
LO6

34. Leverage Customer Information
Chapter 19 Customer Relationship Management
Leverage Customer Information
LO7
Explain the process of leveraging customer information throughout the organization

35. CRM Marketing Database Applications
Chapter 19 Customer Relationship Management
CRM Marketing Database Applications
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
Notes:
Exhibit 19.3 lists some common CRM marketing database applications.
LO7

36. Campaign Management LO7 Campaign Management
Chapter 19 Customer Relationship Management
Campaign Management
LO7
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.

37. Campaign Management LO7
Chapter 19 Customer Relationship Management
Campaign Management
Communicating offerings in a way that enhances customer relationships
Developing customized offerings for appropriate segment
Pricing these offerings attractively
LO7

38. Retaining Loyal Customers
Chapter 19 Customer Relationship Management
LO7
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
Notes:
If a company has identified its best customers, effort should be made to maintain and increase their loyalty. As shown here, customer retention can have a dramatic effect on a company’s profitability, while in turn continue to reward loyal customers.
Loyalty programs provide information about customers and trends

39. Targeted Marketing Communications
Chapter 19 Customer Relationship Management
Targeted Marketing Communications
LO7
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
Notes:
Using transaction and purchase data, customers can be segmented into infrequent, moderate, and heavy users. Communications programs for each segment are designed to encourage customer purchases and loyalty.

40. Increasing Effectiveness of Distribution Channel Marketing
Chapter 19 Customer Relationship Management
LO7
CRM Databases
RFID technology
Multichannel Marketing
Online
KidsDadsMoms10
Would you be comfortable building a profile about your child at KidsDadsMoms.com? Why or why not? What are the advantages of giving complete information? Are there any disadvantages? Can you use their highly customized site without building a learning profile for a child?
Notes:
With CRM databases, manufacturers have a tool to gain insight into the customers who are buying their products.
It is also possible to track purchases made online and in brick-and-mortar stores. This concept is called multichannel marketing.
Companies are also using RFID technology (radio-frequency-identification technology) to improve distribution.
Online

41. REVIEW LEARNING OUTCOME Leveraging Customer Information
Chapter 19 Customer Relationship Management
REVIEW LEARNING OUTCOME Leveraging Customer Information
LO7
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