1. Copyright by Debra L. Zahay 2002 Customer Relationship Marketing Dr. Zahay

2. Copyright by Debra L. Zahay 2002 Marketing and Seduction Lonely hearts club members Received direct mail from fictional “lonely women” Over time, solicited money, gifts Deighton, Harvard University

3. Copyright by Debra L. Zahay 2002 Marketing is….

4. Copyright by Debra L. Zahay 2002 Customer Relationship Marketing Marketing Customer Service Operations CRM

5. Copyright by Debra L. Zahay 2002 Three phases of company strategy Product Competitors Customers

6. Copyright by Debra L. Zahay 2002 Customer Relationship Marketing Definition: Process of creating relationships with customers involving integration of processes throughout the company with the objective of create customer value Integrated Sales, marketing and service strategy Management approach, not just software Front-end applications as well as business philosophy

7. Copyright by Debra L. Zahay 2002 CRM means Understanding your customer Meeting his/her needs in a way that you also make profit Looking at your customer in an integrated way Making sure all touch points are coordinated

8. Copyright by Debra L. Zahay 2002 Other Names for CRM 1 to 1 Marketing Relationship Marketing Aftermarketing Segment-of-one marketing IMC

9. Copyright by Debra L. Zahay 2002 Direct Marketing An organized and planned system of contacts Using a variety of media Seeking to produce a lead or an order Developing and maintaining a database Measurable in cost and results Expandable with confidence

10. Copyright by Debra L. Zahay 2002 Interactive Marketing 1) the ability to address an individual 2) the ability to gather and remember a response of an individual 3) the ability to address that individual once more in a way that takes into account his or her unique response (Marketing=conversation) »Deighton, 1996

11. Copyright by Debra L. Zahay 2002 RM >> CRM >> eCRM

12. Copyright by Debra L. Zahay 2002 To what extent are Interactive Marketing, Direct Marketing, Relationship Marketing and Customer Relationship Management related? Are they the same thing ?

13. Copyright by Debra L. Zahay 2002 Why CRM? Use relationships to grow revenue Use integrated information for excellent service Introduce more repeatable sales processes and procedures Create new value Instill loyalty Why else? Kahlota and Robinson 1999

14. Copyright by Debra L. Zahay 2002 Why CRM in Insurance Industry? Customer Retention (4/5) Customer Satisfaction Cost Savings (2.8/5) Source: Insurancenet, Peoplesoft

15. Copyright by Debra L. Zahay 2002 “The Loyalty Effect” Customers Suppliers Shareholders Profitability Reichheld 1996

16. Copyright by Debra L. Zahay 2002 Reminder: Aftermarketing, Retention Marketing The average company loses half its customers every 5 years. Reducing defections by 5% can increase profits by 25 to 85%, depending on industry. Up to 85% of customers who defect say they were satisfied. Customers who are extremely satisfied are 6 times more likely to repurchase than customers who are merely satisfied. A satisfied customer will tell 5 people while a dissatisfied customer will tell 9 people. Source: Cambridge Technology Partners

17. Copyright by Debra L. Zahay 2002 What is a relationship?

18. Copyright by Debra L. Zahay 2002 Relationships Reciprocity –“we should return good for good, in proportion to what we receive;... We should resist evil, but not do evil in return;... We should make reparation for the harm we do.” (Bagozzi (1995), Becker (1990) In interpersonal relationships, a close relationship is one where two people, “mutually influence each other’s behavior over a long period.” (Kelley 1983)

19. Copyright by Debra L. Zahay 2002 Characteristics of Relationships

20. Copyright by Debra L. Zahay 2002 Type of Customer Market segmentation –Demographic –Product end-use –Buying situation –Customer benefits –Customer buying behavior –Customer decision making style »Rangan, Moriarty and Swartz (1992)

21. Copyright by Debra L. Zahay 2002 Buying Behavior: Relationship Types Jackson (1985) –Always a share (Long-term) –Lost for good (Short-term) Friendship Continuum (Fournier 1998) Rangan Moriarty and Swartz (1992) –programmed buyers –relationship buyers –transaction buyers –bargain hunters

22. Copyright by Debra L. Zahay 2002 Can a consumer have a relationship with a company?

23. Copyright by Debra L. Zahay 2002 The Relationship Marketing Process Learn About Customers Customize and Personalize of the Marketing Mix 1. Products/Services 2. Communications 3. Channels 4. Price Inter- actions

24. Copyright by Debra L. Zahay 2002 Customer Relationship Marketing Process of creating relationships with customers, integration throughout the company to create value Integrated Sales, marketing and service strategy 400-600 software programs claiming to deal with some aspect of relationship management Claims made for these packages in terms of performance

25. Copyright by Debra L. Zahay 2002 Phases of relationship building 1) awareness 2) exploration 3) expansion 4) commitment 5) dissolution Scanzoni (1979)

26. Copyright by Debra L. Zahay 2002 The Relationship Continuum Mass Market Differentiated Customized TransactionsRelationships Mass Market Differentiation/Segmentation Personalization Customization Relationships

27. Copyright by Debra L. Zahay 2002 Not All Customers Are Valued or Treated Equally Tier 1 Tier 2 Tier 3 Tier 4 CustomersRevenuesCost 1% 10% 24% 65% 50% 40% 7% 3% 5% 30% 45% 20% 1%50%5% 10%40%30% 24%7%45% 65%3%20% Adopted from Haht Corporation

28. Copyright by Debra L. Zahay 2002 Tier 1 Tier 2 Tier 3 Tier 4 CustomersRevenuesCost 1% 10% 24% 65% 50% 40% 7% 3% 5% 30% 45% 20% 1%50%5% 10%40%30% 24%7%45% 65%3%20% Nor Should They Be Treated Equally Grow or Aggregate Improve Customer Service Tighten Demand Chain Reduce Costs Improve Customer Service Enhance Customer Loyalty Haht Corporation

29. Copyright by Debra L. Zahay 2002 CRM vs. 1 to 1 Identify Acquire Enhance Retain Identify Differentiate Interact Personalize/Customize

30. Copyright by Debra L. Zahay 2002 Fulcrum Analytics, The Path to Customer Relationships Meet me (collect data) Understand Me (analyze individual customers, data mining) Value Me Remember Me (create database) (create targeted campaign, campaign management)

31. Copyright by Debra L. Zahay 2002 SAS CRM Business Flow: The Role of Customer Intelligence

32. Copyright by Debra L. Zahay 2002 Operational CRM Analytical CRM Business Operations Mgmt.Business Performance Mgmt. ERP/ERM Supply Chain Mgmt. Order Promising Order Mgmt. Legacy Systems Customer Service Marketing Automation Sales Automation Mobile Sales ( Product CFG) Field Service Voice (IVR, CTI, ACD) Conferencing Web Conference Email E-Resp. Mgmt. Fax, Letter Direct Interaction Marketing Automation Vertical Apps Category Mgmt. Campaign Mgmt. Customer Activity Data Mart Customer Data Mart Product Data Mart Data Warehouse Customer Interaction Closed Loop Processing (EAI Toolkits, Embedded/Mobile Agents) Mobile Office Front Office Back Office Collaborative CRM Business Collaboration Management CRM Technologies

33. Copyright by Debra L. Zahay 2002 CRM and the Value Chain Customer Relationships Inbound (Purchasing, Logistics) Operations (Production, Inventory Management) Outbound (Distribution) Marketing and Sales Service Primary Technology Application Value (Use) Information