Ch. 21

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Lamb, Hair, McDaniel
2011-2012
CHAPTER 21
Chapter 21
Copyright ©2012 by Cengage Learning Inc. All rights reserved
1
© ISTOCKPHOTO.COM/YUNUS ARAKON
Customer Relationship
Management (CRM)
Learning Outcomes
LO 1 Define customer relationship management
LO 2 Explain how to identify customer relationships
with the organization
LO 3 Understand interactions with the current customer
base
LO 4 Outline the process of capturing customer data
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2
Learning Outcomes
LO 5 Describe the use of technology to store and
integrate customer data
LO 6 Describe how to identify the best customers
LO 7 Explain the process of leveraging customer
information throughout the organization
Chapter 21
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3
What Is Customer
Relationship Management?
Define customer
relationship
management
LO1
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4
What Is Customer
Relationship Management?
Customer Relationship
Management (CRM) is…
a company-wide business strategy
designed to optimize profitability,
revenue, and customer satisfaction by
focusing on highly defined and precise
customer groups.
LO1
Chapter 21
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5
LO1
Customer Relationship
Management Strategy
Organize the company around customer segments
Encourage and track customer interaction with the company
Foster customer-satisfying behaviors
Link all processes of the company from its customers
through its suppliers
Allows companies to tightly focus in on their target markets
Chapter 21
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6
Exhibit 21.1
A Simple Flow Model of the
Customer Relationship Management
System
Identify customer relationships
LO1
Chapter 21
Leverage customer
information
Understand interactions
with current customer base
Identify best customers
Capture customer data
based on interactions
Store and integrate
customer data using IT
Copyright ©2012 by Cengage Learning Inc. All rights reserved
7
Implementing a CRM System
Key Points:
1. Customers take center stage
2. Business must manage the customer
relationship across all points of
customer contact
LO1
Chapter 21
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8
Identify Customer Relationships
Explain how to
identify customer
relationships with
the organization
LO2
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9
Identify Customer
Relationships
Customer-centric is…
a philosophy under which the company
customizes its product and service
offering based on data generated
through interactions between the
customer and the company.
LO2
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Identify Customer
Relationships
Learning is…
an informal process of collecting
customer data through customer
comments and feedback on product
or service performance.
LO2
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Identify Customer
Relationships
Knowledge Management is…
the process by which learned
information from customers is
centralized and shared in order to
enhance the relationship between
customers and the organization.
LO2
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Knowledge Management
Experiential
observations
Comments
Collected
Information
Includes:
Customer actions
Qualitative facts
LO2
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13
Empowerment
Empowerment is…
delegation of authority to solve
customers’ problems quickly—usually
by the first person the customer
notifies regarding the problem.
LO2
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Successful CRM
Interaction
Occurs when a customer
and a company
representative exchange
information and develop
learning relationships
• The success of CRM can be directly
measured by the effectiveness of the
interaction between the customer and the
organization.
LO2
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15
Understand Interactions
of the Current Customer Base
Understand
interactions
with the current
customer base
LO3
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16
Exhibit 21.2
© Image Source/Jupiterimages
Customer-Centric Approach for
Managing Customer Interactions
LO3
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17
Interactions of the
Current Customer Base
Touch Points
All possible areas of a business
where the 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
LO3
Chapter 21
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18
Capture Customer Data
Outline the
process of capturing
customer data
LO4
Chapter 21
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19
Capture Customer Data
The traditional approach for acquiring data from
customers is through channel interactions.
Store visits
Conversations with salespeople
Interactions via the Web
Traditional phone conversations
Wireless communications
LO4
Chapter 21
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20
Capture Customer Data
In a CRM system, channel interactions are
viewed as prime information sources based on
the channel selected.
Interactions between the company and the
customer facilitate collection of large amounts
of data, captured across several touch points.
LO4
Chapter 21
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21
Store and Integrate
Customer Data
Describe the use of
technology to store
and integrate
customer data
LO5
Chapter 21
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22
Customer Data
• Only useful if consistent and accurate.
– Use information technology to capture,
store, and integrate important information
(data warehousing)
• Useful information:
–
–
–
–
Customer vital stats
Purchasing habits
Transaction methods
Product usage
• Access vast amounts of information required to
make decisions
LO5
Chapter 21
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23
Store and Integrate
Customer Data
Response list
Compiled list
::::::::::::::::::::::::::::::::::::::::::
::::::::::::::::::::::::::::::::::::::::::
Database
\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
///////////////////////////////////////////////////////////
~~~~~~~~~~~~~~~~~~~~~~~~~~
~~~~~~~~~~~~~~~~~~~~~~~~~~
Data Warehouse
LO5
Chapter 21
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24
Identify the Best Customers
Describe how to
identify the best
customers
LO6
Chapter 21
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25
Identifying the Best
Customers
Data Mining:
A data analysis approach that identifies
patterns of characteristics that relate to
particular customers or customer groups.
LO6
Chapter 21
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26
Data Mining

Identify and profile the best customers

Calculate their lifetime value

Predict purchasing behavior
LO6
Chapter 21
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Data Analysis
Customer segmentation
Recency-frequency-monetary analysis
Lifetime value analysis
Predictive modeling
LO6
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Customer Segmentation
Customer
Segmentation:
The process of breaking large groups of
customers into smaller, more homogeneous
groups.
LO6
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Recency-FrequencyMonetary Analysis
1. Identifies customers most likely to
purchase again
2. Identifies and ranks “best customers”
3. Identifies most profitable customers
LO6
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LO6 Lifetime Value Analysis
and Predictive Modeling
Lifetime Value Analysis:
A data manipulation technique that projects
the future value of the customer over a period
of years.
Predictive Modeling:
A data manipulation technique in which
marketers try to determine what the odds are
that some other occurrence will take place in
the future.
Chapter 21
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31
Leverage Customer
Information
Explain the
process of leveraging
customer information
throughout the
organization
LO7
Chapter 21
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32
Exhibit 21.3
Common CRM Marketing
Database Applications
Campaign management
Reinforcing customer
purchase decisions
Retain loyal
customers
Inducing product trial
by new customers
Cross-selling other
products and services
Increasing effectiveness
of distribution channel
marketing
Designing targeted
marketing communications
Improving
customer service
LO7
Chapter 21
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33
Campaign Management
Campaign Management is…
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.
LO7
Chapter 21
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34
Campaign Management
Developing customized
offerings for appropriate segment
Pricing these offerings
attractively
LO7
Chapter 21
Communicating offerings in a way
that enhances customer relationships
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35
Retaining Loyal Customers
Retaining an additional 5 percent of customers can
increase 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
Loyalty programs provide information about
customers and trends
LO7
Chapter 21
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36
Cross-Selling Other
Products and Services
• Match product profiles and consumer
profiles to cross-sell products matching
customer characteristics
• Use product and customer profiling
online to reveal cross-selling
opportunities while customers surf
company Web sites
LO7
Chapter 21
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37
Designing Targeted
Marketing Communications
Infrequent
Users
Offer direct incentives, such
as a price discount
Moderate
Users
Offer more reinforcement of
past purchase decisions
Heavy
Users
Design around loyalty and
reinforcement of purchase
LO7
Chapter 21
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Reinforcing Customer
Purchase Decisions
• Thanking customers for purchases and
telling them they’re important
• Updating customers periodically on order
status
• Offer customer service opportunities with
postsale e-mails
LO7
Chapter 21
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Inducing Product Trial
• Use of marketing database to identify
new customers
– Best customer profile can be used to profile
potential customers
• Overlay demographic and behavioral
data on existing customer data
LO7
Chapter 21
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Increasing Effectiveness of
Distribution Channel Marketing
• Use Web sites to keep in touch with
customers and gain information about
them
• Use multichannel marketing to monitor
purchases of customer shopping both instore and online
• Use RFID technology to improve
distribution
LO7
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Improving Customer Service
Examples of Web site tools used to get
customers to return include
– customer wish lists
– recommendations based on purchase and
search behavior
– one click purchasing and shipment tracking
LO7
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Privacy Concerns and CRM
• If customers fell their privacy is being
violated, then the relationship can
become a liability.
• Privacy policies for companies in the U.S.
are largely voluntary, but may vary
outside the U.S.
LO7
Chapter 21
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Beyond the Book
Email Marketing Bumps Web site
Traffic
LO7
Looking for return customers? Email marketing
gets customers to click back. Being wellestablished, trusted, and easy makes email the
ideal medium for marketers to get the word out.
Online traffic is fairly simple to track, and using
customer information gathered from online
purchases offers businesses a relatively simple
way to establish a relationship with customers.
Source: “Email marketing ‘a trusted method,’” www.directnews.co.uk, Wednesday November 11, 2009.
Chapter 21
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Beyond the Book
Chapter 21 Videos
LO7
Chapter 21
Method – Customer Relationship
Management
How has method identified customer relationships
within the organization?
What does the company do to nurture those
relationships?
http://www.cengage.com/marketing/boo
k_content/1439039429_lamb/company_c
lips/ch21.html
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