E-Commerce & CRM Building Relationships, Satisfaction, and Loyalty

Transcription

1 Lecture 8 E-Commerce & CRM Building Relationships, Satisfaction, and Loyalty CRM Defined a combination of business process & technology that seeks to understand a company s customers from the perspective of who they are, what they do, and what they like (Couldwell, 1998) 2 CRM Defined a strategy to learn more about customers needs & behaviours in order to develop stronger relationships with them there are many technological components to CRM, but thinking about CRM in primarily technological terms is a mistake CRM is a process that will help bring together lots of pieces of information about customers, sales, marketing effectiveness, responsiveness & market trends. (Deck, 2001) 3

2 CRM An approach that recognises the customers as one of the core element of the business Advocating that the success of the company correlates with the satisfaction of its customers Aims at building and/or sustaining long-term relationship with the customers Based on the concept of Relationship Marketing 4 Relationship Marketing A concept of conducting trade/commerce while establishing & maintaining trust, relationship & loyalty between the vendor & the customers Happy customers = loyal customers = repeat trade/business = maintain/increase trade/business 5 Perspectives on CRM Movement from mass marketing & transactionbased marketing to more direct 1-to-1 marketing based on customer relationships Establishing a learning relationship Use of modern IT & internet-based technologies to support marketing function Movement from production-centric to customercentric organisations Customer centric organisations 60% more profitable than others 6

3 Perspectives on CRM CRM can thus mean Organisation paying a little more attention to customer service & being enabled in this by some new software or Complete organisational transformation to customer-centric organisation that practices relationship marketing supported by data warehousing, data mining & sales automation tools 7 Perspectives on CRM Commoditisation of mass produced goods Difficult to differentiate Vulnerable to price competition Modern IT enables interaction(s) with customers more cheaply & easily Data collection learn more about >Who customers are >What customers want >What customers are worth to organisation 8 Perspectives on CRM Loyal customers contribute disproportionally to profitability Pareto s Principle a.k.a. the 80/20 rule a.k.a. the Vital Few and Trivial Many Rule Tailor goods & services to meet needs of most profitable segment(s) 9

4 The Basic Tenets of CRM Customers are assets of firm Customers exhibit differences in Needs Preferences Buying behaviour Price sensitivity Profitability of customers vary not all are equally desirable By (on-going) learning, organisations can tailor product/service portfolio to maximise profitability 10 Key Requirements Focus changes from product-centric to customer-centric Close cooperation between marketing & IT Organisation-wide collection of data at touchpoints with customers Organisation-wide transformation implied Change in emphasis from customer acquisition to customer retention Establishment of long term relationships Enabled by use of IT 11 Why Customer Retention & Loyalty? $ % Acquisition costs Defection before breaking even 3.5 Cons. Electrics/appliances Groceries Apparel years Years to break even 1.1 (Reichheld & Schefter, 2000) 12

5 Why Customer Retention & Loyalty? 35-95% average lifetime value of a customer 5% in customer retention 25-80% improved profits (Adapted from Reichheld & Kenny, 1990; Reichheld, 1996; Ryals & Knox, 2001) 13 So Why Customer Retention & Loyalty? Customer s switching costs Advertising value Loyal Customers LCV? Purchase over time Admin costs (Adapted from Cash, 1999) 14 Lifetime Customer Value (LCV) Calculating the LCV LCV = ( P C) MC T J K T = time periods measured J = number of products purchased K = number of marketing tools used MC = cost of marketing tool P = price C = cost 15

6 Why CRM? sales Up-selling & cross-selling Customers buy more over time > Companies become more efficient at serving them Referrals from retained & satisfied customers Customers become less price sensitive customer attrition customer satisfaction (advocates, apostles) transaction costs cycle times 16 Beware of customer attrition Customer Loyalty Initial purchase High New products Emerging trends New services Substitution Competitors advertisement Changes in consumer s characteristics Low Buy Buy????Buy??? High Low Customer relationship intensity Elapsed time 17 Why CRM? Loyalty & Satisfaction High Zone of affection Apostle Zone of indifference Loyalty measure Zone of defection Low Terrorist 1 Completely dissatisfied Satisfaction Completely measure satisfied (Service Management Interest Group, HBS, in Cash, 1999) 18

7 Why CRM? acquire new customers offer a superior product/service & excellent service enhance profitability of existing customers cross-selling & up-selling enhance value proposition for customers aim to retain profitable customers be adaptable to changing requirements 19 But Do remember Database marketing is expensive Establishment cost could be astronomical Constant updating of information is needed Appropriate skills are needed 20 Where s CRM in the Overall Architecture? Remember this? Supplier A Buyer A Supplier C Supplier B Retail Firm Buyer B Wholesaler Supplier D Supply side Demand Side 21

8 Where s CRM in the Overall Architecture? Administration and Infrastructure Accounting Human Resource Management Margin Product/Technology Development (R&D) Finance Human Resource Procurement ERP Inbound Logistic Operations MRP Outbound Logistic Sales & Marketing Service CRM Margin 22 Where s CRM in the Overall Architecture? Administration and Infrastructure Suppliers Human Resource Management Buyer Margin Suppliers Suppliers Product/Technology Development (R&D) Procurement ERP Inbound Logistic Operations Outbound Logistic Sales & Marketing Service CRM Margin Supply Side Demand Side 23 CRM Architecture Customer Intelligence System(s) Customer Knowledge Business Rules Real Time Learning Campaign Management System(s) Real Time Response Customer Touchpoints Field Rep Contact Center Internet IVR POS/ Kiosk Direct C U S T O M E R S Targeted Delivery to Best Point(s) (Arthur Andersen, 2000) 24

9 CRM Technical Architecture The NAB example (The Tower Group, 2001) 25 Critical Success Factors of CRM Its not just technology Understanding the customers & the market segment Appropriate & proper use of customers data Appropriate business and customer strategy The need for a customer-centric strategy Legal/ethical issues Understanding the implication of CRM to the organisation s operations re-engineering of business processes might be needed 26 Critical Success Factors of CRM The appropriate technology Technology associated with Business Intelligence Datawarehouse Datamining Others: Internet, Webservices, Intelligent agents, mobile technologies Integrated & cross-functional Multiple channels 27

10 Critical Success Factors of CRM The appropriate technology Technology associated with Business Intelligence Datawarehouse Datamining Others: Internet, Webservices, Intelligent agents, mobile technologies Integrated & cross-functional Multiple channels Service & customer oriented Customers empowerment Customisation & personalisation Targeting the right customer 28 Critical Success Factors of CRM Using CRM Identify the customers Differentiate the customers Interact with the customers Customise & personalise 29 Barriers to Successful CRM (1) Lack of skills Lack of focus Lack of alignment between business strategy & customer strategy Inadequate investment Poor data quality & quantity (Ryals & Pane, 2001; Kiely, 2001; Yu, 2001) 30

11 Barriers to Successful CRM (2) Failure to understand the benefits Failure to understand the implication of CRM to the business Functional boundaries Inadequate measurement systems Failure to understand the customer s view & value of relationship (Ryals & Pane, 2001; Kiely, 2001; Yu, 2001) 31 To put things in perspective Over these years, how mature is CRM? How far would you go with CRM? Ethical & privacy issues? Do your customers want relationship? As a customer yourself, what do you want? What do you need? Is relationship with the company you purchase your goods important for you? 32