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Retailing
MKTG 3346
Retail CRM (Consumer
Relationship Management)
Professor Edward Fox
Cox School of Business/SMU
Customer Relationship Management
Recognizes that the customer, rather than individual
purchases or contracts, is the source of value to the
firm
Focuses on customer acquisition and retention
Highlights repeat purchase and loyalty over time as key
goals
Recognizes the importance of customer satisfaction
Requires customer data to forecast their response to
potential offerings and manage customers over time
Customer Relationship Management
Relating with few customers
Emphasizes sales force
Usually B-to-B
Relating with many customers
Emphasis is on purchase history
Often, though not always B-to-C
With retail consumers (i.e., many customers)…
The retailer must be able to customize the product or
price or service offering
The retailer must be able to address consumers
individually
Customer Relationship Management
OBJECTIVES
Create loyal purchase behavior
Customize product and price offerings to target
customers
Consumer Targeting Continuum
Mass
Marketing
Segment
Marketing
Niche
Marketing
Increase customer lifetime value
MicroMarketing
Customer Relationship Management
ORGANIZATIONAL REQUIREMENTS
Performance measures
Internal incentives
Customer information / data architecture
Customer Relationship Management
PROGRAMS
Card programs
Discount
Credit
Membership
Specific examples
Catalina coupons catalina marketing
Collaborative filtering (recommenders)
Virtual model landsend.com
amazon.com
How can the retailer reward loyalty rather than
purchase volume?
Customer Relationship Management
LOYALTY PROGRAMS
Loyalty programs are set up to reward customers
with incentives such as discounts on purchases, free
food, gifts, or even cruises or trips in return for their
repeated business.
Retailers use them for three reasons:
to retain loyal customers
to increase loyalty of non-loyal customers
to collect information about them and what they buy
Loyal customers are the source of most profits
Less price sensitive
More purchases per customer – higher share-of-requirements
Customer Relationship Management
RETAIL CUSTOMER DATA
Customer Relationship
Management (CRM) is
enabled by the gathering and
warehousing of consumer
data
Retailers gather customer
data from:
Frequent shopper or
shopper loyalty cards
Store credit cards
Identifiable tender
Customer Relationship Management
RETAIL CUSTOMER DATA
Retail customer databases are
organized collections of data about
individual consumers including:
Geographic
Demographic
Behavioral data
Purchase histories
Appended behaviors
Databases may enable retailers to gain a
competitive advantage
Adapted from Prentice Hall
Customer Relationship Management
RETAIL CUSTOMER DATA
Most leading retailers use card programs
89% of retail “leaders” in the practice of CRM use
card programs (Progressive Grocer, 2001)
However, retailers are not using the resulting data
effectively
“The retailers have collected all of this frequent
shopper data, but few, if any, attempts have been
made to mine the opportunities that it probably
presents.” (Shulman 2003)
Issues
How can retailers better exploit consumer data?
How can it be used for targeted marketing offers?
Customer Relationship Management
DATA WAREHOUSING
Data warehousing is the coordinated and periodic
copying of data from various sources, both inside and
outside the enterprise, into an environment ready for
analytical and informational processing
Wal-Mart makes good use of its data warehouse. It
should. Experts estimate that it is second in size to
that of the U.S. government
Customer Relationship Management
DATA MINING
Data mining is the process by which insights are derived
from vast amounts of data, such as that contained in a
data warehouse.
Statistical algorithms are applied to customer data to
identify merchandise buying patterns and relationships.
Customer Relationship Management
MARKET BASKET ANALYSIS
A market-basket analysis is uses data mining
techniques to determine what predominant categories
individual consumers are buying.
Based on these analyses, Wal-Mart has changed the
traditional locations of several items:
Since bananas are the most common item in America’s
grocery carts, they sell bananas next to corn flakes (to help
sell more cereal) as well as in the produce section.
Kleenex tissues are in the paper-goods aisle and also
positioned among the cough and cold medicines.
Measuring spoons are in housewares and also hanging
next to Crisco shortening.
RETAIL CRM ISSUES
How does the retailer respect the shopper’s privacy while
gathering information to respond more effectively to that
customer?
What does the retail shopper get out of CRM? Why should
(s)he give is the retailer information about (her-)himself?
Should the retailer offer different levels of price or service?
What is the advantage of uniformly high prices or customer
service?
What is the appropriate level of customization? How much
does the retailer gain by individual, rather than store-specific
offers? At what cost?