page 1

Transaction and CRM

page 2

Outline

1. Transaction

1.1. Definition of e-commerce1.2. Increasing importance of e-commerce

2. CRM

2.1. Definition of CRM2.2. CRM in electronic media

page 3

Business is not financial science, it's about trading… buying and selling. It's about creating a product or service so

good that people will pay for it.

Anita Roddick, Founder of The Body Shop

page 4

The Interactive-Tableau helps to structure communication activities

Consideration CRMCommunication

function TransactionBranding

PR

PP + Progr.

Print

TV

Online

DM + MobilePo

ssib

le c

ross

me

dia

inte

gra

tion

Communi- cation channel

Outlet

Communication cycle

page 5

Definition of e-commerce

Source: AMA , 2009

e-commerce (narrow definition)

• e-commerce is a term referring to a wide variety of

Internet-based business models.

• Typically, an e-commerce strategy incorporates various

elements of the marketing mix to drive users to a Web

site for the purpose of purchasing a product or service.

page 6

Differentiation of e-commerce definitions

Source referring to: Marketing; Meffert, H.; 9. edition 2000; p. 917

E-commerce (in the broader sense)

TransactionInformation and communication

Objectives from supplier’s point

of view

Technology

Internet

Extranet, intranet, TV, telephone, fax

etc.

E-commerce (narrow definition)

page 7

Areas of e-commerce

Consumer-to-business

e.g. job exchange

Consumer-to-consumer

e.g. eBay

Consumer-to-administration

e.g. income tax,declaration of residence

Business-to-administration

e.g. sales tax

Business-to-business

e.g. e-procurement

Business-to-consumer

e.g. orders(e.g. Amazon)

Administration-to-consumer

e.g. support at transactions

Administration-to-business

e.g. procurement for public institutes

Administration-to-administration

e.g. transactionsof public institutes

page 8

Outline

1. Transaction

1.1. Definition of e-commerce1.2. Increasing importance of e-commerce

2. CRM

2.1. Definition of CRM2.2. CRM in electronic media

page 9

Revenues of B2C e-commerce

Source: Hauptverband des deutschen Einzelhandels, 2009 ; containing transaction for tangible goods, services (e.g. delivery services), rights of exploitation (e.g. travels, tickets) and information (e.g. charged downloads).

Bill

. E

uro

1.252.5

5

8

11

13

14.5

16.3

0

2

4

6

8

10

12

14

16

18

1999 2000 2001 2002 2003 2004 2005 2006

18.3

2007 2008

20.021.9

2009

2.1

% o

f TR

S

0.3

3%

of T

RS

0.6

5%

of T

RS

1.2

9%

of T

RS

2.9

1%

of T

RS

3.3

7%

of T

RS

3.7

2%

of T

RS

4.1

6%

TR

S

4.6

5%

of T

RS

Total retail sales (TRS): 370 - 392 bill. € (1999 – 2009)

4.6

9%

of T

RS

2010

23.7

5.5

9%

of T

RS

page 10

Germany‘s top ten online shops

Source: ACTA, 2008

* Including private auctions

** 2007

18

1.64

2.84

2.93

3.16

4.14

4.27

4.85

5.63

13.0513,73

2,9

1,94

1,7**

6,12

3,6

buecher.de

conrad.de

neckermann.de

bonprix.de

quelle.de

weltbild.de

otto.de

tchibo.de

amazon.de

ebay.de*

Annual revenue (in bill.€)

Million customers

tchibo.deotto.de

page 11

Growth of online shopping

Online shopper

Online purchases in the last 12 months

1 - 4

5 -9

10 and more

Source: ACTA 2009

page 12

Online purchases by product category

Books

Travel

Hotel reservation

Clothes, shoes

Hard- and software

Drugs, medical equipment

Cosmetic

Source: ACTA 2009

page 13

Outline

1. Transaction

1.1. Definition of e-commerce1.2. Increasing importance of e-commerce

2. CRM

2.1. Definition of CRM2.2. CRM in electronic media

page 14

The Interactive-Tableau helps to structure communication activities

Consideration CRMCommunication

function TransactionBranding

PR

PP + Progr.

Print

TV

Online

DM + MobilePo

ssib

le c

ross

me

dia

inte

gra

tion

Communi- cation channel

Outlet

Communication cycle

page 15

General requirements changed in the 21th century

New challenges

Increasing individualization of consumer behavior

Within today’s global and transparent markets, competitive differentiation only via products not longer sufficient

Sales of products or services not regarded as closing of a deal, but rather as beginning of a long lasting relationship

Source: Benchmarking Customer Relationship Management, University of St. Gallen, 2002

Integration of customer related data

Integration of product related data

Integration of production related data

Qualitty orientation

Product orientation

Customer Orientation

page 16

Source: AMA, 2009

• A discipline in marketing combining database and computer technology with customer service and marketing communications.

• Customer relationship management seeks to create more meaningful one-on-one communications with the customer by applying customer data (demographic, industry, buying history, etc.) to every communication channel.

• At the simplest level, this would include personalizing e-mail or other communications with customer names.

• At a more complex level, CRM enables a company to produce a consistent, personalized marketing communication whether the customer sees an ad, visits a Web site, or calls customer service.

Definition of customer relationship management

page 17

Objectives of CRM

Increase customer retention…

Strengthen brand image

…which means to optimize the long-term value of the consumer

E.g. customer and service orientation

Modern research & development

Future and environment orientation

Source: insights 2; May 02; editor BBDO Consulting; p. 57

Enlarge knowledge… …about markets and new competitors

…about existing consumer segments (learning relationship)

…potential consumer segments

Increase effectiveness and efficiency…

…regarding processes

…regarding costs

Increase acquisitions… …in existing business segments

…in new business segments

page 18

Economic objectives of CRM: Optimizing the CLV

Customer lifetime value (value of a customer)

Sum of all discounted, customer related payments, which are caused by the transactions

with the customer during the phase of acquisition, as well as during the total duration of the

customer relationship.

CLVi = Ai + (CMIit – CMOit)∑ . 11 + r

tT

t=0

CLVi = Customer lifetime value of customer i

Ai = Present value of investment for acquisition of customer i until t=0

t = Time in years (t=0: start of business relationship)

CMIit = Customer related monetary incomes for customer i and year t

CMOit= Customer related monetary outcomes for customer i and year t

r = Annual interest rate for evaluation of customer related costs of capital

page 19

Sample calculation for competing CLV

Costs for banner advertising in the Internet 100,000 EURThereby generated clicks (on homepage) 12,000 Thereof buyers 800

Acquisition costs per customer 125 EUR

Average initial order value per customer 180 EURThereof contribution margin (CM rate 40%) 72 EUR

Initial investment per customer (since costs > revenues) -53 EUR

Period Rate of repeat buyersAverage purchasing

volumeCM rate

Contribution margin per new customer

1st year 60 % 150 EUR 40 % 36.00 EUR

2nd year 48 % 175 EUR 40 % 33.60 EUR

3rd year 30 % 220 EUR 40 % 26.40 EUR

CLV = -53 EUR + + + 36.00 EUR

1.2

33.60 EUR

1.22

26.40 EUR

1.23

= 15.61 EUR

With interest rate of 20 %

page 20

CRM – Sources of customer value

Basically quantifiable

Purchase quantity Willingness to pay (payment of prices

above average) Customer support coefficient (reduction

of marketing costs) Cross-selling potential Duration of customer relationship

Hard to quantify

Reference potential (gaining of new

customers via recommendation / word-

of-mouth propaganda)

Information potential

(customer as market research object)

Sources of customer value

! But: Long lasting customers not necessarily provide an improved marketing efficiency

or a higher willingness to pay.

Source: Krafft, M. / Bromberger, J. (2001): Kundenwert und Kundenbindung, in: Albers, S. / Clement, M. / Peters, K. / Skiera, B. (eds.): Marketing mit Interaktiven Medien, 3rd edition. Frankfurt am Main, p. 160 – 163Krafft, M. (2002): Kundenbindung und Kundenwert, Heidelberg, p. 33-40

page 21

CRM – Truly for everyone?

CRMcosts

Basisprofit

Up-selling

Cross-selling

Recommendations Recommendations

Complementary products and services

Additional functionalitiesDeal-price realization

Retention and frequency

Acquisition costsCustomer retention

serving costs

page 22

62%

51%43%

0%

25%

50%

75%

are reading eWOM

are affected in conumption decision by

eWOM

are forwarding eWOM

to friends

Source: Deloitte 2007

Consumers…

Study 2007

eWOM from virtual communities

62% of the consumers are reading eWOM and 51% are affected by online ratings.

page 23

Outline

1. Transaction

1.1. Definition of e-commerce1.2. Increasing importance of e-commerce

2. CRM

2.1. Definition of CRM2.2. CRM in electronic media

page 24

Seite 24

Online CRM

Examples

page 25

Online CRM

Examples

page 26

Mobile CRM

page 27

Mobile CRM

Glow Cap Hexal

Zipcar

page 28

Again! – Objectives of CRM

Branding Consideration TransactionCustomer

relationship management

Basic idea of interactive marketing

Raise customer retention

Increase acquisitions

Enlarge knowledge

Strengthen brand image

Increase effectiveness and

efficiency

Source: insights 2; May 02; editor BBDO Consulting; p. 57

page 29

The ABSOLUT Vodka Case

From a local brand to a global success

page 30

History

1879 + Lars Olsson Smith + A revolutionary distilling method

= „Absolut rent Bränvin“

(absolutely pure vodka)

How the story began…

…and how it went on:

Åhus

USA

Latin

America

EuropeAsia

Russia

1979Export to the USA

TodayWorld‘s biggest-selling

premium vodka (in volume)

2002 World‘s number one

luxury brand

1997500th million bottle

was produced

Source: Forbes Magazine; Euromonitor; Pernod Ricard

page 31

Lifestyle &Fashion

Event focus

Interactivity

Target group

low

high

low highsp

ecia

l

broa

d

Product Design

AdvertisingCampaigns

Celebrities

Art, Music &Events

Digital & Social Media

Brand cube of market success

ABSOLUT integrates and balances its marketing activities

page 32

1 – Advertising Campaigns

1981

ABSOLUT campaign, in

which the brand

commented on and paid

tribute to contemporary

culture, was launched.

… 27 years later …

More than 1,000 ads in many

different media published and 400

advertising awards won.

2008

‚In an ABSOLUT world‘

challenges the question:

What if everything in the

world was approached with

the same ideals as

ABSOLUT approaches

vodka?

Source: www.absolut.com

page 33

2 – Digital & Social Media (I)

www.absolut.com ABSOLUT on your iPhone

ABSOLUT integrates online and mobile world

following the principles of participation and interaction

to create a strong (virtual) brand community.

page 34

2 – Digital & Social Media (II)

ABSOLUT takes part in social communitys,

accepts and supports user-generated-content

and connects to bloggers

to create a strong brand identification.

ABSOLUT COLLECTORS

WORLDwww.absolutcollectorsworld.co

m

page 35

3 – Lifestyle & Fashion

Lifestyle

Fashion

ABSOLUT Icebars in London, Stockholm, Jukkasjärvi and

Mojave are meeting points for brand lovers and sightseers.

Upcoming and established designers creat fashion items for the brand

which enthuse fashionists.

Handbag designed by Versace in 1997

page 36

4 – Art, Music & Events

Art, music and events

create emotional connections to the brand and

are import elements for an emotional product differentiation.

Exhibitions Music Contemporary art ads Installations by artists

„Photo Giants“(World‘s biggest outdoor exhibition

of pictures in 3 German cities in 2009)

„In an ABSOLUT world opportunities always pop up“

(By Justin Broadbent in Toronto in 2009)

„ABSOLUT Tracks“(4 djs produced unique tracks as a musical

interpretation of the brand in 2004)

„ABSOLUT Art“(e.g. Andy Warhol and Keith Haring painted

pictures of the bottle)

page 37

5 – Product Design

Rock

Disco

Masquerade

No Label

Colors

Limited editions

• limited number increases demand

• fancy design supports brand image

• constant form enables recognition

page 38

6 – Celebrities

Lenny

Kravitz

Kate

Beckinsale

Jason

Lewis

Brand ambassadors / testimonials

enable an image transfer from the

person to the brand.

cool

modern

sexy

page 39

Branding

Consideration Transaction

CRM

Integrated communication at every level

Lifestyle &Fashion

Event focus

Inter-activity

Target grouplo

whi

gh

low highsp

ecia

l

broa

d

Product Design

AdvertisingCampaigns

Celebrities

Art, Music &Events

Digital &Social Media

page 40

Apple

Why is it so successful?

„Importantly, iPod innovation was not a one-hit wonder, but a series

of ‘episodes’. Each has packed a punch that combines superior

functionality, ease of use and aesthetic appeal.

The first iPod offered a step-change in storage capacity, the iTunes Store

made online music-buying much easier and iPod Photo has expanded the

device's functionality, and so the list goes on.”

(Source: Taylor, 2005)

page 41

Apple – history

X X X X1976

1984

2001

2007

page 42

Apple – The world of iTunes

iTunes is a multimedia program that enables you to

play – convert – organise – buy your music – games – movies – videos