Transcript MAR 4721 Professor Charles Hofacker

MAR 4721
Professor Charles Hofacker
Module 4
Consumer-Business Relationships
Professor Hofacker
MAR 4721 Slide 4.0
Electronic Marketing
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Lecture Overview
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Professor Hofacker
MAR 4721 Slide 4.1
Electronic Marketing
All About Relationships
Harrah Entertainment
CRM
Digital Data
Evaluating Customers
Loyalty
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Relationships vs. Transactions
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Long lasting mutually beneficial win-win
relationships between supplier and buyer
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Integration of all marketing activities toward
establishing, developing and maintaining
successful relational exchanges
loyalty
retention
profitability
Retention Is Cheaper than Acquisition
Professor Hofacker
MAR 4721 Slide 4.2
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Relationship Life Cycle
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Attract – identify and invest, create joint goals
Retain – deepen loyalty, educate, encourage
relationship specific investments
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Extend – broaden the relationship, new or
complementary products and channels
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Leverage - referrals, resell third-party offerings,
increase prices
Professor Hofacker
MAR 4721 Slide 4.3
Electronic Marketing
Sawhney, Mohanbir and Jeff Zabin (2002), "Managing and
Measuring Relational Equity in the Network Economy," Journal
of the Academy of Marketing Science, 30 (4), 313-332.
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Harrah Entertainment, Inc.
1.
Each player is offered tailored hotel and
recreation deals – Describe how Harrah
Entertainment might choose the hotel price
2.
If you were to sort all Harrah customers with
the “top” or “best” customer first, and the
“bottom” or “worst” customer last, how would
you do that?
Professor Hofacker
MAR 4721 Slide 4.4
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from Business Week, October 29, 2001
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Customer Relationship Management
“CRM is a strategic posture calling for iterative
processes designed to turn customer data into
customer relationships through active use of, and
learning from, the information collected.”
Swift, Ronald S. (2001) Accelerating Customer Relationships Using CRM
and Relationship Technologies, Prentice Hall: Upper Saddle River, NJ.
“CRM is information-enabled relationship
marketing”
Professor Hofacker
MAR 4721 Slide 4.5
Electronic Marketing
Ryals, Lynette and Adrian F. T. Payne (2001), “Customer
Relatoinship Management in Financial Services: Towards
Information-Enabled Relationship Marketing,” Journal of
Strategic Marketing, 9 (March), 1-25.
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CRM Overview
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Historic shift in marketing from managing
products to managing customer relationships
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Emphasis on marketing via customer
information databases (“Database Marketing”)
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Emphasis on measuring the value of and for
each customer (“Dual Value Process”)
Professor Hofacker
MAR 4721 Slide 4.6
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The Nature of Databases
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Flat File
o Contains a single “table”
o A typical example might look like:
Fields
Records
1
m
34
32312
2
f
29
32306
··· ··· ··· ···
232 f
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Professor Hofacker
MAR 4721 Slide 4.7
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32311
Relational Database
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Relational Database
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Professor Hofacker
MAR 4721 Slide 4.8
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Consists of a set of tables
Accompanying software can be used to
access data in more than one table, and to
relate data elements from those tables
Each table will generally have a key field
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Relational Database Example
Product Records
Customer Records
cust_id address phone
age
32882
33 J
St
2222222
23
75676
1 H
St
3333333
32
88842
4 L
St
4444444
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Professor Hofacker
MAR 4721 Slide 4.9
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prod_id
desc
4A887
hammer
7V266
nail
Transaction Records
cust_id date
prod_id
75676
7V266
1-3-4
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Useful Customer Information
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Customer preferences
Customer importance
weights
Consideration sets
Cognitive style
Customer characteristics
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Transaction information
Contact history
Marketing exposure
history
Product usage
Profitability
o Demographic
o Psychographic
Professor Hofacker
MAR 4721 Slide 4.10
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Database Marketing Leverages
All Customer Touch Points
A financial services company might have many
channels
Call center
 Web site
 ATM
 Automated voice response system
 Cashiers and customer service reps
 Mobile devices
 POS card swipe
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Professor Hofacker
MAR 4721 Slide 4.11
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Discussion Question
1. What is the difference between the economic
concept of elasticity and marketing concept of
customer lifetime value?
Professor Hofacker
MAR 4721 Slide 4.12
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Historical View: Elasticity
Current
Offline
and/or
Online
Sales
Firm's Online Expenditures
Professor Hofacker
MAR 4721 Slide 4.13
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Discussion Question
2. What might it mean to analyze the “net present
value” of a customer? What pieces might go
into an equation for this?
Professor Hofacker
MAR 4721 Slide 4.14
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Newer View: Customer Equity aka Customer NPV
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CE =
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t=0
Net Customer
Contribution in period t
Gt - Ct
(1 + i)
Rt
Retention rate
t
Expected interest
rate or return
Professor Hofacker
MAR 4721 Slide 4.15
Electronic Marketing
Inspired by
Jain & Singh (2002), J Interactive Mar
Kuman, Ramani & Bohling (2004) J Interactive Mar
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Relationship Data
Time
Ongoing Relationships
Are Right-Censored –
Relationships Are
Underestimated from
Raw Data
Terminated Relationships Can Be Assumed
Professor Hofacker
MAR 4721 Slide 4.16
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“Gone for Good” (contractual service) or
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“Always a Share” (noncontractual service)
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Switching Costs
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Procedural switching costs
economic risk, evaluation, learning, setup
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Financial switching costs
benefit, monetary loss
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Relational switching costs
personal, brand
Professor Hofacker
MAR 4721 Slide 4.17
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Loyalty and Cognitive Lock-In
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Skills are transferable or non-transferable
Depends on Interface similarity, Ocam’s Razor and standards in
design
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Learning Curve and the Power Law of Practice
Time to
Complete
Task
Practice Trials
Professor Hofacker
MAR 4721 Slide 4.18
Electronic Marketing
Murray, Kyle B. and Gerald Häubl (2003), "A Human Capital
Perspective of Skill Acquisition and Interface Loyalty,"
Communications of the ACM, 46 (12), 272-278.
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