Transcript BGS Customer Relationship Management Chapter 10 Marketing

BGS
Customer Relationship Management
Chapter 10
Marketing Strategy and CRM
Thomson Publishing 2007 All Rights Reserved
Customer Loyalty and Satisfaction
Marketing Strategy & CRM
• Customer loyalty: Minute Maid O.J.
• Three entirely different definitions of
loyalty
1.Behavioral
2.Affect loyalty
3.Situation specific loyalty
Four Types of Loyalty
Repeat Purchase
Strong
Weak
Strong
True
Latent
Weak
Spurious
None
Strength Of Affect
Brands Have Four Levels of Meaning
1. Benefits
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Functional
Emotional
Internal
2. Brand personality
3. Brand attributes
4. Brand conveying values
What we Know about Customer
Satisfaction
• Satisfied customers may not remain loyal
• Dissatisfied customers tell more people than
satisfied customers
• Only a small percent of customers ever
complain
• Relationships based on satisfaction are, in
fact, weak
Confirmation/Disconfirmation
Model of Satisfaction
Satisfaction is the difference between what was expected
and what was experienced.
– “Was our service above, below, or at the same level of what
you expected?”
There are three Types of Relationships
Companies Have with Customers
• Acquaintance: Based on satisfaction
• Friendly: Based on trust
• Partner: Based on commitment
Factors Intervening between
Satisfaction and Loyalty
• Shear number of competitors’
offerings
• Novelty seeking
• Lack of personal attachment with
brand
• Lack of consistency in performance
• New competitors offering better
value or a greater variety of ancillary
services
• Customer expectation of future use
• Customers may not want a
relationship with your firm
Developing a Loyalty Profile
of Your Customers
• Customer loyalty is based on favorable
attitudes and behavioral responses such as
repeat purchase. It is both
– Behavioral
– Attitudinal
• Customers may be emotive
loyalists or deliberative loyalists.
Are Loyal Customers Always More
Profitable?
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Five reasons many say yes:
1. Increased number of purchases
2. Tendency to “Trade-Up”
3. Tendency to become less price sensitive because of focus
on convenience and purchase efficiencies
4. Word-of-mouth referrals
5. Lower cost of servicing them
New Findings Regarding Customer
Retention and Profitability
• In terms of profitability per month, short
lifetime but high revenue customers were
most attractive.
• Profits for long-life customers
did not increase over time.
• Short-life customers paid higher
prices than long-life customers.
• Some long-life customers may cost the firm
more in the long run due expenses.
Loyalty, Rewards, and Frequency
Programs
• More than half the United States
participates in at least one
• Flying United vs. Singapore Airlines
• Loyalty programs are primarily
defensive
• Are CRM only if data is used to
establish dialogue
• Are useful for bringing friends and
family into the program
• Are useful in creating databases
The Usefulness of CRM for any
Organization
Questions To Ask Regarding CRM’s
Usefulness To Any Organization
• Do we have a steep or shallow skew?
• Do we have a multichannel or single-channel value
proposition?
• Is our market characterized by “always a share” or
“lost for good” relationships?
CRM Strategy Cycle
The “New Marketing” Strategies
Acquisition
Retention
Winback
Acquisition Strategies
• Necessary to fill the pipeline since companies lose
2-40 percent of their customers every year.
• Mass media advertising still useful here.
• Capture potential user IDs and gain permission to
begin dialogue.
• Begin with defining your target and goals for the
acquisition campaign.
How To Develop Effective
Acquisition Strategies
• Qualitative and quantitative marketing
research
• Eliminate switching cost
• Present your offer at the appropriate times
• Encourage word-of-mouth referrals
Retention Strategies
• Can be based on:
– Rewarding
– Bonding
– Service structure strategy
• With two types of bonds
– Programmatic
– Humanistic
Types of Retention Strategies
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Preferential treatment
Rewarding
Employ idiosyncratic-fit
Personalization
Customization
Cross-selling
Up-selling
Managing migration
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Conversion
Profit driving
Brand building
Providing and attaining
Intimacy
Online customer
management
• Data mining
Preferential Treatment
…Is the customer’s perception of how much
better they are treated than the company’s
other customers. (Like a King!)
– Marshal Field and company’s Glamorama
– VIP rooms
– “Comps”
Rewarding
• Offering tangible benefits such as pricing or gift
incentives to its regular customers in return for
their loyalty.
– Frequent flyer programs
– Customer point programs
– Free gifts
– Used as much in B2B as in B2C
Employ the Idiosyncratic-Fit Heuristic in
Creating Loyalty Programs
• This is the tendency for customers to be enticed
by offers for which they enjoy a relative
advantage.
• Increasing program requirements can enhance a
customer’s likelihood of joining IF they feel they
have an advantage over others.
• Make them feel that they, but few others, qualify.
Personalization
• Consumer’s perception about how warmly
they are treated.
• Web related: a company-controlled web site
that a customer can modify to suit their own
purposes.
• Example: the personalized independently
owned women’s fashion business offered by
women selling out of their own homes.
Customization
“It’s one thing to train a sales staff to be warm and
attentive. It’s quite another to identify, track and
interact with an individual customer and then
reconfigure your product or service to meet that
customer’s needs.”
Peppers, Rogers, and Dorf
Customization
• Over the Web, customization refers to companycontrolled web site modifications.
• Wisconsin Tourist Bureau can customize users’ web
pages by emphasizing their interests through usage:
fishing, hunting, boating, antiquing, hiking, biking,
birding, skiing, etc.
• Companies can also develop new ideas, customize
product functions and features, and collect customer
info through continuous contact through many
touch points.
Cross-Selling and Up-Selling
• Brooks Brothers, NRS, and Amazon
• Items to include are determined by customer habits
and clever “bundling”
• Of all the CRM strategies, up-selling is the most
conversation oriented – wait for the relationship to
progress through acquaintanceship and trust stages
and enter the commitment stage
Reducing and Reversing Downward
Migration
• McKinsey says reducing downward migration can
provide 2-4 times more profit than reducing
attrition.
• “Migration is the change in customer value over
time.
• Measuring downward
migration is key, for it
may be a precursor to
defection.
Conversion
• Some long-time customers may be barnacles and
not treasures.
– If loyalty is overrated, then try to convert your shortterm, transaction-oriented customers to a more
attractive segment.
• Rewards based on purchase
frequency, dollar value, or profit may elevate
these customers to more profitable ones.
Brand Building through CRM
Can Help Companies:
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Acquire more customers
Increase customer share
Lower rate of brand defection
Express your brand through CC personnel
Enable advertising and SP to be more targeted
Collect better metrics for management (CLV)
Get more direct and frequent customer inputs
Provide new types of marketing research data
Provide new segmentation data by mining
Provide more customer need data
Provide more multichannel usage data
What Brands Do
• SYMBOLIZE
– Attributes, benefits, producer’s values, culture,
brand
– Personality, and users’ personalities
• EVOKE
– Relationships, experiences, emotions, and life
• CREATE
– Personal meaning, loyalty, friendship, and romance
Providing and Attaining Intimacy
• Customers do not want deep relationships with
every company, it’s untenable
– …but customers do want relationships with companies
providing them with products and services with which
they are highly involved
• Lesson: companies should not try to establish
bonds with every customer, just those for whom
the products are important
Online Customer Management
and Data Mining
• OCM consists of
– Understanding customers RSFM
– Conduct customer web log analysis
– Site improvement
Winback Strategies
• Sometimes referred to as “Regain
Management” or “Comeback Strategies”
– The process of winning back customers who either
give notice to terminate or have already ended the
relationship
– Winback is the process of firms’ revitalizing
relationships with customers who have defected
The Importance of Winback…
• Research has shown that a firm has a
– 60- 70 percent chance of successfully repeat-selling
to an active customer
– 20-40 percent chance of successfully repeat-selling
to a lost customer
– 15-20 percent chance of successfully closing the
sale on a brand new customer
Questions?