Download Chapter 1

Customer Relationship Management
Chapter 15 Objectives

After reading Chapter 15, you will be able to:
 Define customer relationship management (CRM) and
identify the major benefits to e-marketers.
 Outline the three pillars of CRM for e-marketing.
 Describe social CRM and how it relates to traditional
CRM.
 Discuss the nine major components needed for
effective and efficient CRM in e-marketing.
 Highlight some of the company-side and client-side
tools that e-marketers use to enhance their CRM
processes.
 Differentiate CRM metrics by customer life cycle stage.
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The Best Buy Story
 Best Buy is the 11th largest U.S. e-commerce retailer
with 1B online visitors and a multichannel strategy.
 In 2008 Best Buy initiated the Best Buy Community
online.
 600,000 customers a quarter post 20,000
messages and view over 22 million pages of
content.
 The community has yielded $5M in benefits to
Best Buy.
 Best Buy also uses Twitter to engage customers
(@twelpforce).
 http://www.youtube.com/watch?v=RbkS8AnqNGU
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Customer Relationship Management
 http://www.youtube.com/watch?v=IdmtJIlkHzw
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Building Customer Relationships, 1:1

According to Harvard Business Review authors Jones and
Sasser, “Increased customer loyalty is the single most
important driver of long-term performance.”
 Many experts believe that relationship capital is the
most important asset a firm can have.
 This approach represents a major shift in marketing
practice



From mass marketing and focus on acquiring lots of new
customers
To individualized marketing and retaining and building more
business from loyal, high-value customers 1:1
Consumer Services Market


Internet technologies facilitate relationship marketing
One key is identifying key Internet tools
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Relationship Marketing Defined

Marketers named customer focus relationship
marketing (also 1:1 marketing)
 Relationship Marketing is about “establishing,
maintaining, enhancing, and commercializing customer
relationships through promise fulfillment” (Gronroos,
1990)
 Promise Fulfillment is making offers in their marketing
communications programs; customer expectations would
be met through actual brand experiences.
 A firm using relationship marketing focuses more on
wallet share than on market share.

Wallet share is the amount of sales a firm can generate
from one customer over time, rather than on market share.15-6
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From Mass Marketing to Relationship Marketing
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Stakeholders
 Relationship marketing can be used to build
mutually supportive bonds with stakeholders other
than consumers, such as employees and suppliers.
The four stakeholders most affected by Internet
technologies are:
 Employees.



It is difficult for a firm to persuade buyers when
employees are not happy
Employees who need training and access to data and
systems used for relationship management.
Many relationship management programs fail due to
lack of employee training and commitment
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Stakeholders, Cont.


Business customers in the supply chain.

With partners relationship management (PRM),
firms build and maintain relationships with those
companies upstream and downstream

Both business customers and suppliers are extremely
important
Lateral partners.

Such as other businesses, not-for-profit
organizations, or governments join with the firm for
some common goals but not for transactions with other.

Consumers.

Consumers who are end users of products & services.

Marketers must differentiate between business
customers and final customers
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3 Pillars of Relationship Marketing
 Relationship Marketing is more than promising
fulfillment

Two-way communication is vital to the success of this
relationship.
 Experts believe that relationship marketing has
three pillars that support customer relationships
with the company’s products and services:



Customer Relationship Management (CRM)
Customer experience management (CEM)
Customer collaboration management (CCM)
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3 Pillars of Relationship Marketing, Cont.

Customer Relationship Management (CRM, 1.0)


Customer experience management (CEM)


“The process of targeting, acquiring, transacting, servicing,
retaining and building long-term relationships with customer”
“Represents the discipline, methodology and / or process used
to comprehensively manage a customer’s cross-channel
exposure, interaction and transaction with a company, product,
brand or service”
Customer collaboration management (CCM) Also
called CRM 2.0 and Social CRM


Social CRM is a strategy to engage customer in relationshipbuilding conversation, often through social media.
Designed to make the company and the customer collaborate
to create mutually beneficial results
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3 Pillars of Relationship Marketing
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Customer
Relationship
Management (CRM)
Customer experience
management
(CEM)
Customer
collaboration
management (CCM) /
CRM 2.0 / Social CRM
Definition
• The process of
targeting…
• Discipline,
methodology and / or
process...
• Social CRM is a
philosophy and a
business strategy
Focus
• Internal processes
• More on the customer • Designed to make the
to maximize customer
expectations and
company and the
value in the long term
touch point
customer
satisfaction /
collaborate to create
dissatisfaction
mutually beneficial
(customer value)
results.
Requires
•
•
•
•
•
Controlled
by
• Marketer
Requires much data
Information
Customer insight
Knowledge
Requires relationship
building skills
• Experience
• Collaboration
• Content, people &
interaction
• Marketer
• Customers
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Customer Relationship Management
 CRM is the process of targeting, acquiring,
transacting, servicing, retaining, and building longterm relationships with customers.
 CRM is a philosophy, strategy, and process (not just
software) that includes all 3 pillars.
 Firms now focus on the idea that if they do not keep
their customers happy, someone else will.
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Maximizing Customers Through Retention
Customer
acquisition
Customer
retention
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Social Customer Relationship Management (CRM 2.0)




Social CRM (CRM 2.0) holds all the principles of CRM 1.0, it
adds social media technology and customer collaborative
conversations to the process.
Social CRM means that companies must interact with customers
on their terms, and not based solely on the company’s data,
strategy and desires.
Social CRM extends CRM 1.0, but does not replace it.
Adds benefits such as:







Monitoring and improving reputations.
Learning more about customer needs, wants, and problems.
Improving target market selection and revenue potential.
Gathering data for market research on products & customer service.
Decreasing customer service costs.
Identifying new revenue opportunities.
The explosion of social media has marketers putting “social” in
front of CRM
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CRM Benefits

Increased revenue from better prospecting



Increased wallet share with current customers



Most companies use customer data and mathematical models to
determine who is a “good” customer
Can define prospects that are most likely to respond to
promotional offers
Current customers will spend more of their disposable income
with the firm
Brand loyalty is a must to increase wallet share
Retaining customers for longer periods of time


It is five to seven times more expensive to attract new customers
than to retain a current customer.
Money would be better spent marketing to current customer due
to the 80/20 principle
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CRM Benefits, Cont.
 More customer leads to more sales
 Word-of-mouth communication among
customers is the heart of CRM
 Cost Saving


US businesses saved $155 billion between 1998 and
2000 by using CRM
A 5% increase in customer retention translates to 25%
to 125% profitability in the B2B market
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Retention vs. Acquisition
 Retention is less costly than acquisition because:
 Reduced promotion costs both for advertising and
discounts.
 Current customers are likely to have higher response
rates to promotional efforts .
 Sales teams can be more effective since they should
know their individual customers well.
 CRM makes sense because they build loyal,
experienced customers. They know who to call in the
firm when they have questions. This means loyal
customers should cost less to service. They post
positive reviews online.
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CRM Evolves Using Social Media
Social CRM (2.0)
Customers
CRM 1.0
Company
employee
MEDIA
Phone
E-mail
In-person
SMS
Website
Paper mail
Customer
Traditional media
Company
employees
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MEDIA
Blogs
Social networks
Microblogs
Photo sharing
Forums
Wikis
Reviews/Ratings
Interactive Web sites
Other social media
Live chat
All CRM 1.0 media
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9 Building Blocks for Successful CRM

Businesses understand that CRM is necessary to be successful, but
nearly all firms are currently losing money on the investment of CRM
software. Businesses want to use CRM technology, but want to know
how to use it effectively and efficiently.
1.
2.
3.
4.
5.
6.
7.
8.
9.
CRM vision
CRM strategy
Customer experience management (CEM)
Customer collaboration marketing (CCM)
Organizational collaboration
CRM processes
CRM information
CRM technology
CRM metrics
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9 Building Blocks for Successful CRM
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1. CRM Vision





Management must start with a vision that fits the company
culture and makes sense for the firm’s brands and value
propositions.
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 is a non-profit, independent organization helps web
users build and earn trust in companies. TRUSTe:



Provides its seal and logo to any website meeting its privacy
philosophies.
Will not sponsor or recommend an organization unless specific
requirements are met
Offers security to online customers
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TRUSTe Builds User Trust
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2. CRM Strategy

E-marketers must determine their objectives and strategies
for initiating CRM programs and buying technology or
setting up social media accounts.
 Relationship Intensity
 Many CRM goals refer to customer loyalty (e.g. Harley
Davidson and Apple computers)


An important CRM strategy is to move to move customers
up the relationship intensity pyramid to advocacy
(awareness, identity, connection, community, and
advocacy, Ch. 9).
Another CRM goal involves building bonds with
customers on 3 levels: financial, social and structural.
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2. CRM Strategy, Cont.

1.
Relationship Levels
Marketers build a financial bond


2.
Marketers stimulate social interaction with customers




3.
Ongoing personal communication
Aggressive pricing strategies
Customers are more loyal due to the social bond
Can also use community building
Marketing relies on creating structural solutions to customer
problems



Use pricing strategies
Price promotions are easily imitated (the lowest level)
Firms add value by making structural changes that facilitate the
relationship
Customizing Web pages
Social networks combine levels two and three, they create
community and structural bonds (e.g. LinkedIn, Facebook).
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3. Customer Experience Management





Most customers want brand loyalty as much as the firms want
customer loyalty
According to Sheth (1995), the basic principle of CRM is
choice reduction. That, consumers want to patronize the
same website
Many consumers are “loyalty prone,” and will stick with the
right product as long as its promises are fulfilled.
Communication preferences vary by individual
Customer Service




Fills every stage of customer acquisition, retention, and
development practices.
Most often occurs post purchase
E-mail and web self-service are emerging trends
Synchronous and asynchronous technologies can provide
automated and human communications that solve customer
problems.
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Relationships Over Multiple Communication Channels
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4. Customer Collaboration Management /
Marketing (CCM)





CCM recognizes the change from a transaction focus
online to an interaction focus
A learning relationship between a customer and an
enterprise gets smarter and smarter with each individual
interaction
CCM is content, people, and interaction driven, while
traditional CRM is data-driven.
CCM is about managing customer relationships and
experiences by creating and monitoring online content
Listening the online chatter using technology such as
Google Alerts and social media dashboards is more
important than talking when a company is selling.
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5. Organizational Collaboration
 Marketers must collaborate both internally and
externally
Internally

Cross-functional teams focus on customer
satisfaction to create a CRM culture

Creates a better company culture as well
 Externally

Companies join forces to create results that would
reach beyond what each could have done separately.

Can be in distribution channel or non-transactional
type collaboration

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5. Organizational Collaboration, Cont.
 CRM-SCM Integration
 CRM refers to front-end operations (e.g. emails,
telephone calls…)



SCM refers to back-end operations (e.g. inventory &
payment)



Working to create satisfying experiences at all customer
levels
Can be challenging due to different employees and
computer systems
Usually includes the entire supply chain
Goal is to seamlessly link all involved
Extranet


Two or more intranet networks joined for the purpose of
sharing information (allow CRM-SCM integration).
Proprietary to the organizations involved.
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CRM-SCM Integration
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6. CRM Processes
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6. CRM Processes, Cont.
 Firms monitor and attract customers, both online
and offline and they progress through the stages
of customer care life cycle (target, acquire,
transact, service, retain, and grow).
 A customer churn cycle, that works both for
retention and for increasing customer value:
Hear Now or Gone Tomorrow
2. Build a Dynamic Customer Profile
3. Sales Force Automation (SFA)
4. Marketing Automation
1.
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6. CRM Processes, A customer churn cycle: Cont.
1.
Hear Now or Gone Tomorrow



Describes the importance of listening to customers and
gathering interaction data across all marketing channels
Customization occurs when companies tailor their
marketing mixes to meet the needs of small target
segments even to the individual level, using electronic
marketing tools.
Personalization involves ways that marketers
individualize in an impersonal computer networked
environment
2. Build a Dynamic Customer Profile

Gather data to profile each customer as reflected by his
interactions with a brand at many touch points
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6. CRM Processes, A customer churn cycle, Cont.
3.
Sales Force Automation (SFA)

this means “increasing your sales, not the sales
force”

Allows salespeople to build, maintain, and access
customer records; manage leads and accounts;
manage schedules; and more.

Up-to-date customer and prospect records help
build customer relationships.

Salesforce.com also has tools to monitor brand
conversations in the social media.
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6. CRM Processes, A customer churn cycle, Cont.
4. Marketing Automation


Marketing automation activities that aid marketers
in effective targeting, efficient marketing
communication and real-time monitoring of
customer and market trends.
SAS, a business intelligence and predictive
analytics software provider, offers automation
benefits to aid CRM, such as:

An integrated customer view

Customer life cycle management

Customer targeting and analytics
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Building a Dynamic Customer Profile
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7. CRM Information
 The more information a firm has, the better value
(more accurate, timely, and relevant information)
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.
 Databases can provide a 360° customer view
across various channels.
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7. CRM Information, Cont.
 Some factors in facilitating customer relationship
management are:
1. Target the right customers
2. Own the customer’s total experience
3. Streamline business processes that impact the
customer
4. Provide a 360 degree view of the customer
relationship
5. Let customers help themselves
6. Help customers do their jobs
7. Deliver personalized service
8. Foster community
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8. CRM Technology
 Technology enhances the CRM process and can
be categorized into

Company-Side Tools (push information to users)
and

Client-side Tools (pull information from customers)
 Cookies, Web site logs, bar code scanners, social
media, and other tools help to collect information
about consumers and their behaviors.
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Company-Side Tools (push)
1. Cookies: allow ad-server companies to track user
activities and shopping baskets
2. Web Analytics : files to assist companies in tracking
customer’s habits and preferences. Firms use software to
help analyze customer behavior to customize the web
experience
3. Data Mining: firms use software to find patterns of
interest
4. Behavioral Targeting: using customer profiling to offer
instant promotions or coupons based on customer
behaviors
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Company-Side Tools (push), Cont.
5. Collaborative Filtering : software that gathers the
recommendations of an entire group of people and
presents the results to like-minded customers
6. Outgoing E-Mail: E-mail is used to communicate with
individuals in an effort to increase their purchases,
satisfaction, and loyalty
7. Social Media: Companies build community and learn
about customers and products through blogs, social
networks, and bulletin board/newsgroup e-mail postings
all over the Web
8. iPOS Terminals: credit card technology used to create
instant sales promotions and coupons
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Client-Side Tools (pull)
1.
2.
3.
4.
5.
Agents: shopping agents and search engines match user
input to databases and return customized information
Individualized Web Portals: customizable websites –
My Yahoo! or My AOL
Wireless Data Services: most wireless users only want
text due to slow connection speeds and small displays
Web Forms: can be used for site registrations or survey
research
Fax-on-Demand: for documents that are not in digital
format
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Client-Side Tools (pull), Cont.
6. Incoming E-Mail: post transaction customer service.
Companies are careful to adequately staff email
addresses, since customers expect a response in a
reasonable amount of time
7. RSS Feeds: Really simple syndication (RSS) allows users
to subscribe to blogs and Web sites
8. CRM Software: Technology and software are what grease
the CRM wheel, allowing companies to gather, interpret,
and use masses of customer and prospect data
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9. CRM Metrics


E-marketers use numerous metrics to assess the Internet’s value
in delivering CRM performance.
Experts believe the three most important metrics to CRM are
customer retention rates, ROI, and customer lift
(increased response or transaction rates).
 ROI
 Cost savings
 Revenues
 Customer satisfaction
 Customer Lifetime Value (LTV)

LTV is the expected profit that you will realize from
sales to a particular customer in the future
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10 RULES FOR CRM SUCCESS
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Recognize the customer’s role.
Build a business case.
Gain buy-in from end users to executives.
Make every contact count.
Drive sales effectiveness.
Measure and manage the marketing return.
Leverage the loyalty effect.
Choose the right tools and approach.
Build the team.
Seek outside help.
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All rights reserved. No part of this publication may be reproduced, stored in a retrieval
system, or transmitted, in any form or by any means, electronic, mechanical,
photocopying, recording, or otherwise, without the prior written permission of the
publisher. Printed in the United States of America.
Copyright © 2012 Pearson Education, Inc.
Publishing as Prentice Hall
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