1. E-Marketing 4/E Judy Strauss, Adel I. El-Ansary, and Raymond Frost
Chapter 14: Customer Relationship Management
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2. Chapter 14 Objectives After reading Chapter 14 you will be able to:
Define customer relationship management and identify the major benefits to e-marketers.
Outline the three legs of CRM for e-marketing.
Discuss the eight major components needed for effective and efficient CRM in e-marketing.
Differentiate between relationship intensity and relationship levels.
Highlight some of the company-side and client-side tools that e-marketers use to enhance their CRM processes.
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3. "A business absolutely devoted to Customer Service Excellence will have only one worry about profits. They will be embarrassingly large." -Sir Henry Ford
"The cost of retention is $180 per customer," he says. "But most automotive dealerships are set up for customer acquisition - which is crazy when you consider the average cost of customer acquisition is $1,000 or more." -Arthur Hughes, author of several books on using databases to enhance CRM.
"70 to 90 percent of decisions not to repeat a purchase of anything are not about product or price. They are about some dimension of service." -Barry Gibbons, former CEO, Burger King
"The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency." -Bill Gates
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4. The Cisco Story
Cisco provides Internet networking systems for corporate, government and education clients.
The Internet plays a major role in acquiring, retaining and growing customer business.
2.5 million users log onto the Cisco site each month.
90% of orders come through the Internet
82% of all customer questions handled online
Cisco has become an expert at online customer relationship management (CRM).
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5. The Cisco Story, cont.
Cisco set a goal to migrate customers to the online channel.
In 1996, 5% of their customers placed orders on the Web site.
In 2001, 90% of their orders came through the Internet.
Cisco saves $340 million a year in customer service costs due to automation.
Can you think of other B2B marketers that utilize the Internet as successfully as Cisco?
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6. Relationship Marketing Defined
Relationship marketing (1:1 marketing) is about establishing, maintaining, enhancing, and commercializing customer relationships through promise fulfillment.
Relationship capital may be the most important asset a firm can have.
A firm using relationship marketing focuses more on wallet share than on market share.
More $ from each customer instead of more customers
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7. Continuum from Mass Marketing to Relationship Marketing
Discrete transactions
Continuing transactions
Short-term emphasis
Long-term emphasis
One-way communication
Two-way communication
and collaboration
Acquisition focus
Retention focus
Share of market
Wallet share
Product differentiation
Customer differentiation
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8. Stakeholders
Firms can establish and maintain relationships with different stakeholder groups through Internet technologies:
Employees who need training and access to data and systems used for relationship management.
Business customers in the supply chain.
Lateral partners, such as other businesses, not-for- profit organizations, or governments.
Consumers who are end users of products and services.
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9. Customer Relationship Management
CRM is the process of acquiring, servicing, retaining and building long-term relationships with customers.
The benefits of CRM include:
Increased revenue from better targeting.
Increased wallet share with current customers.
Retention of customers for longer time periods.
The cost of acquiring a new customer is typically 5 times higher than the cost of retaining a current customer.
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10. Retain 5 current customers ($100 each)‏ $ 500
Acquisition Emphasis
Retention Emphasis
Gain 6 new customers
($500 each)‏
$3,000
Gain 3 new customers
$1,500
Retain 5 current customers
($100 each)‏
$ 500
Retain 20 current customers ($100 each)‏
$2,000
Total cost
$3,500
Total number of customers 11 23
Maximizing Number of Customers
Source: Adapted from Peppers and Rogers (1996)‏
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11. Customer Relationship Management, cont.
CRM has 3 facets:
Sales force automation (SFA).
Marketing automation.
Customer service.
Used primarily in the B2B market, SFA helps salespeople to:
Build, maintain, and access customer records.
Manage leads and accounts.
Manage their schedules.
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13. Customer Relationship Management, cont.
Marketing automation software aids marketers in effective targeting, marketing communication, and monitoring of customer and market trends.
Software solutions include campaign management, database marketing, and market segmentation.
Most customer service occurs post purchase when customers have questions or complaints.
and Web self-service are often used.
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14. 8 Building Blocks for Successful CRM
1. CRM Vision: Leadership, value proposition
2. CRM Strategy: Objectives, target markets
3. Valued Customer Experience
Understand requirements
Monitor expectations
Maintain satisfaction
Collaboration and feedback
Customer interaction
4. Organizational Collaboration
Culture and structure
Customer understanding
People, skills, competencies Incentives and compensation
Employee communication
Partners and suppliers
5. CRM Processes: Customer life cycle, knowledge management
6. CRM Information: Data, analysis, one view across channels
7. CRM Technology: Applications, architecture, infrastructure
8. CRM Metrics: Value, retention, satisfaction, loyalty, cost to serve
Exhibit Eight Building Blocks for Successful CRM
Source: Adapted from Gartner Group (
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15. 1. CRM Vision
To be successful, the CRM vision must start at the top and filter throughout the company to keep the firm customer focused.
One key aspect of CRM vision is how to guard customer privacy.
The benefits of using customer data must be balanced by the need to satisfy customers and not anger them.
TRUSTe provides its seal and logo to any Web site meeting its privacy philosophies.
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16. TRUSTe Builds User Trust
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17. 2. CRM Strategy
E-marketers must determine their objectives and strategies before buying CRM technology.
Many CRM goals refer to customer loyalty.
An important CRM strategy is to move customers up the relationship intensity pyramid
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18. Three Levels of Relationship Marketing
Another CRM goal involves building bonds with customers on 3 levels:
Financial
Social
Structural
Level
Primary Bond
Potential for Sustained Competitive Advantage
Main Element of Marketing Mix
Web Example
One
Financial
Low
Price
Two
Social
Build 1:1 relationships
Build community
Medium
Personal
communications
Three
Structural
High
Service delivery
my.yahoo.com
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19. 3. Valued Customer Experience
Consumers are constantly bombarded by marketing communications and unlimited product choices.
According to Jagdish Sheth (1995), the basic tenet of CRM is choice reduction.
Many consumers are “loyalty prone,” and will stick with the right product as long as its promises are fulfilled.
Synchronous and asynchronous technologies can provide automated and human services that solve customer problems.
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20. Relationships over Multiple Communication Channels
Automated
Human
Synchronous
Web 1:1 self-service
Online transactions
Telephone routing
Telephone
Online chat
Collaboration tools
Asynchronous
Automated
Short message services (SMS)‏
Web forms
Fax on demand
response
Postal mail
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21. 4. Organizational Collaboration
Marketers collaborate within and outside the organization to focus on customer satisfaction.
CRM, or “front-end” operations, can be linked with the entire supply chain management system (SCM), or “back-end” operations.
Customer service reps have access to inventories.
Producers and wholesalers constantly receive data that can be utilized for production and delivery.
The use of extranets, two or more intranet networks that share information, allows CRM- SCM integration.
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22. 5. CRM Processes
Firms use specific processes to move customers through the customer care life cycle.
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23. CRM Processes, cont. CRM processes are used to:
Identify customers.
Differentiate customers.
Customize the marketing mix.
Interact with customers.
Firms can identify high-value customers by mining customer databases and profiling customers in terms of: (RFM analysis)‏
Recency of purchases.
Frequency of purchases.
Monetary value of purchases.
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24. 6. CRM Information
The more information a firm has, the better value it can provide to each current or prospective customer.
Firms gain much information by tracking behavior electronically.
Bar code scanner data.
Software that tracks online movement, time spent per page, and purchase behavior.
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25. 7. CRM Technology Technology greatly enhances CRM processes.
Firms use company-side tools to push customized information to users.
Client-side tools allow the customer to pull information that initiates the customized response from the firm.
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26. Company-side Tools Company-Side Tools (push)‏ Description Cookies
Cookies are small files written to the user’s hard drive after visiting a Web site. When the user returns to the site, the company’s server looks for the cookie file and uses it to personalize the site.
Web log analysis
Every time a user accesses a Web site, the visit is recorded in the Web server’s log file. This file keeps track of which pages the user visits, how long he stays, and whether he purchases or not.
Data mining
Data mining involves the extraction of hidden predictive information in large databases through statistical analysis.
Real-time profiling
Real-time profiling occurs when special software tracks a user’s movements through a Web site, then compiles and reports on the data at a moment’s notice.
Collaborative filtering
Collaborative filtering software gathers opinions of like-minded users and returns those opinions to the individual in real time.
Outgoing Distributed
Marketers use databases to build relationships by keeping in touch with useful and timely information. can be sent to individuals or sent en masse using a distributed list.
Chats
Bulletin boards
A firm may listen to users and build community by providing a space for user conversation on the Web site.
iPOS terminals
Interactive point-of-sale terminals are located on a retailer’s counter and used to capture data and present targeted communication.
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27. Client-side Tools Client-Side Tools (pull)‏ Description Agents
Agents are programs that perform functions on behalf of the user, such as search engines and shopping agents.
Individualized Web portals
Personalized Web pages users easily configure at Web sites such as MyYahoo! and many others.
Wireless data services
Wireless Web portals send data to customer cell phones, pagers, and PDAs, such as the PalmPilot.
Web forms
Web form (or HTML form) is the technical term for a form on a Web page that has designated places for the user to type information for submission.
Fax-on-demand
With fax-on-demand, customers telephone a firm, listen to an automated voice menu, and select options to request a fax be sent on a particular topic.
Incoming
queries, complaints, or compliments initiated by customers or prospects comprise incoming , and is the fodder for customer service.
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28. 8. CRM Metrics
E-marketers use numerous metrics to assess the Internet’s value in delivering CRM performance.
ROI
Cost savings
Revenues
Customer satisfaction
One study named customer retention, ROI and customer lift (increased response or transaction rates) as the most important metrics.
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29. CRM Metrics, cont.
One very important CRM metric is customer lifetime value (LTV).
The LTV calculation demonstrates the benefits of retaining customers over time and the need for building wallet share.
LTV also illustrates that no matter how good customer retention is, the firm must still focus on customer acquisition activities.
Exhibit illustrates Customer LTV.
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30. Total Retention Net NPV at 10-Year Year Customers Rate Revenue Profit
15%
LTV 1
1,000
60%
$35,900
$ 5,900 $ 2
600
65%
45,540
27,540
23,948
118.12 3
390
70%
29,601
17,901
13,536
129.15 4
273
75%
20,721
12,531
8,239
138.35 5
205
78%
15,541
9,398
5,373
143.45 6
160
79%
12,122
7,330
3,645
145.55 7
126
80%
9,576
5,791
2,504
146.81 8
101
7,661
4,633
1,742 9 81
6,129
3,706
1,212 10 65
4,903
2,965
843
Customer Lifetime Value (LTV)‏
Source: Adapted from Peppers and Rogers Group at
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