CRM FINAL 4.pdf

INTRODUCTION TO CUSTOM RELATIONSHIP MANAGEMENT - Marketing and CRM is very much related subjects. - We all are in the business environment and we have been dealing with organization. What is marketing? - Marketing is an organizational function and a set of processes f...

INTRODUCTION TO CUSTOM RELATIONSHIP MANAGEMENT - Marketing and CRM is very much related subjects. - We all are in the business environment and we have been dealing with organization. What is marketing? - Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. - Marketing objectives are goals set by a business when promoting its products or services to potential consumers that should be achieved within a given time frame. In other words, marketing objectives are the marketing strategy set in order to achieve the overall organizational objectives. A company's marketing objectives for a particular product might include increasing product awareness among targeted consumers, providing information about product features and reducing consumer resistance to buying the product. Marketing object -> - Marketing is where you make a genuine effort what customer really want. As a marketer we need to know what these customer expect.  Expectation are equally the performance of the organization so customer are just satisfied.  Expectation are greater than the performance of the organization so customers are dissatisfied.  Expectation are lower than the performance of the organization so customer are delighted. **Delighting - providing your product or the service beyond customer expectation - As a marketer our duty is to delight the customer. But mainly company is actually use almost the same strategy to delight the customer. But in CRM learn how to go beyond that and customize this experience for your customer.as a result you are creating a delight situation and customer will never forget the organization Develop relationship mind set - In terms of delighting the customers through that Relationship and create in a moment of truth for the customer **Moment of truth – could be negative or positive. Where the organization provide an extremely delighting experience for the customer. But actually happen in the modern business world, marketers are providing extremely dissatisfied experiences for the customer. Ways to delight customer ---------------------------------------------------------------------------------------------------------- Additional 1. make customer feel valued - Most businesses place a premium on customer value. A focus on making customers feel valued, on the other hand, isn't. It should really be. Loyalty and engagement follow when clients believe their relationship with you matters and that you value the contributions they make. 2. Always try to better. - "Just do your greatest work And then try to support it," Walt Disney once said. Customers will notice if you really try to improve their experiences and relationships. As your loyalty and engagement grow, so will you. 3. Predict Customer Needs - You almost probably have access to the data that is becoming highly common around your clients and their interactions with you. Use it to learn more about what they want and how they want it, and then deliver it to them. 4. Maintain Consistency Across All Channels - Customers want consistent high-quality experiences across a growing number of channels. And it feels broken when the experience isn't consistent from one channel to the next. It's easier to be consistent if you attempt to minimize data and service barriers.  5. Make sure your clients value what you have to provide on a regular basis. - Make it a habit to question yourself why your clients should choose you above your competitors. What makes your product or service truly unique? What is the significance of this to your customers? What difficulties do you help them address, or what goals do you assist them in achieving? 6. Get Rid of Unhappiness (So You Can Focus on Loyalty) - Though there is no direct link between customer satisfaction and loyalty, the truth remains that you can't build customer loyalty until you've identified and addressed consumer displeasure. So, figure out what's causing your dissatisfaction and eliminate or solve it. 7. Develop empathy for customers - To put it another way, this implies expressing genuine concern for your consumers by going beyond basic classification to support their emotional wants and needs through attitudes, actions, and words. https://www.mcorpcx.com/articles/23-ways-delight-amaze-customers ------------------------------------------------------------------------------------------------------------- Examples: -  Sampath bank - sends a birthday card every year  BOC - would give gold coin on get married for cardholder  Regency hotel - when enter hotel they would provide free drink, towel etc.   Nils-this dress shop sending new dresses photos to WhatsApp number  Hsbc – providing gift voucher for every Christmas  Giving a loyalty card  Establish children’s play area Marketing - There are 30 relationship any marketer would have to maintain.(last lesson) - In this lesson we would understand, “for a relationship to happen there has to be interaction”. What is this interaction? o interaction between SP and SR – service provider and service receiver - So, there has to be exchange. The fundamental premise of marketing also exchange. Because of these exchange, lots of things have to be done. These exchange might been profit making or nonprofit making one. You might be working in a bank, university, etc. any place when ever and exchanges happen you have to do with due care. - Being working in any organization we have to see how to make this exchange a productive, successful or delighting one. it called “classic dyed” Classic dyed - Fundamental relationship in CRM - Is a relationship between service provider and service receiver  - Other relationships come from other parties (government. media, supplier, lending organizations, advertising agencies) and that is not discussed in CRM. - Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders Value - Fundamental aspect - Marketer should understand the reason people what want/expect - Examples -:  Join the gym -some people come to get experience -some people come to gym socialize Different people have different objects and marketer should know Marketer need to know what value customer except Have to have data/information about customer Provide customize offer etc. Then customer would be delighted Why internal customer matter a lot? - Internal customer has to be with correct attitude. Attitude is the key thing have to develop. If company recruit someone without the correct attitude you would find it hard to satisfied external customers. What is marketing management? - Marketing management is the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicating superior customer value. Getting customer – There are lot of strategies to get the customers. Such as promotions, advertising etc. Keeping customer – record customer data and keep data their next visit. Growing customer -where customer encouraged to buy higher value product. -similarly growing the customer and keeping the customer can be done with cross selling and upselling.  Cross selling - Where the organization attempt to sell similar type of products for customer or bundle up similar products Ex: a comb could be cross-sold to a customer purchasing a blow dryer. Up selling -where customer encouraged to buying higher value product Ex: a housekeeping service might upsell a customer buying a weekly cleaning package by offering a package with more rooms What is customer relationship management? (CRM) - CRM is a process of carefully managing detailed information about individual customers and customer “touch points” to maximize loyalty - Get keep and grow the customer - CRM system is mainly technology system - Customer relationship management (CRM) is a technology for managing all your company’s relationships and interactions with customers and potential customers. The goal is simple: Improve business relationships to grow your business. A CRM system helps companies stay connected to customers, streamline processes, and improve profitability. Touch point - All possible way a customer could connect with the organization / how do customer connect with organization. - Customer touchpoints are your brand’s points of customer contact, from start to finish. - For example, customers may find your business online or in an ad, see ratings and reviews, visit your website, shop at your retail store, or contact your customer service. Customer - “A party that receives or consumes products (goods or services) and has the ability to choose between different products and suppliers” - Classification of Customer 1. Business Customers - purchase products or services to use in the production of other products. 2. End- customers - an individual or entity to whom Customer sells, provides or distributes the Customer Solution and with whom Customer has entered into an agreement to provide the Customer Solution. The importance of the customer - A customer’s perception is their reality o Perception is different from person to person. Then, if it wants to identify your customer’s perception you should have to data. Therefore you should record customer details. At least it should talk with customers. Why should we do these things? Because we should delight our customers. It should create a movement of truth for that it should provide service beyond their expectation.  Ex: Nordstrom – they make superior customer value - It is easier to retain customers happy than attract new customers - Complaints spread like wildfire on the internet - Without customers, we don’t have a business - Brands win or lose by how well they wow customers Key factors contributing to CRM 1. People : includes both customers and the employees Internal customers  customers - It is discussed about both customers and employees why? Any organization provides a combination of goods and services. A customer is a crucial person for their satisfaction or dissatisfaction. Especially in the modern environmental characteristics. Technology is so involved. People are given obtain services themselves. When they obtain the services themselves. They pay the role of the part-time employee. As a result, the customer is determined as both the customer and the employee. - Why it is said that the customer is also important in service delivery or When it comes to obtaining products or delivery? Most of the interactions in the modern business world are done by the customer themselves. Now the customer is regarded as part-time employees with the introduction of technology. Customers have a big role in obtaining satisfaction. As an example, when I go to the ATM, I'm not happy since I didn't know about it, and this is my fault. Ex: online transaction, online banking 2. Process : systems used to deliver the services - Ex: Assume you need to reserve a flight ticket. You have two options for purchasing tickets: either online or in-person at a travel agency. - When providing a product or service, there are three stages. o Pre-purchase stage o Purchased stage three purchase time zone o Post-purchase stage Pre-purchase stage  Where before the customer is attractive, have to do a lot of marketing such as advertising, awareness, etc. Purchased stage   Where the customer is actually making a purchase. Post-purchase stage Where the customer is evaluate purchase - Mostly technology is embodied in the pre-purchase stage and post- purchase stages. 3. Technology: assists both people and process - Assists both people and process. CRM is mainly about technology. Because CRM is based on the data base. We record all the information. And these record would help you to make customized decision. Factors Necessitate CRM - Yesterday’s condition and today’s conditions are different. Technology customer knowledge competitions are different compared to past. o Changing technology o Changing customer knowledge and preferences o Hyper competition o Globalization o Shorter product life cycle Transactional (TM) versus relationship marketing (RM) - Main relationship of the marketing is classic dyad. - Evaluation of marketing o Production orientation o Product orientation o Sales orientation o Marketing orientation o Social marketing orientation  - Production orientation  their intention is to manufacture, sell and distribute at a large scale. Their average cost comes down. - Product concept and selling concept are related to transactional mindset. o Product concept – if you improve the quality of the product that was customer want. o Selling concept – they are only concerned with pushing the customer through promotion. They thought then the customer would not buy enough quantity unless they push. - initially, the transaction was the main concern of marketing - The main concern of TM was to increase the market growth in terms of customer numbers - TM is grounded on the marketing mix - Numerous changes in the environment threatened the success of TM - Therefore, relationship marketing became a better option TM versus RM A paradigm shift - There is a transition from transactional marketing to relationship marketing. Marketing says it is preferred as a paradigm shift. Paradigm is the exciting assumptions; values, beliefs, and practices. o Ex: earlier people thought that the world is flat. But now we know it is round.  - Earlier knowledge is repaired by the new. - In transactional marketing, marketers believe we only have to respond to getting the customer, acquiring the customer. That responsibility is up to the marketing department. Another department think that we only serve them. - Under relationship marketing, everyone in the organization is a part-time marketer. How we dress, what we do our ethics, and all those things impact the organization. All have intention to keep the customer. Not only acquire but also keep customer is our goal. Relationship marketing - Berry (1983, p. 25) defined RM as “attracting, maintaining and—in multi-service organizations— enhancing customer relationships.” - Elaborating further, Berry (1983) indicated five key RM activities: o developing a core service o customizing the relationship with individual customers, o Augmenting the core service with extra benefits o pricing the service to encourage loyalty o looking after the employees in anticipation that they would do the same for the customers. - Importantly, a company that adopts RM reflects its relationship orientation through maintaining long-term relationships, in addition to  the importance placed on satisfying the customer (Choi & Chu, 2001; Wu & Chen, 2012) Relationship marketing (RM) versus customer relationship management (CRM) - CRM is built on the conceptual foundations of relationship marketing (Battor & Battor, 2010; Reinartz, Krafft, & Hoyer, 2004) - Due to the common grounds between relationship marketing and CRM they have been referred to interchangeably (Parvatiyar & Sheth, 2000; Parvatiyar & Sheth, 2001). The common elements of CRM and RM - The emphasis on a one-to-one relationship with customers, an interactive process rather than a transactional process, value added activity with mutual interdependence, and collaboration between the supplier and the customer (Parvatiyar & Sheth, 2001). The differences between CRM and RM - Gummesson (2008) stated that relationship marketing is the attitude of the organization, whereas CRM is the tool used to implement that attitude. - As pointed out by Mitussis, O'Malley, and Patterson (2006), while relationship marketing focuses on all parties including suppliers, competitors, and intermediaries, CRM exclusively focuses on managing end customer relationships. Consequently, CRM has become a separate field of marketing  - These are different concept - Broadest level is the RM concept. It has to be operated from the top of the management in an organization - RM is the vision of the organization - RM is provide the foundation for the marketing - RM is also consantrating tracking and maintaining customers, but with different other customemrs - RM is the philosophy of the organization which is based on as key activities. o Segmenting the supply base o Measure and improve supplier performance o Become a better customer o Collaborate with suppliers o Improve supplier quality Similarities in RM and CRM - They all have concern for the customer Difference between RM and CRM o Relationship marketing is a philosophy. CRM is a tool for philosophy. Then RM is broader than CRM. CRM is subset of RM Customer service management - It is a tool to record customer data. There are various ways to you to collect the data. These data use for several things. - Customization  providing each and every customer wants]  - CRM is more concern about more profitable customers. They don’t want know about customers What is customer service? - The assistance and advice provided by a company to those people who buy or use its products or services (Oxfordditionaries.com) - Customer service is also defined as the degree of assistance and courtesy granted those who patronize a business - It is considered necessary for services organizations that supply their customers’ needs and wants - Customer service is about meeting or exceeding customer expectations - Customer service management involves supporting the customer through the process of selecting, purchasing, and maintaining a product or service can be done by hiring knowledgeable employees, providing online or telephone support, offering generous return policies or including warranties that guarantee customer satisfaction Importance of CRM to an organization - Increased revenue and profits - Increased efficiency - Less waste - Improved staff morale and confidence - Reduction in staff turnover and absenteeism - Saves money - Enables individuals to take responsibility – saves time - Increased customer confidence – which leads to more purchases - Gives employees a sense of pride in the company – increased motivation - Happier shareholders - Less bad publicity, more good publicity, which in turn brings in more customers Negative service encounters - Being passed around - People not returning calls - Having to chase up all the time - People not taking ownership of the problem - Obvious insincerity - Poor communication of mistakes and problems - Being kept waiting - Voice mail and music whilst on hold and the telephonies never coming back to you - Staff not knowing enough about who does what - Staff making mistakes - again and again - Arrogance and complacency - Rigid inflexible procedures - Staff who couldn't care less/are rude/lacking in product knowledge - Not delivering on time CRM in services context - Banks deal with a large number of individual retail customers. Banks want CRM for its analytical capability to help them manage customer defection (churn) rates and to enhance cross-sell performance. - Data mining techniques can be used to identify which customers are likely to defect, what can be done to win them back, which customers are hot prospects for cross-sell offers, and how best to communicate those offers. Banks want to win a greater share of customer spend (share of wallet) on financial services. - In terms of operational CRM, many banks have been transferring service into contact centers and online in an effort to reduce costs, in the face of considerable resistance from some customer segments CRM in manufacturing context - Consumer goods manufacturers deal with the retail trade. They use CRM to help them develop profitable relationships with retailers. - CRM helps them understand costs-to-serve and customer profitability. Key account management practices are applied to strategically significant customers. IT-enabled purchasing processes deliver higher levels of accuracy in stock replenishment. Manufacturers can run CRM- enabled marketing campaigns which are highly cost effective CRM in nonprofit organizations - The city council of the USA, sought to improve the levels of information and services that it provided to its 69 000 citizens. Named the ‘Citizens First Program’, it involved the design and implementation of an operational CRM strategy to open the lines of communication to automate many services between the city council’s 1100 employees, municipal departments, and the citizens of the city. - The project comprised the establishment of a website to provide citizens with 24/7 access to information concerning the city’s services and facilities, in addition to enabling citizens to make requests for information, inquiries, and complaints. Supporting the website was CRM software and a linked call center, providing personalized follow- up and ongoing support. Since implementation, many benefits have been seen, namely: A 50% reduction in time taken to respond to citizen inquiries Citizens can track the progress of requests for service, inquiries, etc. The city council can measure and report on organizational performance Levels of communication within the city council and between municipal departments have improved. Strategically shaking the customer - That is a new concept under CRM. If a customer is unprofitable, that CRM should make a record for that customer also. Even though the customer is unprofitable, they should analyze data about that customer. Because that this customer can we profitable one of our other products. And the company can encourage the customer to invest more. Satisfaction - In simple terms it is fulfillment, leaving nothing to be desired, to be pleased (Oxford Dictionary) - It is customers’ post-purchase evaluation of the overall service experience (processes and outcome). It is an affective (emotion) state or feeling reaction in which the customer’s needs, desires and expectations during the course of the service experience have been met or exceeded - Customer satisfaction is expected to o insulate customers from competitors o can create sustainable advantage o reduce failure cost Advantages of customer satisfaction o encourage repeat patronage and loyalty o enhance positive WOM o lowering cost of attracting customers CRM and Its Influence on Customer Loyalty ladder ** https://www.mbaskool.com/business-concepts/marketing-and-strategy-terms/6791- customer-loyalty-ladder.html Identifying customer satisfaction/dissatisfaction - Complaint solicitation o Consumer complaints provide firms with the opportunity. to recover from their mistakes, and to retain dissatisfied consumers. - Critical incident analysis o is a method widely employed to encourage reflective learning. It involves some in description and analysis of an actual, lived experience within its unique environment. - Mystery shopping o Mystery Shopping is a process in which a person visits a retail store, restaurant, bank branch or any such location with the objective of measuring the quality of customer experience. - Customer panels o A group of people chosen by a company or organization to offer feedback and opinions on goods and services for research on consumer behavior is known as a consumer panel. - Eye cameras o a specialized camera that observes and records eye movements in humans. Eye movement analysis, which measures how people's eyes react to advertisements visually, makes use of an eye camera. Therefore, eye cameras are important for marketing. - Lost customer research o The process of acquiring, analyzing, and interpreting the true factors why a specific customer or a group of customers has cancelled their service agreement and/or stopped using a company's product is known as "lost customer research." - Feedback-generating mechanisms such as surveys o Feedback is a powerful guide that can give your leadership team insights that chart a path forward for every part of a company. That’s especially important when it comes to customer satisfaction. o Feedback-generating mechanisms such as surveys, emails, focus groups, digital channels, and user testing. Complaints are the best way to learn about an organization.  FORMS OF CRM 1. Strategic CRM - The commitment of top management to CRM. Top management use CRM data to make important decision when has a long-term impact to the organization. 2. Analytical CRM - The ability to measure how well you are providing that service through measuring,g people, process and technology. This is used by middle-level management to make decisions. 3. Operational CRM - The ability to provide accessibility to your service through people, process and technology. It is help day to day activities of the front-line staff, when they are dealing with the customer. Strategic CRM - Strategic CRM is defined as “a top-down perspective on CRM which reviews CRM as a core customer-centric business strategy that aims at winning and keeping profitable customers” (Buttle, 2004, p. 3). - Strategic CRM reflects the philosophy of the organization and its customer-centric approach. Customer centric / customer led / customer focused / customer oriented - Strategic CRM is aimed at deepening the knowledge about the customers through four main components: o customer management orientation o implementation and alignment of organizational process o information capture and alignment of technology o CRM strategy implementation (Buttle, 2004; Iriana & Buttle, 2007; Kumar & Reinartz, 2006)  - A company decided that the only way to escape the bruising price competition and razor-thin margins of office supply superstores was to provide greater value through superior customer service, with the support of a CRM system. After implementing CRM system differentiated them from other competitors in the office supplies industry. - The company can now share customer data across business units, distribution centers and customer service centers. This has allowed Boise to cross-sell, retain and service accounts much more effectively. - One of the CRM system’s many features is web collaboration which allows representatives to co-browse and chat with customers online while making recommendations Analytical CRM - Analytical CRM is defined as “a bottom-up perspective on CRM which focuses on the intelligent mining of customer data for strategic or tactical purposes” (Buttle, 2004, p. 3). - The key component of analytical CRM is customer information. Along with IT, analytical CRM is assigned the task of accumulating, storing, organising, interpreting, and distributing customer data (Iriana & Buttle, 2007) - Analytical CRM is designed for analysts to use customer data, captured at numerous touch points to make decisions about the customers. The information is also distributed to the customer contact staff to use in effective and efficient customer interactions. - Furthermore, analysis of data on the characteristics and behaviour of the customer can be used to predict customer behaviour, initiate proactive communication with the customer, and to optimise communication (Doyle, 2002). - A company wants a better understanding of its customers, in order to be able to make more personalized offers and implement customer loyalty campaigns. - This requires data mining solutions. There are solutions that creates profiles and predictive models from customer data which enables more finely targeted campaign management, call centre management, sales-force automation and other activities involved in customer relationship management. - This enables to design and execute personalized actions and customer loyalty campaigns tailored to the needs and expectations of high-value customers. Operational CRM - Operational CRM is defined as “a perspective on CRM which focuses on major automation, sales force or marketing automation” - Operational CRM is concerned with the automation of tasks related to the customer-facing level which focuses on the total customer experience. - While operational CRM collects customer data through numerous touch points such as contact management systems, mail, fax, sales force, and web it also uses the data for efficient and effective interactions. - Buttle (2004) discusses a number of software solutions under operational CRM such as; o marketing automation (market segmentation, campaign management and event-based marketing)  o sales force automation (lead management, contact management, and product configuration) o Service automation (which includes contact and call centre operations, web- based service and field service. Data warehousing and mining - Capable of capturing, processing, transmitting, and storing data which enables organizations to integrate their various databases into data warehouses. - Data warehousing is defined as a process of centralized data management and retrieval. - Data warehousing helps maintaining a central repository of all organisational data. - Centralisation of data is needed to maximize user access and analysis. - Technological advances are making this vision a reality for many companies. - And, equally dramatic advances in data analysis software are allowing users to access this data freely. - The data analysis software is what supports data mining. - Data mining is nontrivial extraction of implicit, previously unknown, and potentially useful information from the data. This includes a number of different technical approaches, such as clustering, data summarisation, learning classification rules, finding dependency networks, analysing change, and detecting anomalies. - In other words, it includes retrieving, analysing, extracting, loading, transforming and managing data - In involves sophisticated software techniques to identify patterns and regularities of structured data  - It enables these companies to determine relationships among internal factors such as price, product positioning, or staff skills, and "external" factors such as economic indicators, competition, and customer demographics. And, it enables them to determine the impact on sales, customer satisfaction, and corporate profits. Finally, it enables them to "drill down" into summary information to view detail transactional data. - With data mining, a retailer could use point-of-sale records of customer purchases to send targeted promotions based on an individual's purchase history. By mining demographic data from comment or warranty cards, the retailer could develop products and promotions to appeal to specific customer segments. Use of data mining - Identify buying patterns of customers - Associating buying behaviour with certain segments - Analysing responses to advertising or mailing-and therefore enabling predictive analysis of future responses and facilitating greater focus - Identify fraudulent activities e.g. fraudulent credit card use, fraudulent mortgage patterns - Loyalty analysis - Spending and cross correlation to classes of customers - Product penetration by types and classes of customers - Risk analysis - Branch network product sales structure of a data warehouse consist of - Summarized data: o is compact and easily accessible can even be found outside the warehouse - Collated data o Can also call summarized data which as been synthesized and slimmed down from lower levels of data within the warehouse.  - Current data o This of central importance. Reflects the most important happenings - Older/archived data o Infrequently accessed and stored at a level of detail which is consistent with the current detailed data - Metadata o Is the final component of the data warehouse and is really of different dimension. Different as shown in the operational environment Example of data mining - WalMart is pioneering massive data mining to transform its supplier relationships. WalMart captures point-of-sale transactions from over 2,900 stores in 6 countries and continuously transmits this data to its massive 7.5 terabyte Teradata data warehouse. WalMart allows more than 3,500 suppliers, to access data on their products and perform data analyses. These suppliers use this data to identify customer buying patterns at the store display level. They use this information to manage local store inventory and identify new merchandising opportunities. WalMart computers and processes over 1 million complex data queries Issues with data Reliance on data bases to supply raw data which tend to be dynamic, incomplete, noisy and large - Limited information o Adequacy and the relevance of the information stored - Noise o Database usually contain errors which contaminate the data they contain Subjective or measurement judgements that can cause errors which may result in misclassifications. - Duplication - Missing data - Size updates and irrelevant fields Misunderstandings on CRM - CRM is database marketing o CRM is not database marketing. But the database is a key requirement of CRM. CRM is how you take work out of the data available - CRM is a marketing process o CRM is not just a marketing products, it is beyond that - CRM is an IT issue o It is not just IT, bit it is a tool - CRM is about loyalty schemes o Loyalty is one way of practicing CRM - CRM can be implemented by any organization o Only leaders with the relationship marketing attitude can implement this. Case Study - Eric has been running a service station together with a petrol shed for 12 years. During that time he has seen his regular clientele decline and change. There are certainly the regulars who continue to bring their cars to him for the thorough service and personal attention to detail that they’ve come to depend on him to provide, and there are those who come in every Friday or Monday morning like clockwork for a fill-up, but Eric has noticed that lately there don’t seem to be as many. He’s started thinking about what he might be able to do about this with the aim of building a more regular and loyal customer base, especially since there are now two big service stations providing competition nearby, one of which has a convenience store attached to it, and the other a McDonald’s restaurant  What CRM strategies would you recommend Eric to implement this business? - Create a database about customers - Reminding customer about next service of vehicle - Improve the appearance - Offering customer feedback survey - Give free services - Advertise etc.  Strategic CRM Developing a CRM Strategy Perspectives of CRM - There are three perspectives of CRM: o Functional level  Where you would be implementing different software related to various organizational functions. o Customer-facing level  Which helps day to day activities of the organization o Company-wide level  You are the top management. How you are going to think about CRM. This is the strategic level. Definition of CRM from a strategic perspective - CRM is the strategic process of selecting customers that a firm can most profitably serve and shaping interactions between a company and these customers. The ultimate goal is to optimize the current and future value of customers for the company - Optimizing the current and future value of customer’s means that; you can get value from the customers by treating various parties in various ways. These guys would say that they would provide the best value for our money if you treated them accordingly. Elements of a CRM strategy 1. CRM vision 2. Culture of customer orientation 3. Alignment of organizational processes 4. Data and technology support 5. CRM implementation 1. CRM Vision - It is a foundation. Without having a proper foundation, you can’t implement. - Any initiative around CRM should be based on a clear vision of what the company aims to achieve with their customer relationship management efforts. - Therefore, an essential component of the CRM vision should focus on customer value. - a key part of the vision should focus on the topic of value. In fact, building on the concept of customer value, we can infer that the CRM vision is to build an organization in a manner that all actions are geared toward maximizing the lifetime value of each customer to the firm. - This involves acquiring and retaining strategically important customers and develop, communicating, and delivering value propositions that meet or exceed customer expectations. - With this vision, an organization can focus on developing the key asset of the enterprise that matters in the long term, progressively deeper relationships with valuable customers (Edeling & Fischer, 2016; Srivastava, Shervani, & Fahey, 1998) - In a CRM, your vision would specifically center on what needs to be done to increase customer lifetime value. Remember how people must be treated. The plan must include these. - Vision would disclose what you want. All customer information must be recorded in CRM vision. To connect with them and increase the lifetime value of the customer, all customer data is helpful. It cannot succeed if its goal is unknown. 2. Culture of customer orientation - Customer orientation is the set of organizational values, beliefs, and strategic actions that enable the implementation of customer management principles. - It is characterized by a top management belief and commitment where the customer is the center of all activity (not the product, geography, etc.). - The main reason why many CRM efforts have failed is due to the lack of commitment from top management. If top management fails to establish a customer-oriented culture, an appropriate organizational structure and reward system, this can result in insignificant or even negative CRM outcomes (Chen & Popovich, 2003) - If you wanted to be customer-oriented, you would be able to comprehend customers, and the focus would need to be on customer-centricity. Therefore, you should support customer-centricity or customer orientation through your beliefs, values, and actions. This is the most important thing, and all top management should act accordingly. - Customer orientation should be focused on internal customers and also external customer orientation. 3. Integration and Alignment of Organizational Processes - In the context of strategic CRM, the integration and alignment of organizational processes involve the organization-wide creation and synchronization of processes, systems, and reward systems that enable the implementation of customer management principles (Reinartz, Krafft, & Hoyer, 2004) - CRM works best for organizations that adopt cross-functional processes rather than functional silos 4. Data and Technology Support - Successful CRM also involves collecting and analyze complex customer information. Thus, data and technology support plays a central role as an enabler for effective CRM (Jayachandran et al., 2005). Information technology has made processes more efficient, transformed both processes and services, and supported entirely new processes, especially in terms of online activities - Data and technology can make customer management processes not only more efficient but also more effective, for example by creating new processes and channels based on online and wireless applications 5. CRM Implementation - Activities and processes that constitute both analytical and operational CRM. They might include customer data collection, satisfaction and loyalty metrics, customer needs analyses, relationship economics, or segmentation for example. - Activities and processes that constitute operational CRM, such as value proposition management, campaign management, channel management, referral management, and loyalty management. - The firm’s ability to understand the value of the customer to the firm and varied needs of different customers Steps in Developing a CRM Strategy 1. Gain enterprise-wide commitment. 2. Build a CRM project team. 3. Analyze business requirements. 4. Define the CRM strategy. Step 1: Gain Enterprise-Wide Commitment - In order to gain enterprise-wide commitment we need to get the top management commitment and the communication to the bottom. - Once you start from the top, when the information comes from the top resistance can be managed to a greater extent. And also you need to get from the functional level or operational level that’s where you have to communicate. - We need to have a dedicated project even though the consulting firm would be giving your guidance. o Top-down management commitment o Bottom-up buy-in from system users o A dedicated full-time project team o Budget allocation for the total solution  Step 2: Build a CRM Project Team - Management - IT/technical personnel - Sales, marketing, and service groups - Financial staff - External CRM expert Step 3: Analyze Business Requirements - What functions do you perform? - What types of data do you use? - How do you interact with customers? - What data can be made available to help you better understand customers? - How can you improve your communication with customers and management? - How can you reduce administrative and scheduling requirements that detract from the time available to build relationships? - How involved are you in outreach activities such as telemarketing and direct mail? - What are your reporting needs and requirements? - How are you involved in lead tracking, lead follow-up, data transfer, and other daily actions, and how can these processes be improved Step 4: Define the CRM Strategy (i)Value Proposition - The goal of a CRM strategy is to retain strategically important customers, and the objective of customer retention is to develop, communicate, and deliver value propositions that meet or exceed customer expectations. - The value proposition in turn is a multifaceted package of product, service, process, price, communication, and interaction that customers experience during their relationships with a company. - It is the soul of the company’s business, in that it differentiates the company from others. - The value proposition must address three areas: o What customers value? o What the company says it offers the customers? o What the company actually offers the customers? (ii)Customer Strategy - Customer understanding: o To develop, communicate, and deliver a satisfactory value proposition, the company must understand its customers’ expectations. - Customer competitive context: o The company should be aware of how its competitors are servicing their customers and how it should retain and increase its share of customers in the competitive marketplace - Customer affiliation: o Customer affiliation is critical because it is a primary factor affecting a company’s ability to retain and extract greater value from the customer through cross and up-selling. Comparative assessments of the strength of customer affiliation affect strategies for customer retention  - Customer management competencies: o The company must have a defined standard process about who should and how to manage customers. To retain its customer management competency, the company also needs to benchmark its management against that of its competitors and improve it continuously. The best way to meet customers’ expectations may be to provide them with customized instead of generic offers. Customized offers should include not only customized products but also services, processes, distributions, communication, and even prices (iii)Business Case - The planned increase in the economic value of the customers over the duration of their connection with the company: The lifetime value, risk involved in unlocking that value, and growth potential by a customer segment should be considered - Reference and referral effects: If the company is investing more to satisfy the needs of customers, there should be a significant impact in the form of increased customer acquisition through referral. Thus, a value must be placed on new customers who have been acquired as a result of the investment - The impact of learning and innovation: The enhanced learning and innovation resulting from CRM add more value by reducing the cost incurred by the company through higher marketing effectiveness and improved products and services delivered to customers (iv)Enterprise Transformation Plan 1. Business process: o All primary business processes should be assessed from the perspective of the customer strategy to determine whether the distinct needs of the customer are met and, if not, how to do so. 2. Organization:  o Most customer strategies result in organizational changes, which include cultural changes. 3. Location and facilities: o Particular locations that customers visit have profound impacts on their perceptions of the company, so the physical assets of the company must be adjusted to match the customer-centric strategy. 4. Data flows: o A CRM strategy should contain a data strategy, covering all aspects from collecting data, transforming data, extracting actionable information and finally distributing the results to different users (staff and customers). 5. Application architecture: o To implement a CRM strategy, the application architecture should be changed to feature new application software—or at least to integrate existing software in new ways. 6. Technology infrastructure: o A CRM strategy requires a change to the technology infrastructure, including new hardware, new operating software, and operations personnel (v)Management of Other Stakeholders - Stakeholders of a company include management, customers, employees, and partners as well as owners/investors. - Management initiates CRM and takes the responsibility to ensure that in the comprehensive CRM strategy, the relationships with all stakeholders are effectively managed. - Because strategic CRM is a top-down approach, it succeeds only if management is committed to the CRM strategy. Managing customer value, and customer satisfaction and customer retention Pathways to grow - Attract new customers o Offer new customers discounts and promotions o Ask for referrals o Re-contact old customers o Network (meeting new people, telling them who you are and what you do)\ o Updates websites o Promote your expertise  Volunteering to speak on industry panels  Giving a webinar or workshop  Speaking at industry events  Holding educational sessions o Participate in community event - Encourage existing customers to purchase more units of service o Address customer needs o Offer a personal touch o Create a loyalty programs o Create a service focus environment - Encourage existing customers to purchase higher-value services (staying in a more expensive, better class hotel) - Reduce the extent of turnover-or churn resulting from desirable customers that defect to a competing supplier - Regain lost customers o Give intensives o Give information about anything new or different that the company provide o Give the undivided attention - Terminate unprofitable customers o Increase relational costs ( offer lower service quality, less or no advantages)  o Inform the customer gently about the situation o Take action to terminate the relationship  Ex: American airlines trying to get rid of its single most unprofitable customer  sprint sending letters to hundreds of unprofitable customers. CRM and improving the customer lifetime value - Leaky bucket analogy o The analogy is designed to highlight that the firm has two approaches it can take in order to maximize the amount of water in the bucket (that is, the size of the customer base). o These two approaches are increasing the water flow into the bucket – in other words, increasing the number of new customers acquired. Or it can look to reduce or plug some of the holes in the bucket to reduce the water loss – in other words, concentrating on customer retention Reasons for lost customers - Lack of quality control - Poor customer service - Failed inspection and audits - Consistent process  - Bad premises - Services offered - Wrong management - No complete plan - Cannot keep people happy - Customer lifetime value is a measure of a customer’s profit generation for a company. It is the present-day value of all net margins earned from a relationship with a customer, customer segment or cohort. Offensive versus defensive strategies - Offensive marketing strategies emphasize on attracting new customers - Defensive marketing strategies emphasise on retaining the existing customers How profitable are the loyal customers - 80/20 rule- Typically 20% of customers generate approximately 80% revenue - Long-term customers are more knowledgeable and price-sensitive - Customers resent firms that try to profit excessively from their loyalty - Long-life customers are costly to serve - Short-life customers become unprofitable if invested in - Higher average prices are paid by short-life customer Customer profitability tiers - The Platinum tire describes o the company’s most profitable customers typically those who are heavy users of the product, are not overly price sensitive, are willing to invest in and try new offerings, and are committed customers of the firm - The gold tire differs o from the platinum tire in that profitability levels are not as high, perhaps wants price discounts that limit the margins or as not as loyal as platinum - Iron tire contains o essential customers who provide the volume needed to utilize the firm’s capacity, but their spending levels, loyalty and profitability are not substantial enough for special treatment  - The lead tire o consists of customers who are costing the company money. They demand more attention than, are problematic customers Framework for customer retention Build a foundation for customer retention - Segment market to match customer needs with firm profile - Manage customer data base via effective tiring of services - Deliver value and satisfaction to all customers - Develop trust in the brand - Install effective complaints handling and recovery procedures  What is the relationship between customer retention and segmentation - Customer retention is often about learning what customers want and being able to handle any problems customers have had. The use of segments makes it easy to group people together, whether they have been longtime customers, or whether they're newcomers. It also provides a way to manage retention campaigns more easily. Three key strategies for customer retention 1. Create loyalty bonds 2. Build switching barriers 3. Reduce churn drivers  1. Create loyalty bonds - Confidence benefits o Feeling trust or confidence in the services provider, along with a sense of reduced anxiety and comfort in knowing what to expect - Social benefits o Regular customers often develop a social relationship with the services providers such as being recognized, feel welcome and develop personal rapport with the service personnel - Special treatment benefits o Getting the benefit of the doubt, special deals, preferential treatments - Reward based benefits o Rewards based on frequency of purchase, value of the purchase or combination of both. - Customer engagement o Confidence in the brand, brand integrity, pride in the brand, passion for the brand - Build higher level bonds Social bonds versus structural bonds - Many services involve a period of interpersonal interaction between SP and SR, which is important to develop long-term customer relationships. The trust developed lead to social bonds or friendships that lead to higher level of commitment by both parties. Social bonds o While the customer is involved in the commercial relationship they want it feel like a personal one.  o ex: customer like to be recognized, use customers name is crucial to make them feel that they are in valued relationships Structural bonds o these are mostly seen in B2B setting, aiming to stimulate loyalty through structural relationship between the provider and the customer o ex: joint investment in project, sharing information o Structural bonds are created in B2C environment too. 2. Build switching barriers - Economic switching barriers o Financial penalty due to switching - Psychological switching barriers o Many customers are reluctant to leave the SP due to the personal side of the relationship they find it stressful to leave the services provide 3. Reduce churn drivers - Custom churn refers to the percentage of customers that ended the use of your company’s product or service during a set period of time - Reason for customer churn can be personal and unique from person to person. But price, product, user experience and customer experience are common reasons that affected. - For reduce churn drivers o Conduct churn diagnostics o Understand key defection triggers o Address by churn drivers o Develop retention strategies Why are customers lost? - Price o While it may be important in attracting new customers. It would seem that it is a minor issue in the development, loyalty, and retaining customers. Most research in this area, though varies by industry and country. Rarely puts price at more than 15% as the reason for switching suppliers or business. - Physical factors o Such as physical factors as a ‘ more convenient location’ are also ranked quite low are competitor action and invention o One of the most common and significant reasons for customer switching and disloyalty is the indifference and intention of the business and from the customer’s point of view. - Customer sophistication o Customer sophistication is the process or result of becoming cultured, knowledgeable, or disillusioned. Customers not only expect and demand more they are also more articulate. Social change in housing, lifestyle, education, travel, etc., has changed the way many of us select the business we use. - Complexity o Buying even the simplest product or service can. If the customer wishes, be a very complex decision-making process. It is challenging to separate purchase motivation and criteria due to the blending of distinctions between brands, goods, and companies, the dynamic interaction between a product and the quality of service behind it, and the sale and post-sale period. o Consider the personal computer industry, from two or three main hardware manufacturers in the early eighties, there are now thousands of organizations producing an almost infinite variety of opinions and possibilities. Players move into the market and can quickly gain an advantage and market share, at least for a brief period. - Costs o Cost has a significant role to play in understanding the economic trends and changes of recent years. The economic downturn of the early nineties gave both the business customer and personal consumer a sharp job in the ribs to remind them that markets can indeed go down as well as up. Aware of cost the value of  managing cost and the importance of getting greater value for money when purchasing and choosing suppliers. - It becomes clear that there are many critical aspects behind any customer defection including; o Too little contact o Too little individual attention o Poor quality attention – especially when problems are encountered o Generally your service level and standard - Improving these 4 areas will encourage customers to stay - Improving these 4 areas usually reduces the amount of customer erosion or churn but further steps are usually needed t create loyal, higher, spending customers. - Ex: Mercedes Benz o Mercedes Benz enjoys a reputation as one of the world’s leading car workers. It also boasts a high level of customer loyalty and advocacy. As an example, over a third of all new car customers choose to take advantage of the company’s offer to collect the car in person from the factory. An extensive customer center delivers a high level of hospitality, allowing them a factory tour and presentations about the organization’s history and development. Customers even have an opportunity to talk with the technicians who carry out the presentation of their vehicle. Many of these customers travel from all over the world for this experience. Complacency, not competition kills customers - As many successful organizations are now discovering their cost. The challenge to their future is not necessarily from their competitors but from their own competency toward their customers. These organizations become victims of their own success. - Another more recent example was the fall during the late nineties of the unique and successful marks and spencer organization. Typically regarded as one of the best- run retailing organizations in the world, it has suffered at the hands of its customers. What you would have to do to lose all your customers - Ignore them - Lie to them - Fail to return calls or answer letters or e-mails - Fail to deliver on promises - Miss expectations - Be rude to them - Stop all marketing activity - Patronize them - Fail to open on time or be available at the right times - Not listening to them - Poor follow-up - Incompetent staff - Poor product quality - Confusing pricing - Treating them as if they were in the wrong - One of the biggest blocks in building solid customer relationships is an organization taking its finger off the pulse of what customers want - Ex: Marks and spencer lost their customers because of many reasons. Marks and Spencer – MS - Among the measures Marks and Spencer is taking to put things right, are a better relationship with its customers, including more accurate segmentation; more frequent interaction, and attention to innovation and service standards - However, Marks and Spencer is not unique, and there are many similar experiences by companies of all sizes in all markets.  - Perhaps one of the reasons for this happening was that market research and customer surveys had focused on only a small number of loyal customers. This meant that the company did not get an early warning of trouble - 96 percent of unhappy customers never complain. But if their problem remains unsolved ,they usually tell ten other customers Complacency - No organization should think of itself as immune. You can be IBM,BMW, Coca- Cola, Levi’s, Disney, Virgin Group or even Microsoft, but complacency is what gives opportunity to competitors - Complacency  simple meaning  extreme self-satisfaction - Complacency  synonyms  gratification, smugness, satisfaction, contentment, self-congratulation The seven most important elements in making a customer feel special 1. Speed and time 2. Personal interaction with a customer 3. Expectations 4. Courtesy and competence 5. Information and keeping the customer informed 6. Attitude and customer liaison 7. Long-term relationship - Over and above solving their initial problem or basic concern. By some strange coincidence, when put together these seven elements will actually spell the word ‘special’: Every Customer a Special Customer - How to make every customer a special customer o Speed - S o Personalize - P o Exceed expectations - E o Competence and courtesy - C o Information - I o Attitude – ‘Can do’ - A o Long-term relationship - L Database VS Data Warehouse Data base - Database is a collection of related data that represents some elements of the real world - Database is designed to record data whereas the Data warehouse is designed to analyze data - contains information about a particular enterprise o Collection of interrelated data o Set of programs to access the data o An environment that is both convenient and efficient to use - A database is any collection of data organized for storage, accessibility, and retrieval. A data warehouse is a type of database that integrates copies of transaction data from disparate source systems and provisions them for analytical use - Database Applications: o Banking: transactions o Airlines: reservations, schedules o Universities: registration, grades o Sales: customers, products, purchases  o Online retailers: order tracking, customized recommendations o Manufacturing: production, inventory, orders, supply chain o Human resources: employee records, salaries, tax deductions - Databases can be very large. - Databases touch all aspects of our lives Data Warehouse / Database System - Data Warehouse is the place where huge amount of data is stored. It is meant for users or knowledge workers in the role of data analysis and decision making. - These systems are supposed to organize and present data in different format and different forms in order to serve the need of the specific user for specific purpose. These systems are referred as online analytical processing - Database System is used in a traditional way of storing and retrieving data. - The major task of a database system is to perform query processing. These systems are generally referred as online transaction processing system. These systems are used day to day operations of an organization Data VS information - Data is a collection of facts, while information puts those facts into context. - While data is raw and unorganized, information is organized. - Data points are individual and sometimes unrelated. Information maps out that data to provide a big-picture view of how it all fits together - Data  At a restaurant, a single customer’s bill amount is data.  - Information  when the restaurant owners collect and interpret multiple bills over a range of time, they can produce valuable information, such as what menu items are most popular and whether the prices are sufficient to cover supplies, overhead, and wages. - Point of data o A customer’s response to an individual customer service survey is a point of data. - But when you compile that customer’s responses over time—and, on a grander scheme, multiple customers’ responses over time—you can develop insights around areas for improvement within your customer service team - The number of likes on a social media post is a single element of data. When that’s combined with other social media engagement statistics, like followers, comments, and shares, a company can intuit which social media platforms perform the best and which platforms they should focus on to more effectively engage their audience. - On their own, inventory levels are data. However, when companies analyze and interpret that data over a range of time, they can pinpoint supply chain issues and enhance the efficiency of their systems - Competitors’ prices are individual data elements, but processing that data can reveal where competitors have an advantage, where there may be gaps in the market, and how a company can rise above its competition. Data Warehouse Use Cases - Data warehouses provide high-level reporting and analysis that empower businesses to make more informed business. Use cases include: o Segmenting customers into different groups based on their past purchases to provide them with more tailored content o Predicting customer churn using the last ten years of sales data  o Creating demand and sales forecasts to decide which areas to focus on next quarter Database Use Cases - Databases process the day-to-day transactions in an organization. Some examples of database applications include: o An ecommerce website creating an order for a product it has sold o An airline using an online booking system Data warehousing and mining - Capable of capturing, processing, transmitting, and storing data which enables organizations to integrate their various databases into data warehouses. - Data warehousing is defined as a process of centralized data management and retrieval. - Data warehousing helps maintain a central repository of all organizational data. - Centralization of data is needed to maximize user access and analysis. - Technological advances are making this vision a reality for many companies. - And, equally dramatic advances in data analysis software are allowing users to access this data freely. - The data analysis software is what supports data mining. o Microsoft power BI o SAP business objects o Google data studio The structure of a data warehouse consists of - Summarized data: o is compact and easily accessible and can even be found outside the warehouse - Collated data o Can also call summarised data which has been synthesized and slimmed down from lower levels of data within the warehouse. - Current data o This of central importance. Reflects the most important happenings - Older/archived data o Infrequently accessed and stored at a level of detail which is consistent with the current detailed data - Metadata o Is the final component of the data warehouse and is really of different dimension. Different as shown in the operational environment Data mining - Data mining is the nontrivial extraction of implicit, previously unknown, and potentially useful information from the data. - This includes a number of different technical approaches, such as o clustering, o data summarisation, o learning classification rules, o finding dependency networks o analysing change o Detecting anomalies. - In other words, it includes retrieving, analysing, extracting, loading, transforming and managing data  - In involves sophisticated software techniques to identify patterns and regularities of structured data - It enables these companies to determine relationships among internal factors such as price, product positioning, or staff skills, and "external" factors such as economic indicators, competition, and customer demographics. - And, it enables them to determine the impact on sales, customer satisfaction, and corporate profits. Finally, it enables them to "drill down" into summary information to view detail transactional data. - With data mining, a retailer could use point-of-sale records of customer purchases to send targeted promotions based on an individual's purchase history. - By mining demographic data from comment or warranty cards, the retailer could develop products and promotions to appeal to specific customer segments. Use of data mining - Identify buying patterns of customers - Associating buying behavior with certain segments - Analysing responses to advertising or mailing-and, therefore, enabling predictive analysis of future responses and facilitating greater focus - Identify fraudulent activities o e.g. fraudulent credit card use, fraudulent mortgage patterns - Loyalty analysis - Spending and cross correlation to classes of customers - Product penetration by types and classes of customers - Risk analysis - Branch network product sales Example of data mining - WalMart is pioneering massive data mining to transform its supplier relationships. WalMart captures point-of-sale transactions from over 2,900 stores in 6 countries and continuously transmits this data to its massive 7.5 terabyte Teradata data warehouse. Walmart allows more than 3,500 suppliers, to access data on their products and perform data analyses. These suppliers use this data to identify customer buying patterns at the store display level. They use this information to manage local store inventory and identify new merchandising opportunities. In 1995, WalMart computers processed over 1 million complex data queries - What is Walmart? o Walmart is the world’s largest company in revenue. Their bestselling item is fruit. There are another many products such as health and beauty aids, home furnishing, electronics, hardware, toys, jewelry, and houseware. - Walmart Inc. is an American multinational retail corporation that operates a chain of hypermarkets. The owner is the Walton family. It was founded by Sam Walton in 1962 - An emphasis on customer attention (ex: direct mail advertising ), cost control ( ex: low cost imports), and efficiencies in its distribution networks (ex: regional warehousing) helped Walmart become the largest retailer in the US in 1990 Issues with data - Reliance on databases to supply raw data which tend to be dynamic, incomplete, noisy, and large o Limited information  Adequacy and the relevance of the information stored o Noise Database usually contain errors that contaminate the data they contain Subjective or measurement judgments that can cause errors that may result in misclassifications.  o Duplication o Missing data o Size updates and irrelevant field How to apply data mining in business - Data mining is a process used by companies to turn raw data into useful information. By using software to look for patterns in large batches of data, businesses can learn more about their customers to develop more effective marketing strategies, increase sales and decrease costs Data Mining and Business Intelligence - The first example of Data Mining and Business Intelligence comes from service providers in the mobile phone and utilities industries. Mobile phone and utilities companies use Data Mining and Business Intelligence to predict ‘churn’, the terms they use for when a customer leaves their company to get their phone/gas/broadband from another provider. They collate billing information, customer services interactions, website visits and other metrics to give each customer a probability score, then target offers and incentives to customers whom they perceive to be at a higher risk of churning Retail sector - Another example of Data Mining and Business Intelligence comes from the retail sector. Retailers segment customers into ‘Recency, Frequency, Monetary’ (RFM) groups and target marketing and promotions to those different groups. A customer who spends little but often and last did so recently will be handled differently to a customer who spent big but only once, and also some time ago. The former may receive a loyalty, upsell and cross-sell offers, whereas the latter may be offered a win-back deal, for instance E-commerce - Amazon Perhaps some of the most well - known examples of Data Mining and Analytics come from E commerce sites. Many E commerce companies use Data Mining and Business Intelligence to offer cross-sells and up-sells through their websites. One of the most famous of these is, of course, Amazon, who use sophisticated mining techniques to drive their, ‘People who viewed that product, also liked this’ functionality Supermarkets - Supermarkets provide another good example of Data Mining and Business Intelligence in action. Famously, supermarket loyalty card programmes are usually driven mostly, if not solely, by the desire to gather comprehensive data about customers for use in data mining. One notable recent example of this was with the US retailer Target. As part of its Data Mining program, the company developed rules to predict if their shoppers were likely to be pregnant. By looking at the contents of their customers’ shopping baskets, they could spot customers who they thought were likely to be expecting and begin targeting promotions for nappies (diapers), cotton wool and so on. The prediction was so accurate that Target made the news by sending promotional coupons to families who did not yet realise (or who had not yet announced) they were pregnant! You can read the full story here on Forbes Crime agencies - The use of Data Mining and Business Intelligence is not solely reserved for corporate applications and this is shown in our final example. Beyond corporate applications, crime prevention agencies use analytics and Data Mining to spot trends across myriads of data – helping with everything from where to deploy police manpower (where is crime most likely to happen and when?), who to search at a border crossing (based on age/type of vehicle, number/age of occupants, border crossing history) and even which intelligence to take seriously in counter-terrorism activities  Loyalty program - LP - Customer loyalty is a goal of many CRM programs. Many loyalty programs are very simple, particularly when the brand owners have a single retail site, hand a reward card to the customer, and stamps the card when a purchase is made; “buy five cups of coffee, get the next one free” - However, there are other programs that are operationally and technologically complex. o Ex: nectar loyalty program  Nectar is the UK’s largest coalition loyalty program with half of all UK households owning a nectar card. Over 19 million collectors earn points when shopping at over 6000 retail outlets for groceries, doing DIY, booking a holiday, paying household bills, buying petrol, or getting their car serviced. Collectors can also earn Nectar points every time. They shop online via nectar.com at over 500 leading online retailers. Then consumers can spend their points on treats including movie and theatre tickets, and luxurious holiday breaks. - The most basic type of loyalty program offers customers greater rewards the more they purchase from a retailer or visit an establishment. o Airline industry  airline frequent flyer programs such as southwest airlines rapid Rewards or United Airlines MileagePlus. o Hospitality industry  initiatives such as Starwood preferred guest or open table dining rewards. Will you provide benefits or hard benefits? - This is a big question when it comes to loyalty programs. Few companies can afford to give away tangible and meaningful rewards or awards. So, decide this quickly - Travel companies, telecommunication companies, and credit card issuers offer hard benefits because they can and because it’s becoming a cost of entry. - Many other companies cannot afford it in the long run. Although a hard benefit the approach makes a good, limited-time promotion. - CRM tool used by marketers to identify, award, and retain profitable customers Why is a customer loyalty program such a key marketing strategy? - Because at the end of the year, all-year marketing strategies try to capture customers’ mind share, hard share, and market share. So one of the powerful strategies is the loyalty program. Different countries, and companies, are having different loyalty programs. - The whole point of starting a business isn’t simply to make customers happy during the very first sale. - It’s to entice them to return and keep buying products that drive revenue and then spread the word to new loyal customers. - Customer churn isn’t cost-effective; on the flip side, repeat customers spend more on the brands to which they are loyal and they spend more often. - They also issue priceless word-of-mouth referrals to their friends and colleagues. Definition - A customer loyalty program is a marketing approach that recognizes and rewards customers who purchase or engage with a brand on a recurring basis. - Benefits may involve free merchandise, rewards, coupons, or insider perks like early access to new products. - A company may dole out points or perks, and graduate customers to higher levels of loyalty the more they buy. - These incentives and specific benefits often result in the customer becoming a more regular consumer or the ideal - a brand promoter. Giving Free Extras - Businesses can be wary of giving free extras — however, it’s a strategy that doesn’t have to incur huge costs. After all, psychologist Norbert Schwarz found that spending as little as 10 cents can create reciprocity between two people. Studies have found that members of customer loyalty programs typically spend up to 18% more than other customers.  - Throwing in an extra small product or service with purchase is an excellent way to reinforce a buying decision your customer just made. - Everyone loves receiving something for nothing. And for every cent a business spends investing in a customer loyalty program, it is likely to reap multiples in return. By contrast, when a customer walks away from your business, their income stream is lost forever A Database Approach - 95% of customers say trusting a company increases their loyalty - 91% of customers say their trust in a company makes them more likely to buy more frequently - Database approach, data warehousing or data mining all help to come out with the 95% of customers, 91% of the customers. Loyalty Programs Membership Growth Satisfaction-Loyalty-Profit Chain Loyalty program – LP - Turn loyalty into revenue Build rewarding loyalty programs to groom repeat customers and grow revenue - A loyalty program is a marketing strategy designed to encourage customers to continue to shop at or use the services of a business associated with the program. ( ex: star bugs, amazon prime, blockbuster ) - Loyalty programs, sponsored by retailers and other businesses, offer rewards, discounts, and other special incentives as a way to attract and retain customers. - They are designed to encourage repeat business, offering people a reward for store/brand loyalty - The most common example of a paid loyalty program is Amazon Prime. While it seems like a hard model to mimic, paid loyalty can suit many different business models. McKinsey identified three elements that successful paid loyalty programs have in common: The benefits clearly outweigh the fees, which encouraged sign-ups How do loyalty programs work? - Traditionally, loyalty marketing programs have used point-based systems, where customers get rewards for purchases they make or dollars they spend. After enough of these purchases or dollars stack up, they can redeem the points for unique offers, products or discounts Benefits of loyalty programs - Reward current customers o If you want your current customers to feel good about supporting your brand, a loyalty program can help - Reduce slow seasons. - Reduce costs. - Create mailing lists. - Boost profits. - Find new clients. - Improve brand reputation. - Get ahead of competitors - Better customer retention o Today, customers are making purchasing decisions not just on price, but on shared values, engagement, and their overall experience of your brand.  Cost efficiency:  It’s more cost-effective for your business to retain happy customers than it is to consistently churn and acquire new ones.  User-generated content:  Programs that encourage happy customers to publish reviews and ratings on websites and social media create authentic ambassadors for your brand.  More customer referrals  If your customers enjoy the benefits of your customer loyalty program, they’ll tell their friends and family about it Building Loyalty - Some programs become biased toward the traditional promotional currency structure because it has been made so popular and obvious by travel companies, retailers, credit card issuers and telecommunications companies - Whether a program has a promotional currency structure designed to reward customers or a series of soft benefits that hope to excite customers, there are some important decisions to be made early in the planning process How do you start? - Create a points system o but make it simple: Allowing frequent customers to earn points that convert into rewards is the basic building block of a loyalty program. This works best for quick, inexpensive purchases at retailers such as fashion outlets and grocery stores. It’s important to make the relationship between points and tangible rewards as simple and intuitive as possible. - Offer tiered rewards o A tiered loyalty program typically offers a small incentive for making an initial purchase. The value of the rewards increases as the customer moves up the loyalty ladder. This type of program tends to work better for higher- commitment and price-point businesses such as airlines, hotels, and insurance companies. - Charge an upfront fee o It can be a good strategy to ask customers to pay a one-time fee that allows them to bypass common purchase barriers later on. Amazon Prime’s upfront membership fee, for example, allows subscribers to make frequent, repeat purchases without worrying about inconveniences such as taxes and shipping.  - Partner with another company o Think of other companies that would be a good fit. For example, if you sell hiking backpacks, consider forming a loyalty program with a maker of hiking boots. When customers receive value that’s relevant to them but goes beyond what your company alone can offer, it shows that your business really cares and understands their needs. Businesses can also grow their network to reach their partners’ customers. Co-branding - Offer distinctive rewards: o A bonus for purchasing a company’s products need not be a discount on future purchases. Customers who spend at a certain threshold could receive free tickets to events, or subscriptions to other products and services. Remember, too, that two-thirds of customers are more willing to invest in brands that take stances on social and political issues they care about. Customer loyalty programs can tap into this sense of altruism. for example, a percentage of every purchase could go to charity. - Come up with a unique name: o The name of your loyalty program should stand out from the crowd to draw interest. For example, Sephora’s Beauty Insider Program, with a clever spin on VIP, they include a level named VIB (Very Important Beauty Insider) Examples of Loyalty Programs - Volkswagen Club and Card o Customers collect points from Volkswagen (VW) for servicing their car or buying accessories and from partners of car rental companies and tour operators o The points can be redeemed for dealer services, price reductions on car purchases, and catalog merchandise - Star Alliance Frequent Flyer Program o Any flight on any Star Alliance airline counts towards a member’s frequent flyer program  - Neimann Marcus o Offers its LP ‘InCircles’ to all customers. Using a shopping card, customers accumulate points that can be redeemed for exclusive rewards - Club Bally Member Reward Overt and covert programs Overt - Announcing a program to the public sets a clear expectation in the mind of your customers. - Customers believe that the programme is available to everyone and will be available on an ongoing basis Covert - A covert programme is communicated to a group of customers, through the mail, telephone or the Internet. - You select the customers and you also establish a control group Will you provide soft benefits or hard benefits? - This is the big question when it comes to loyalty programmes. Few companies can afford to give away tangible and meaningful rewards or awards, so decide this quickly. Travel companies, telecommunication companies and credit card issuers offer hard benefits because they can and because it’s becoming a cost of entry. Many other companies cannot afford it in the long run (although a hard benefits approach makes a good, limited time promotion). Key metrics for customer loyalty program - Customer retention rate: o This indicates how long customers stay with you. In a successful loyalty program, this number should increase over time as the number of members grows. - Negative churn: o If churn is the rate at which customers leave the company, then negative churn measures customers who do the opposite by upgrading or purchasing additional services. - Net Promoter Score: o This is a customer satisfaction metric that measures, on a scale of 1–10, the degree to which people would recommend your company to others. - Customer Effort Score: o This measures actual experience, specifically how much effort a customer has to make to solve a problem with a company What are some of the best customer loyalty programs? - The most basic type of loyalty programs offers customers greater rewards the more they purchase from a retailer or visit an establishment. o Airline industry - airline frequent flyer programs such as Southwest Airlines Rapid Rewards or United Airlines MileagePlus, o Hospitality industry - initiatives such as Starwood Preferred Guest or OpenTable Dining Rewards. - Refer a friend o Lyft: Drivers in this rideshare company are able to get a $10 bonus for referring passengers. o TheSkimm: Readers of this online, easy-to-read newsletter who convince their friends to take up a subscription win referral points and prizes. - Make the switch o NerdWallet: Customers who switch banks or open a new account and meet eligibility qualifications can receive a cash reward.  - Join our community o REI: This outdoor merchandiser offers customers membership benefits known as an Annual Dividend. This represents their share of the company’s annual profit. The more the customer spends, the more they contribute to a mentality of “everyone wins.” - Brand Pairings o Starwood and Uber (no longer running): Customers who linked their Uber account were previously able to earn points toward accommodation in Starwood hotels – a loyalty partnership that made sense for travelers needing hotel and transportation services on the road. o Shop at our partners AAA: Members who take out car in