customer relationship management.pdf

Retailing Management Customer Relationship Management 1. What's CRM process. How consumers 2 data are collected. The 3 method used to analyzed customers and identify customer service 4. How retailer develop frequent shopper...

Retailing Management Customer Relationship Management 1. What's CRM process. How consumers 2 data are collected. The 3 method used to analyzed customers and identify customer service 4. How retailer develop frequent shopper to implement efficient CRM programs 5. Explain various ways Instructor: Kuo-Nan (Nick) Hsieh Retailing Management 1 Customer Relationship Management (CRM) Customer relationship management (CRM;顧客關係管理) is a business philosophy and a set of strategies, programs, and systems that focuses on identifying and building loyalty with a retailer's most valued customers. CRM is based on the philosophy that retailers can increase profitability by building relationships with their better customers. The goal of CRM is to develop a base of loyal customers who patronize the retailer frequently. Retailing Management 2  The CRM Process  Retailers are now beginning to concentrate on providing more value to their customers using targeted promotions and services to increase their share of the wallet (荷包占有率) – the percentage of the customers' purchases made from the retailer – from these customers.  This change in perspective is supported by research indicating that all customers are not equally profitable, and that more and less profitable customers need to be treated differently. Retailing Management 3  Customer Loyalty  Customer loyalty, the objective of CRM, is more than having customers make repeat visits to a retailer and being satisfied with their experiences. Customer loyalty (顧客忠誠度) to a retailer means that customers are committed to purchasing merchandise and services from the retailer and will resist the activities of competitors attempting to attract their patronage.  Loyal customers have an emotional connection with the retailer. Their reasons for continuing to patronize a retailer go beyond the convenience of the retailer's store or the low prices and specific brands offered by the retailer. They feel such goodwill toward the retailer that they will encourage their friends and family to buy from it. Retailing Management 4  The CRM Process  CRM is an iterative process that turns customer data into customer loyalty through four activities: Collecting customer data Analyzing the customer data and identifying target customers Developing CRM programs Implementing CRM programs Retailing Management 5  Collecting Customer Data  The first step in the CRM process is constructing a customer database. This database contains all of the data the firm has collected about its customers and is the foundation for subsequent CRM activities.  Ideally, the customer database should contain the following information: Transactions Customer Contacts Customer Preferences Descriptive Information Responses to marketing activities  The analysis of the customer database can provide important insights for planning merchandise assortment. Retailing Management 6  Identifying Information  Constructing the database is relatively easy for catalog and Internet shoppers and customers who use the retailer's credit card when buying merchandise in stores.  Customers buying from nonstore channels must provide their contact information, their name and address, so that the purchases can be sent to them.  However, identifying most customers who are making in-store transactions is more difficult because they often pay for the merchandise with a check, cash, or a third-party credit card. Retailing Management 7  Identifying Information  Approaches that store-based retailers use: Asking for identifying information Offering frequent shopper cards Connecting Internet purchasing data with the stores Retailing Management 8  Privacy Concerns  Control over Collection: Do customers know what information is being collected? Do customers feel they can decide upon the amount and type of information collected by retailers?  Control over Use: Do customers know how the information will be used by the retailer? Will the retailer share the information with third parties? Retailing Management 9  Analyzing Customer Data and Identifying Target Customers  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 such as forecasting sales and allocating merchandise to stores. Deciding where to place merchandise categories in a store. Retailing Management 10  Market Basket Analysis  Market basket analysis (購物籃分析) 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. Joint promotions Product Placed Near Bananas cornflakes, produce Kleenex paper goods, cold medicine Measuring spoons housewares, Crisco shortening Flashlights hardware, Halloween costumes Little Debbie snack cakes coffee Bug spray hunting gear Retailing Management 11  RFM Analysis  RFM (recency, frequency, monetary) analysis, often used by catalog retailers and direct marketers, is a scheme for segmenting customers according to how recently they have made a purchase, how frequently they make purchases, and how much they have bought.  Customers who have made infrequent, small purchases recently are considered to be first-time customers. The objective of CRM programs directed toward this segment of customers is to convert them into early repeat customers and eventually high-value customers.  CRM programs directed toward customers in the high-value segment (high frequency, recency, and monetary value) attempt to maintain loyalty, increase retention, and gain a greater share of wallet by selling more merchandise to them. Retailing Management 12  Identifying Best Customers  Customer data analysis is focused on identifying market segments – groups of customers who have similar needs, purchase similar merchandise, and respond in a similar manner to marketing activities.  Using information in the customer database, retailers can develop a score or number indicating how valuable customers are to the firm. This score can then be used to determine which customers to target.  Lifetime customer value (LTV;顧客終生價值) is the expected contribution from the customer to the retailer's profits over his or her entire relationship with the retailer.  LTV is estimated by using past behaviors to forecast the future purchases, gross margin from these purchases, and costs associated with servicing the customers. Retailing Management 13  Developing CRM Programs  The next step in the CRM process is to develop programs for the different customer segments.  These include: (1) retaining best customers, (2) converting good customers into high-LTV customers, and (3) getting rid of unprofitable customers. Retailing Management 14  Customer Retention  Four approaches that retailers use to retain their best customers are: Frequent shopper programs Special customer service Community Personalization Retailing Management 15  Customer Retention  Frequent shopper programs are used both to build a customer database by identifying customers with transactions and to encourage repeat purchase behavior and retailer loyalty. Retailers provide incentives to encourage customers to enroll in the program and use the card.  Several considerations should be made in developing effective frequent shopper programs, including: tier rewards according to the volume of purchases offer choices in selecting rewards reward all transactions provide transparency and simplicity. Retailing Management 16  Customer Retention  Special Customer Services Some retailers provide unusually high quality customer service to build and maintain the loyalty of their best customers.  Community Retailers can also develop a sense of community among customers. The Internet channel offers an opportunity for customers to exchange information using bulletin boards and develop more personal relationships with each other and the retailer. By participating in such a community, customers are more reluctant to leave the "family" of other people patronizing the retailer. Retailing Management 17  Customer Retention  Personalization Many small, local retailers have always practiced 1-to-1 retailing, developing retail programs for small groups or individual customers. They know each of their customers, greet them by name when they walk in the store, and then recommend merchandise they know the customers will like. The Internet channel provides an opportunity for retailers 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. Some retailers attempt to match specialized promotions to the customer’s search. Retailing Management 18  Customer Pyramid  Most retailers realize that their customers differ in terms of their profitability or LTV. 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 –The most loyal customers who are not overly concerned about merchandise price and place more value on customer service. Gold Segment –customers shop a significant amount at the retailer but are more price-sensitive and are not as loyal as the platinum customers. Iron Segment – Customers in this third tier probably do not deserve much special attention. Lead Segment – Customers in the lowest segment cost the company money. Retailing Management 19  Converting Good Customers into Best Customers  Increasing the sales made to good customers is referred to as customer alchemy – converting iron and gold customers in to platinum customers. Customer alchemy ( 顧 客 煉 金 術 ) 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 (附加銷售) is selling additional new products or services to existing customers, such as a bank encouraging a customer with a checking account to also apply for a home improvement loan from the bank. Retailing Management 20  Dealing with Unprofitable Customers  In many cases, the bottom tier of customers actually has negative LTV. Retailers actually lose money on every sale they make to these customers.  Two approaches for getting the lead out are: (1) offering less costly approaches for satisfying the needs of lead customers, (2) charging the customers for the services they are abusing. Retailing Management 21  Implementing CRM Programs  Increasing sales and profits from CRM programs is a challenge. The effective implementation of CRM programs requires the close coordination of activities by different functions in a retailer's organization.  The MIS department needs to collect, analyze, and make the relevant information readily accessible for employees implementing the programs – the front-line service providers and sales associates and the marketers responsible for communicating with customers through impersonal channels (mass advertising, direct mail, and e-mail). Retailing Management 22