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Customer Relationship Management (CRM)
CHAPTER
21
Marketing
10
Lamb, Hair, McDaniel
Designed by
Eric Brengle
B-books, Ltd.
Copyright ©2009 by Cengage Learning Inc. All rights reserved
Prepared by
Amit Shah
Frostburg State University
1
LOI
Customer Relationship Management
Customer
Relationship
Management
A company-wide business
strategy designed to optimize
profitability, revenue, and
customer satisfaction by
focusing on highly defined
and precise customer groups.
Copyright ©2009 by Cengage Learning Inc. All rights reserved
2
LOI
Customer Relationship
Management Cycle
Identify customer relationships
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 ©2009 by Cengage Learning Inc. All rights reserved
3
LO2
Identify Customer Relationships
Customer-Centric
The company customizes its
product and service offering
based on data generated
through interactions between
the customer and the company.
Copyright ©2009 by Cengage Learning Inc. All rights reserved
4
LO2
Knowledge Management
Experiential
observations
Comments
Collected
Information
Includes:
Customer actions
Qualitative facts
Copyright ©2009 by Cengage Learning Inc. All rights reserved
5
LO3
Interactions of the
Current Customer Base
Current
transaction
Channel
Customer
Past
Relationship
Requested
Service
Copyright ©2009 by Cengage Learning Inc. All rights reserved
6
LO3
Interactions of the
Current Customer Base
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.
http://www.bestbuy.com
Online
Copyright ©2009 by Cengage Learning Inc. All rights reserved
7
LO4
Capture Customer Data
Store visits
Conversations with salespeople
Interactions via the Web
Traditional phone conversations
Wireless communications
http://www.geico.com
Copyright ©2009 by Cengage Learning Inc. All rights reserved
Online
8
LO6
Identifying the Best Customers
Data
Mining
A data analysis procedure
that identifies significant
patterns of variables and
characteristics that pertain to
particular customers or
customer groups.
Copyright ©2009 by Cengage Learning Inc. All rights reserved
9
LO6
Data Analysis
Customer segmentation
Recency-frequency-monetary analysis
Lifetime value analysis
Predictive modeling
Copyright ©2009 by Cengage Learning Inc. All rights reserved
10
LO6
Customer Segmentation
• The process of breaking large groups of
customers into smaller, more homogeneous
groups
• Generates a “profile” or picture of the
customers’ similar demographic, geographic,
and psychographic traits
• Focuses on best customers
Copyright ©2009 by Cengage Learning Inc. All rights reserved
11
LO6
Recency-Frequency-Monetary
Analysis
1. Identifies customers mostly like to
purchase again
2. Identifies and ranks “best customers”
3. Identifies most profitable customers
Copyright ©2009 by Cengage Learning Inc. All rights reserved
12
LO6
Data Manipulation Techniques
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.
Copyright ©2009 by Cengage Learning Inc. All rights reserved
13
LO7
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
Copyright ©2009 by Cengage Learning Inc. All rights reserved
14
Retaining Loyal Customers
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
Loyalty programs provide information
about customers and trends
LO7
Copyright ©2009 by Cengage Learning Inc. All rights reserved
15
Cross–selling other
products and services
• CRM provides opportunities to cross-sell
related products
•Cross-sell to customers with demographic,
lifestyle, or behavioral characteristic matches
•Internet companies use product and
customer profiling to reveal cross-selling
opportunities
LO7
Copyright ©2009 by Cengage Learning Inc. All rights reserved
16
LO7
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
Copyright ©2009 by Cengage Learning Inc. All rights reserved
17
LO7
Reinforcing Customer Purchase
Decisions
•Cognitive dissonance is the feeling consumers
experience when they recognize inconsistency
between values and opinions and their
purchase behavior
•Thanking customers help cement a long-term,
profitable relationship
•Update customers periodically on the status
of their order
Copyright ©2009 by Cengage Learning Inc. All rights reserved
18
Increasing Effectiveness of
Distribution Channel Marketing
RFID technology
Multichannel Marketing
CRM Databases
http://www.kidsdadsmoms.com
LO7
Online
Copyright ©2009 by Cengage Learning Inc. All rights reserved
19
Improving Customer Service
•Level of customer service is influential in
customer retention
•Customer retention – the percentage of
customers that repeatedly purchase products
from a company
LO7
Copyright ©2009 by Cengage Learning Inc. All rights reserved
20