Retailing Management: Customer Relationship Management

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What is the primary goal of Customer Relationship Management (CRM)?

To develop a base of loyal customers

What is the term for the percentage of the customers' purchases made from the retailer?

Share of the wallet

What is the philosophy behind CRM?

That retailers can increase profitability by building relationships with their better customers

What is the main objective of targeted promotions and services in CRM?

To increase the share of the wallet

What does customer loyalty mean in the context of CRM?

Customers being committed to purchasing merchandise and services from the retailer

Why do retailers need to treat more and less profitable customers differently?

Because research indicates that all customers are not equally profitable

What is the main focus of CRM?

Identifying and building relationships with a retailer's most valued customers

What is CRM?

A business philosophy and a set of strategies, programs, and systems

What opportunity does the Internet channel offer to customers?

To develop more personal relationships with each other and the retailer

What is a key aspect of 1-to-1 retailing practiced by small, local retailers?

Knowing each customer's name and recommending products

What is the main purpose of matching promotions to a customer's search?

To provide personalized service and increase sales

What is the general idea behind the 80-20 rule?

20% of customers contribute to 80% of sales or profits

What is the primary characteristic of customers in the Platinum Segment?

They value customer service over price

Which customer segment is considered the least profitable?

Lead Segment

What is the primary benefit of segmenting customers?

To understand customer differences and tailor marketing efforts

How do online retailers automate the practice of 1-to-1 retailing?

By using customer data and personalized promotions

What is the primary characteristic of loyal customers?

They have an emotional connection with the retailer.

What is the first step in the CRM process?

Collecting customer data

What type of information should ideally be contained in the customer database?

Transactions, customer contacts, customer preferences, descriptive information, and responses to marketing activities

What is the purpose of analyzing the customer database?

To identify target customers

Which of the following customers can be easily identified and added to the customer database?

Customers who buy from nonstore channels

What is one approach that store-based retailers use to collect customer data?

Asking for identifying information

What is a key concern for customers regarding the collection of their information by retailers?

The control they have over the amount and type of information collected

What is the primary benefit of CRM programs?

Increasing customer loyalty

What is the result of successfully implementing CRM programs?

Customers will become loyal to the retailer

What is the purpose of analyzing customer data in the CRM process?

To develop programs for building customer loyalty

Why is it difficult to identify customers who make in-store transactions?

They often pay with a check or cash, or use a third-party credit card

What is one objective of analyzing customer data in retailing?

Forecasting sales and allocating merchandise to stores

What is market basket analysis used for in retailing?

Suggesting where to place merchandise in a store

What is the focus of market basket analysis?

The composition of the products purchased by a household during a single shopping occasion

What is the goal of analyzing customer data in the context of retailing?

To improve the effectiveness of retailing decisions

What is a key aspect of controlling the use of customer information in retailing?

The transparency of how the information will be used

What does customer alchemy involve?

Offering and selling more products and services to existing customers

What is the goal of add-on selling?

To sell additional new products or services to existing customers

Why do retailers lose money on some customers?

Because they have a negative LTV

What is one approach to dealing with unprofitable customers?

Offering less costly approaches for satisfying their needs

What is required for the effective implementation of CRM programs?

The close coordination of activities by different functions in a retailer's organization

What role does the MIS department play in CRM programs?

Collecting, analyzing, and making relevant information accessible for employees

What is the challenge of CRM programs?

Increasing sales and profits from CRM programs

What is the goal of CRM programs in terms of customer relationships?

To increase customer loyalty and retention

Study Notes

Customer Relationship Management (CRM)

  • CRM is a business philosophy and set of strategies, programs, and systems that focuses on identifying and building loyalty with a retailer's most valued customers.
  • The goal of CRM is to develop a base of loyal customers who patronize the retailer frequently.

The CRM Process

  • The CRM process involves four activities: collecting customer data, analyzing the customer data and identifying target customers, developing CRM programs, and implementing CRM programs.
  • Collecting customer data involves constructing a customer database that contains information such as transactions, customer contacts, customer preferences, descriptive information, and responses to marketing activities.

Collecting Customer Data

  • Ideally, the customer database should contain information such as transactions, customer contacts, customer preferences, descriptive information, and responses to marketing activities.
  • Approaches used by store-based retailers to collect customer data include asking for identifying information, offering frequent shopper cards, and connecting Internet purchasing data with store data.

Analyzing Customer Data

  • The next step in the CRM process is analyzing the customer database and converting the data into information that will help retailers develop programs for building customer loyalty.
  • Two objectives for analyzing the customer database are identifying patterns in the data that can improve the effectiveness of retailing decisions and deciding where to place merchandise categories in a store.

Market Basket Analysis

  • Market basket analysis is a specific type of data analysis that focuses on the composition of the basket, or bundle, of products purchased by a household during a single shopping occasion.
  • This analysis is often used for suggesting where to place merchandise in a store.

Customer Retention

  • Personalization is a key aspect of customer retention, and retailers are using the Internet channel to automate the practice of 1-to-1 retailing.
  • Nearly every online retailer allows shoppers to search selectively for items in which they are most interested, and some retailers attempt to match specialized promotions to the customer’s search.

Customer Pyramid

  • Most retailers realize that their customers differ in terms of their profitability or LTV, and they believe in the 80-20 rule - 80 percent of the sales or profits come from 20 percent of the customers.
  • A commonly used segmentation scheme divides customers into four segments: Platinum Segment, Gold Segment, Iron Segment, and Lead Segment.

Converting Good Customers into Best Customers

  • Customer alchemy involves offering and selling more products and services to existing customers and increasing the retailer's share of the wallet with these customers.
  • Add-on selling is selling additional new products or services to existing customers.

Dealing with Unprofitable Customers

  • In many cases, the bottom tier of customers actually has negative LTV, and retailers actually lose money on every sale they make to these customers.
  • Two approaches for getting the lead out are offering less costly approaches for satisfying the needs of lead customers and charging the customers for the services they are abusing.

This quiz covers Customer Relationship Management (CRM) in retailing, including the CRM process, data collection, analyzing customers, and implementing efficient CRM programs.

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