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Customer Relationship Management
Customer Relationship Management
A business philosophy and set of strategies, programs, and systems that focus on identifying and building loyalty with a retailer’s most valuable customers
Customer LoyaltyCommitted to purchasing
merchandise and services from a retailer
Resist efforts of competitors to attract the loyal customer
Emotional attachment to retailer
CRM Process Cycle
Learning
Action
Collecting Customer DataTypes of Information in the
Customer DatabaseApproaches for Collecting
InformationPrivacy Concerns
Information in Each Customer Data
History of purchasesCustomer contacts by retailer
(touch points)Customer preferencesDescriptive information about
customerCustomer’s responses to
promotions
Approaches for Collecting Information
Need to connection contacts with a specific customer identifier
Ask for identifying informationEncourage use of frequent shopper
cardsLink checking account number
and/or third party credit cards to customer
Privacy ConcernsControl over Collection
Do customers know what information is being collected?
Do customers feel they can decide on the amount and type of information collected by retailers?
Control over UseDo customers know how the information
will be used by the retailer?Will the retailer share the information with
third parties?
Concerns When Using Electronic Channels
Information collected without the awareness of customers
Collecting click stream data using cookies
Fair Information PracticesNotice and awareness
Comprehensive statement about information storage, manipulation, and dissemination
Choice/consentOpt-in and Opt-out options
Access/participationCustomer able to confirm accuracy
Integrity/securityControls for theft and tampering
Enforcement/redressMechanism to insure compliance
Analyzing Customer DataData Mining – technique used to
identify patterns in data.Market Basket AnalysisIdentifying Market SegmentsIdentifying Best Customers
The Customer Pyramid
Most ProfitableCustomers
Least ProfitableCustomers
RFM AnalysisRecency, Frequency and Monetary AnalysisRFM Target Strategies
Recency
Frequency
Monetary (Rs)
0-2 m
3-4m 5-6m
>6m
1-2 <1000 First-time customers
Low-value customers1-2 >1000
3-4 <3000 Early repeat customers
Defectors
3-4 >3000
5-6 <5000 High-value customers
Core defectors5-6 >5000
>6 <10000
>6 >10000
Customer Retention Programs
Frequent Shopper ProgramsSpecial Customer ServicesPersonalizationCommunity
Effective Frequent Shopper Programs
Tier Based on Customer ValueOffer Choices of RewardsReward all TransactionsTransparent and SimpleIssues:
Expenses to be justifiedImpact on loyalty questionableEasily duplicated – difficulty to get competitive advantage
Implementing CRM ProgramsNeed systems and data bases
+Close coordination between
departments – marketing, MIS, store operations, HR
Shift in orientation from:Product Centric to Customer Centric