Transcript Customer Relationship Management (CRM)

RFM
RFM is a method used for analyzing customer behavior and
defining market segments. It is commonly used in database
marketing and direct marketing and has received particular
attention in retail.
RFM stands for
•Recency - How recently a customer has purchased?
•Frequency - How often he purchases?
•Monetary Value - How much does she spend?
To create an RFM analysis, one creates categories for each
attribute. For instance, the Recency attribute might be broken into
three categories: customers with purchases within the last 90 days;
between 91 and 365 days; and longer than 365 days.
IMC
Integrated Marketing Communications (IMC) is the
coordination and integration of all marketing
communication tools, avenues, functions and sources within
a company into a seamless program that maximizes the
impact on consumers and other end users at a minimal cost
What is IMC?
•Process for managing customer relationships that drive brand value.
•Its foundation is communication
•Cross-functional process for creating and nourishing profitable
relationships with customers and other stakeholders by strategically
controlling or influencing all messages sent to these groups and
encouraging data-driven, purposeful dialog with them.
•Integrated marketing communications (IMC) is the coordination and
integration of all marketing communication tools, avenues, and sources
within a company into a seamless program that maximizes the impact on
consumers and other end users at a minimal cost. This integration affects
all firm's business-to-business, marketing channel, customer-focused, and
internally directed communications
IMC Components
•The Foundation - corporate image and brand management; buyer
behavior; promotions opportunity analysis.
•Advertising Tools - advertising management, advertising design:
theoretical frameworks and types of appeals; advertising design:
message strategies and executional frameworks; advertising media
selection. Advertising also reinforces brand and firm image.
•Promotional Tools - trade promotions; consumer promotions; personal
selling, database marketing, and customer relations management;
public relations and sponsorship programs.
•Integration Tools - Internet Marketing; IMC for small business and
entrepreneurial ventures; evaluating and integrated marketing program
Importance
Several shifts in the advertising and media industry have caused IMC to develop into a
primary strategy for marketers:
1.
From media advertising to multiple forms of communication.
2.
From mass media to more specialized (niche) media, which are centered on
specific target audiences.
3.
From a manufacturer-dominated market to a retailer-dominated, consumercontrolled market.
4.
From general-focus advertising and marketing to data-based marketing.
5.
From low agency accountability to greater agency accountability, particularly in
advertising.
6.
From traditional compensation to performance-based compensation (increased
sales or benefits to the company).
7.
From limited Internet access to 24/7 Internet availability and access to goods and
services.
THE PUBLIC AND ETHICAL ISSUES IN DIRECT MARKETING
Irritation:
Many people do not like the increasing number of hard-sell, directmarketing solicitations. Especially bothersome are dinnertime or
late-night phone calls, poorly trained callers, and computerized calls
placed by auto-dial recorded-message players.
Unfairness: .Some direct marketers take advantage of impulsive ;or
'sophisticated buyers.' shopping shows that infomercials may be
the worst culprits with-their smooth-talking hosts and claims of
drastic price reductions.
Deception and fraud: Some direct marketers design mailers and
write copy intended 'to mislead buyers. They may exaggerate
product size, performance claims, or the "retail price." The federal
Trade commission receives thousands of complaints each year
about fraudulent investment scams or phony charities.
Invasion of privacy: It seems that almost every time consumers
order products by mail or telephone, enter a sweepstakes, apply for
a credit card, take out a magazine subscription, their names,
addresses, and purchasing behavior may be added to several
company databases. Critics worry that marketers may know too
much about consumers' lives, and that they may use this
knowledge to take unfair advantage.
CRM Process
Suspects
Prospects
1st Time
Customers
Repeat
Customers
Disqualified
Prospects
Inactive or Ex - Customers
Clients
Marketers need to work continuously to find ways and
means to build good relations with their customers. It
requires integration of all the areas of business that
touches the customers like marketing, sales, customer
service etc. through integration of people, process and
technology. There are five different levels of investment
to build a long term relationship with customers.
Basic marketing: A salesperson sells the product but does not contact
the customer again.
Reactive marketing: A salesperson sells the product and encourages
the customer to call if the customer has any complaints or queries :
regarding the product.
Accountable marketing:
A salesperson calls (or phones) the customer after a small
period of time of the actual sale to check whether the product is
meeting the customer's expectations. The salesperson also solicits
information like suggestions with regard to product improvement
and enquires if the customer is disappointed with the product in
any way. This information helps the company continuously
improve its offerings.
Proactive marketing:
Sales person contacts the customer from time to time with
suggestions about product usage for improving the product.
Partnership marketing:
Companies need to work in tandem with their customers
to provide better services to them and improve their (companies')
performance.
Relationship marketing involves maximizing long term values from a
customer by enhancing the experience of the customer with the
product and converting them into brand advocates. When a
customer stays with the company, the profit earned through him
increases steadily over the time. For example, a 5% increase in
retention may lead to a 40% increase in profits. However, companies
should realize that 68% of the customers who leave the brand feel
that the company's attitude towards them is either indifferent or
careless.
In an effort to strengthen its ties with the customers, Mahindra &
Mahindra invited the proud owners of Scorpio (its new SUV) to
visit its plant at Nasik in Maharashtra. The company witnessed a
huge crowd of people who drove all the way from Punjab,
Hyderabad and Chennai. The marketing department felt that the
customers were ready for more interaction with companies but the
companies needed to take the initiative. This kind of interaction
with the customers helped Mahindra and Mahindra understand
customer preferences better. The company also launched a 'top gear
club' for Scorpio with a dedicated website, direct access to the
Director, and a toll free number.
Why CRM is a Customer and Competitive
Necessity
• It typically costs 5-10 times as much to acquire a new
customer as it does to retain an existing one.
• “Some companies can boost profits by almost 100% by
retaining just 5% more of their customers.” Harvard
Business Review .
• A recent McKinsey study showed that the average new
customer spends $24.50 at a given web site in the first 3
months as a shopper. The average repeat customer
spends $52.50 every 3 months.
What is Customer Relationship Management (CRM)?
Customer Relationship Management (CRM) is:
the integration of sales, marketing, service and support
strategy, process, people and technology to maximize
customer acquisition, value, relationships, retention and
loyalty.
• A Redesigning of your Business from the Outside In.
• Customers, Data and Database at the Center of your
Organization (Customer-centricity).
• A organization-wide single customer view.
• A Foundation for “1to1 Marketing: Treating Different
Customers Differently” (Single Ticket Buyer vs.
Subscriber)
• A Means to Your Total Customer Development Ends.
What is Customer Relationship Management (CRM)?
CRM is “the development and maintenance of mutually beneficial
long-term relationships with strategically significant customers”
(Buttle, 2000)
CRM is “an IT enhanced value process, which identifies, develops,
integrates and focuses the various competencies of the firm to the
‘voice’ of the customer in order to deliver long-term superior
customer value, at a profit to well identified existing and potential
customers”.
(Plakoyiannaki and Tzokas, 2001)
Understanding Customer Relationship Management (CRM)?
CRM is a business philosophy based on upon individual customers
and customised products and services supported by open lines
of communication and feedback from the participating firms that
mutually benefit both buying and selling organisations.
The buying and selling firms enter into a “learning relationship”,
with the customer being willing to collaborate with the seller and
grow as a loyal customer. In return,, the seller works to maximize
the value of the relationship for the customer’s benefit.
In short, CRM provides selling organisations with the platform
to obtain a competitive advantage by embracing customer needs
and building value-driven long-term relationships.
Stages in the development of a Customer Relationship
The Pre-relationship Stage
The event that triggers a buyer to seek a new business partner.
The Early Stage
Experience is accumulated between the buyer and seller although a great
degree of uncertainty and distance exists.
The Development Stage
Increased levels of transactions lead to a higher degree of commitment and
the distance is reduced to a social exchange.
The Long-term Stage
Characterised by the companies’ mutual importance to each other.
The Final Stage
The interaction between the companies becomes institutionalized.
CRM Strategies
Customer Acquisition
•
Gain the greatest number of new “Best” customers as early in
their “lifespan” as possible.
Customer Retention
•
Retain and expand your business and relationships with your
customers through up-selling, cross-selling and servicing.
Customer Loyalty
•
Offer programs to ensure that your customers happily buy what
you offer only from you.
Customer Evangelism
Enable loyal customers to become a volunteer sales force.
Cost Reduction
•
Reduce costs related to marketing, sales, customer service and
support.
Improve Productivity
Enhance your e-business strategies.
CRM People
“Customers”
• Suspects, Visitors, Prospects, Subscribers, Patrons,
Members, Ticket Buyers, Users, Consumers, VIPs,
Volunteers, Annual / Major Donors, Advisors,
Advocates, Legislators, Strategic Partners, Sponsors …
Users
• Management, Employees, Visitors
Suppliers
• Services - Consultants
• CRM / Customer Development Experts
• Products - Technology
• Software, Hardware, Connectivity
CRM Processes / Mapping
 Re-examine all of your customer management
business processes.
 Redefine where CRM provides the greatest value
to your “best” customers and your organization.
 Incrementally implement CRM to improve top
targeted processes.
 Ex. Subscription Renewal processes
The “New Consumer” /
“Buyer-Centric” Market
Relevancy
•
I am not overloaded by irrelevant data.
Experiences
•
I seek “Memorable and Remarkable Experiences” over Products.
Attention
•
I am unwilling to waste attention. You must earn It.
Value
•
I expect to receive 2-3x value in return for investing my attention.
Desire For Knowledge and Individuality
•
I desire information that is valuable to me because it enables me to
decide what to do, and how best to do it.
Decoded Complexity
•
I will turn to reliable sources of “evaluated” information and may find it
convenient to complete my purchase at the same time, and at the
same point.
The “New Consumer” /
“Buyer-Centric” Market
Not Deliberately Misled or Confused
• Your uncoordinated marketing communications result in a lack
of congruency or no “single version of the truth” to me.
Organizational Memory
• I expect all employees that I interact with to “know” me.
Respects Privacy
• My data is not shared with anyone and is only used to improve
your value and service my needs.
Problems and Needs
• I expect you to solve my current and future problems and needs
quickly, professionally and efficiently.
CRM Goals, Benefits and Value

Increased Hard / Soft Results :
•
 Internal: Revenue, Margins, Profitability, Results, ROI,
Conversion Rates, Knowledge, Strategy, Efficiency,
Effectiveness, Creativity, Products, Innovation, Morale,
Customer Focus.
 External: Customer Acquisition, Up-selling, Crossselling, Personalization, Interaction, Feedback, Service,
Satisfaction, Loyalty, Evangelism, Relationships, Value,
Understanding.
•

Decreased Hard / Soft Results ($,%,#)
•
 Internal: Costs, Time, Errors, Employee Defection,
Frustration, Fear, Uncertainty, Doubt…
 External: Customer Issues, Complaints, Attrition, Churn
Dissatisfaction.
•
CRM Metrics
Response Rates
• Well-executed event-driven marketing campaigns typically
deliver response rates of the order of 25% - 50%.
Increased Sales
• A well-used CRM system typically yields a direct sales
revenue increase of 10%-20%.
Customer Retention
• Improvement of Average Observed Customer benefit 10%-18% for
Customers That Formally Measured.
ROI Justification
• A 10% improvement in customer retention and increased
revenues and a 14% increase in customer satisfaction,
though small, can provide all the justification any company
needs to implement a CRM system.
Determinants of CRM
In addition to trust and value, salespeople must:
Understand customer needs and problems;
Meet their commitments;
Provide superior after sales support;
Make sure that the customer is always told the truth
(must be honest); and
Have a passionate interest in establishing and retaining a longterm relationship (e.g., have long-term perspective).
Stages in the Development of a Key-Account Relationship
High
Synergistic KAM
Partnership
Degree of
involvement
Mid-KAM
Early-KAM
Low
Pre-KAM
Transactional
Collaborative
Nature of customer relationship
(Millman and Wilson, 1995)
A Relationship Life Cycle Model
High cooperation
Low competition
Prerelationship
stage
Development
stage
Maturity
stage
Decline
stage
Low cooperation
High competition
Time
(Wilkinson and Young, 1997)
Functions of Customer Relationship Management
Direct functions (are the basic requirements of a company that are
necessary to survive in the competitive marketplace)
Profit;
Volume; and
Safeguard
Indirect functions (are the actions necessary to convince the
customer to participate in various marketing activities).
Innovation:
Market;
Scout: and
Access.
The role of salespeople as relationship builders and promoters
Salespeople by:
identifying potential customers and their needs;
approaching key decision makers in the buying firm;
negotiating and advancing dialogue and mutual trust;
coordinating the cooperation between the customers and
their company;
encouraging the inter-organisational learning process;
contributing to constructive resolution of existing conflicts; and
leading the customer relationship development team
are the individuals in any organisation who act both as relationship
builders and as relationship promoters.
Models of Customer Relationship Management
The Evans and Luskin (1994) model for effective
Relationship Marketing
Relationship marketing inputs
•Understanding customer expectations
•Building service partnerships
•Empowering employees
•Total quality management
Relationship marketing outcomes
•Customer Satisfaction
•Customer loyalty
•Quality products
•Increased profitability
Assessment state
•Customer feedback
•Integration
(Evans and Luskin, 1994)
Managing Customer Relationships
The global salesperson must be involved in the following activities in order to initiate,
develop and enhance the process that is aimed at building trust and commitment with the
customer.
Initiating the relationship
Engage in strategic prospecting and qualifying;
Gather and study pre-call information;
Identify buying influences;
Plan the initial sales call;
Demonstrate an understanding of the customer’s needs;
Identify opportunities to build a relationship; and
Illustrate the value of a relationship with the customer
Managing Customer Relationships
The global salesperson must be involved in the following activities in order to initiate,
develop and enhance the process that is aimed at building trust and commitment with the
customer.
Developing the relationship
Select an appropriate offering;
Customise the relationship;
Link the solutions with the customer’s needs;
Discuss customer concerns;
Summarize the solution to confirm benefits; and
Secure commitment.
Managing Customer Relationships
The global salesperson must be involved in the following activities in order to initiate,
develop and enhance the process that is aimed at building trust and commitment with the
customer.
Enhancing the relationship
Assess customer satisfaction;
Take action to ensure satisfaction;
Maintain open, two-way communication; and
Work to add value and enhance mutual opportunities.
Managing Customer Relationships
Qualifying prospects for relationship building
High
Use a non
customized
approach
Build a strong
and lasting
relationship
Opportunities
for adding value
Seek better
opportunities
elsewhere
Focus on
loyalty-building
program
Low
Low
Potential profitability of customer
High
Relationship networks
The ultimate outcome of a successful CRM strategy is the creation
of a unique company asset known as a relationship network.
A relationship network consists of the company and its major
customers with whom the company has established long and
enduring business relationships.
The additional aspects of a global salesperson’s job are to:
Manage customer value;
Act as customer advocate; and
Enhance customer loyalty and build a “health” and
profitable network of relationships.
Summary
CRM is a new business philosophy based on trust and value;
The core function of CRM is the value creation process;
Customer relationships develop over time;
The role of global salespeople in the process is that of both
relationship builders and relationship promoters; and
The basic premise of CRM is to offer superior value to
customers in an effort to turn prospects into
customers, customers into loyal customers, and
loyal customers into partners.