Customer Relationship Management Chapter Fourteen.

Customer Relationship Customer Relationship ManagementManagement

Chapter FourteenChapter Fourteen

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 14-2

Key Learning PointsKey Learning Points

The economics of customer loyaltyThe economics of customer loyaltyA general framework for customer A general framework for customer relationship managementrelationship managementThe importance of a customer The importance of a customer databasedatabaseDefining, measuring, and building Defining, measuring, and building customer satisfactioncustomer satisfactionFrequency marketing programsFrequency marketing programsImportance of mass customizationImportance of mass customizationNew metrics for measuring successNew metrics for measuring success


Figure 14.1Figure 14.1The Buyer-Seller RelationshipThe Buyer-Seller Relationship


OverviewOverview

Transaction buyersTransaction buyersInterested only in the purchase at handInterested only in the purchase at hand

Relationship customersRelationship customersInterested in the benefits of buyer and Interested in the benefits of buyer and seller interdependencyseller interdependency

Customer relationship management Customer relationship management (CRM) programs develop programs of (CRM) programs develop programs of interest to relationship customers.interest to relationship customers.


Figure 14.2Figure 14.2Impact of a 5% Increase in Impact of a 5% Increase in

Retention Rate on Customer Net Retention Rate on Customer Net Present ValuePresent Value


Figure 14.3Figure 14.3Why Loyal Customers are More Why Loyal Customers are More

ProfitableProfitable


Figure 14.4Figure 14.4A Framework for Customer A Framework for Customer Relationship ManagementRelationship Management


Figure 14.5Figure 14.5Customer Information FileCustomer Information File


Figure 14.6Figure 14.6Getting More Customer InteractionGetting More Customer Interaction


Table 14.1Table 14.1U.S. Hotel Usage by Consumer U.S. Hotel Usage by Consumer

Segment in 2002Segment in 2002


Calculating ProfitabilityCalculating Profitability

Where:t = the number of past and current time periods measuredj = the number of product purchased in a time periodk = the number of marketing tools used in a time periodP = price C = cost MC = cost of marketing tool

Customer Profitability =

Analyzing the DatabaseAnalyzing the Database


Table 14.2Table 14.2Margin MultipleMargin Multiple

rr1 + 1 + ii - - rr


Figure 14.7Figure 14.7Customer Life Cycle Profit Pattern Customer Life Cycle Profit Pattern

in the Credit Card Industryin the Credit Card Industry


Table 14.3Table 14.3Descriptive Statistics on Descriptive Statistics on Customer Profitability for Customer Profitability for

PhysiciansPhysicians


Figure 14.8Figure 14.8Customer Profit Ordering for Customer Profit Ordering for

Physicians: Highest to LowestPhysicians: Highest to Lowest


Customer Targeting for Customer Targeting for RetentionRetention

Conventional direct-marketing Conventional direct-marketing approaches are used to contact and approaches are used to contact and keep customers.keep customers.


ActivityActivity

Customer X’s CIF indicates that Customer X’s CIF indicates that until recently, he visited the until recently, he visited the casino on average twice a month casino on average twice a month to play blackjack at the high to play blackjack at the high stakes table. But in the last 12 stakes table. But in the last 12 months, customer X has visited months, customer X has visited only twice. only twice.

As marketing manager for the As marketing manager for the casino, what type of offer would casino, what type of offer would you target towards customer X?you target towards customer X?


Figure 14.9Figure 14.9Customer Satisfaction ModelCustomer Satisfaction Model


Figure 14.10Figure 14.10Customer Satisfaction ScalesCustomer Satisfaction Scales


Figure 14.11Figure 14.11Some Sample ACSI ScoresSome Sample ACSI Scores


Relationship Marketing Relationship Marketing ProgramsPrograms

Customer satisfactionCustomer satisfactionMerely satisfying customers may Merely satisfying customers may not keep them loyal to the not keep them loyal to the firm/brand.firm/brand.

Net promoter - customer loyalty Net promoter - customer loyalty metricmetric

Scores above 75 are high.Scores above 75 are high.



Customer Types Classified By Customer Types Classified By Loyalty and SatisfactionLoyalty and Satisfaction

Loyalist / Loyalist / ApostleApostle

MercenaryMercenary

Defector / Defector / TerroristTerrorist

HostageHostage



Customer service supplements the Customer service supplements the main product or service.main product or service.

Moments of truth are critical.Moments of truth are critical.


Discussion QuestionDiscussion Question

The competition for students is The competition for students is intensifying on many campuses. intensifying on many campuses.

What contact points can result in What contact points can result in “moments of truth” which may make “moments of truth” which may make or break a student’s decision to or break a student’s decision to become (or stay) a student at a given become (or stay) a student at a given University?University?


Figure 14.12Figure 14.12The Augmented ProductThe Augmented Product



Customer Service PrinciplesCustomer Service Principles

Service is the backbone of business.Service is the backbone of business.Customer satisfaction measures great Customer satisfaction measures great service.service.Compensation plans determine behavior.Compensation plans determine behavior.Sales and service are complementary.Sales and service are complementary.Service department hours signal Service department hours signal dedication to customer satisfaction.dedication to customer satisfaction.Service technicians should work Service technicians should work together.together.


Discussion QuestionDiscussion Question

1.1. From a CRM perspective, how did the From a CRM perspective, how did the firm handle your complaint?firm handle your complaint?

2.2. What else could the firm have done?What else could the firm have done?

Customer service is never more critical than Customer service is never more critical than when consumers complain. Think of a recent when consumers complain. Think of a recent experience which led you to complain, either experience which led you to complain, either in person at the time of the incident, or later, in person at the time of the incident, or later, via phone, letter or e-mail.via phone, letter or e-mail.



Customer service can differentiate Customer service can differentiate your brand.your brand.

Service guaranteesService guarantees

Service recoveryService recoveryTraining is necessary.Training is necessary.

Service recovery can boost loyalty.Service recovery can boost loyalty.

Web-based customer service has Web-based customer service has improved substantially.improved substantially.


““One of the major trends in One of the major trends in marketing in the 1990s is marketing in the 1990s is the tremendous growth in the tremendous growth in loyalty programs, or in loyalty programs, or in general, frequency general, frequency marketing.”marketing.”

- Russell S. Winer


IllustrationIllustration

Colloquy provides examples of Colloquy provides examples of loyalty marketing, white papers on loyalty marketing, white papers on related subjects, and tracks loyalty related subjects, and tracks loyalty programs being used in a variety programs being used in a variety of industries.of industries.

Register for free at Register for free at www.colloquy.com and explore the and explore the recent news and examples.recent news and examples.



Technology drives loyalty Technology drives loyalty programs.programs.

Most are card-based.Most are card-based.

Transaction data is tracked.Transaction data is tracked.



Potential Frequency Program Potential Frequency Program ProblemsProblems

Making the Making the reward too highreward too high

UbiquityUbiquity

Confusing Confusing loyalty with loyalty with repeat buyingrepeat buying

Lack of Lack of inspirationinspiration

Lack of Lack of customer customer communicationcommunication

Insufficient Insufficient database database analysisanalysis



Mass customizationMass customizationPositively influences retention Positively influences retention and loyaltyand loyalty

Most often used for manufactured Most often used for manufactured goodsgoods



Creating a sense of affinity for Creating a sense of affinity for brands is a challenging task.brands is a challenging task.

Marketing managers often seek Marketing managers often seek to create a customer to create a customer community.community.

Successful online communities Successful online communities offer certain benefits.offer certain benefits.



Successful Internet Successful Internet Communities Offer:Communities Offer:

A forum for exchange.A forum for exchange.

A sense of place.A sense of place.

Congenial and stimulating Congenial and stimulating dialogues.dialogues.

Encouragement for active Encouragement for active participation.participation.



Other ideas:Other ideas:Volunteer Ambassador programVolunteer Ambassador programCustomer defection research Customer defection research studiesstudies



Privacy issuesPrivacy issuesCritically important for two key Critically important for two key reasons.reasons.

Online communities need to post Online communities need to post privacy policy information.privacy policy information.


Table 14.4Table 14.4CRM-Oriented MetricsCRM-Oriented Metrics


Executive SummaryExecutive Summary

Buyer-seller relationships do not end with the Buyer-seller relationships do not end with the sale.sale.Customer loyalty has economic advantages.Customer loyalty has economic advantages.CRM develops and manages long-term CRM develops and manages long-term customer relationships.customer relationships.Complete CRM programs have several steps.Complete CRM programs have several steps.Customer satisfaction is key.Customer satisfaction is key.Outstanding customer service taps into the Outstanding customer service taps into the augmented product.augmented product.Frequency programs help maintain loyalty.Frequency programs help maintain loyalty.Mass customization helps develop long-term Mass customization helps develop long-term relationships.relationships.Brand communities help to stimulate customer Brand communities help to stimulate customer interactions.interactions.

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Customer Relationship Management Chapter Fourteen.

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