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PPT 11-1 5 th Edition. PPT 11-2 McGraw-Hill/Irwin Levy/Weitz: Retailing Management, 5/e Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights.

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Presentation on theme: "PPT 11-1 5 th Edition. PPT 11-2 McGraw-Hill/Irwin Levy/Weitz: Retailing Management, 5/e Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights."— Presentation transcript:

1 PPT 11-1 5 th Edition

2 PPT 11-2 McGraw-Hill/Irwin Levy/Weitz: Retailing Management, 5/e Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. Customer Relationship Management Chapter 11

3 PPT 11-3 Information Systems Retailing Strategy Retail Market Strategy Financial StrategySite Location Retail Locations Organizational Structure and HR Management Customer Relationship Management

4 PPT 11-4 Customer Relationship Management A business philosophy and set of strategies, programs, and systems that focus on identifying and building loyalty with a retailer’s most valuable customers. What is loyalty? Is it the same thing as liking a retailer or frequently patronizing a retailer?

5 PPT 11-5 Customer Loyalty Committed to purchasing merchandise and services from a retailer Resist efforts of competitors to attract the loyal customer Emotional attachment to retailer –Personal attention –Memorable positive experiences –Brand building communications programs

6 PPT 11-6 CRM Process

7 PPT 11-7 Collecting Customer Data Types of Information in the Customer Database Approaches for Collecting Information Privacy Concerns

8 PPT 11-8 Information About Each Customer in the Data Base History of purchases –Purchase date, price paid, SKUs bought, whether or not the purchase was stimulated by a promotion Customer contacts by retailer (touch points) –Visits to web site, inquires to call center, direct mail sent to customer Customer preferences Descriptive information about customer Customer’s responses to promotions

9 PPT 11-9 Approaches for Collecting Customer Information Need to connection contacts with a specific customer identifier Ask for identifying information –Telephone number, name and address Encourage use of frequent shopper cards Link checking account number and/or third party credit cards to customer

10 PPT 11-10 Privacy Concerns Control over Collection Do customers know what information is being collected? Do customers feel they can decide on the amount and type of information collected by retailers? Control over Use Do customers know how the information will be used by the retailer? Will the retailer share the information with third parties?

11 PPT 11-11 Heighten Concerns When Using Electronic Channel Information collected without the awareness of customers Collecting click stream data using cookies –Similar to an invisible person videotaping a customer as they walk through a store

12 PPT 11-12 Customer’s Decision to Offer Information Balance benefits and risks Discounts Special Treatment Personal Attention Disclosure of Information Unwanted Sales Contacts

13 PPT 11-13 Consumer Protection Differences United States Limited protection in specific areas –Credit reporting –Video rentals –Banking –Medical records European Union Information only can only be collected for specific purposes Purpose must be disclosed to customer Information can only be used for specific purpose Information can not be exported to countries with less stringent regulations

14 PPT 11-14 FTC Guideline for Fair Information Practices Notice and awareness –comprehensive statement about information storage, manipulation, and dissemination Choice/consent –Opt-in and opt-out options Access/participation –Customer able to confirm accuracy Integrity/security –Controls for theft and tampering Enforcement/redress –Mechanism to insure compliance

15 PPT 11-15 GAP Security and Privacy Policy

16 PPT 11-16 Analyzing Customer Data Data Mining – technique used to identify patterns in data. Expl :DVD Player Market Basket Analysis Identifying Market Segments Identifying Best Customers

17 PPT 11-17 Market Basket Analysis Data analysis focusing on the composition of the customer’s market basket – what items are bought at the same time. Uses: -Adjacencies for displaying merchandise -Joint promotions

18 PPT 11-18 Identifying Best Customers Estimating Lifetime Value Classifying Customers by recency, frequency, and monetary value of purchases (RFM Analysis)

19 PPT 11-19 Which Customer Probably Has the Greatest Lifetime Value Purchases Over Last 10 Weeks

20 PPT 11-20 Customer Pyramid Platinum Best Most loyal Least price sensitive

21 PPT 11-21 Customer Pyramid Gold Next best Not as loyal

22 PPT 11-22 Customer Pyramid Iron Doesn’t deserve much attention

23 PPT 11-23 Customer Pyramid Lead Demands attention May have negative value

24 PPT 11-24 RFM Analysis

25 PPT 11-25 RFM Target Strategies

26 PPT 11-26 Illustration of RFM Application A catalog retailer is deciding which group of customers to send a catalog.. Based on experience and an RFM analysis of customer database: Average order size for customers in cell - $40 Contribution margin – 50% Response rate – 5% Cost of catalog and mailing -$.75 Will the retailer make a profit mailing to this RFM segment?

27 PPT 11-27 Illustration of RFM Application A catalog retailer is deciding which group of customers to send a catalog.. Based on experience and an RFM analysis of customer database: Average order size for customers in cell - $40 Contribution margin – 50% Response rate – 5% Cost of catalog and mailing -$.75 Will the retailer make a profit mailing to this RFM segment? $20.00 contribution x.05 response rate - $.75 cost = $.25 profit per catalog mailed

28 PPT 11-28 CRM Programs Retailing Best Customers Converting Good Customers to Best Customers Getting Rid of Unprofitable Customers

29 PPT 11-29 Customer Retention Programs Frequent Shopper Programs Special Customer Services Personalization –1-to1 Retailing Community

30 PPT 11-30 Even Small Retailers Use Frequent Shopper Programs

31 PPT 11-31 Elements in Effective Frequent Shopper Programs Tier Based on Customer Value Offer Choices of Rewards –Non-monetary incentives Reward all Transactions Transparent and Simple

32 PPT 11-32 Issues with Effective Frequent Shopper Programs Expense Difficulty in Making Changes Impact on Loyalty Questionable Easily Duplicated – Difficult to Gain Competitive Advantage –Need to offer “invisible” benefits

33 PPT 11-33 Personalization Hello, Barton Weitz

34 PPT 11-34 Converting Good Customers to Best Customers Cross-selling Add-on selling

35 PPT 11-35 Dealing with Unprofitable Customers Offer less approaches for dealing with these customers Charge customers for extra services demanded

36 PPT 11-36 Implementing CRM Programs Need systems, databases Close coordination between departments – marketing, MIS, store operations, HR Shift in orientation Product CentricCustomer Centric +

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